The End of Convergence: Why the World’s Poor Are No Longer Closing the Gap

The End of Convergence: Why the World’s Poor Are No Longer Closing the Gap

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By: Shatha kalel

For most of modern history, rich countries have consistently outpaced poor ones in economic growth, a trend that has persisted since the Industrial Revolution. However, from the mid-1990s to the early 2010s, the global economy experienced a remarkable divergence from this historical pattern. During these two decades, the world’s poorest nations began to catch up with wealthier ones, leading to reduced global inequality. Extreme poverty rates plummeted, public health indicators improved dramatically, and education levels soared. It was a period of rapid convergence where the gaps in GDP between nations narrowed, and millions were lifted out of poverty.

This exceptional era was defined not by capitalism’s excesses or the global financial crisis, as critics of globalization might argue, but by economic miracles. It saw the rapid growth of emerging economies, significant improvements in public health and education, and the transformative power of globalization. Yet, in recent years, this convergence has slowed or even reversed, raising important questions about the sustainability of these gains and the future of global inequality.

The Miraculous Period: 1995-2015
Between 1995 and 2015, global economic trends shifted in a way that defied the long-standing dynamics of rich countries growing faster than poor ones. A significant number of low- and middle-income countries, particularly in Asia and Africa, began to experience unprecedented economic growth. China, India, and a host of other nations saw their GDP per capita rise at an accelerated pace, narrowing the wealth gap with Western economies. This period marked a significant shift in the global balance of economic power, as emerging markets contributed more to global growth than advanced economies.

One of the most visible impacts of this period was the dramatic reduction in extreme poverty. According to the World Bank, over one billion people were lifted out of extreme poverty between 1990 and 2015. In China alone, more than 700 million people moved out of poverty, thanks to rapid industrialization, economic reforms, and integration into the global economy. Africa, though lagging behind Asia, also experienced growth in key regions, contributing to poverty reduction and improved living standards.

In addition to economic growth, this era saw significant advancements in public health. Global efforts to combat diseases such as malaria, polio, and tuberculosis intensified, leading to a significant decline in mortality rates. Infant mortality plummeted, and life expectancy rose across the developing world. Education also expanded, with school enrolment rates climbing in many of the world’s poorest nations, thanks to increased investment in public education and international support for initiatives such as the Millennium Development Goals (MDGs).

The Role of Globalization
Globalization played a critical role in driving the economic miracles of this period. The liberalization of trade and investment, along with technological advancements, allowed developing countries to integrate into the global economy more effectively than ever before. Emerging economies became key players in global supply chains, particularly in manufacturing and services, which provided new opportunities for economic growth. Countries like China and India capitalized on their large populations and low labor costs to become manufacturing powerhouses, exporting goods to advanced economies and driving growth at home.

Foreign direct investment (FDI) surged, as multinational corporations sought new markets and cheaper labor in developing countries. This influx of capital helped to build infrastructure, create jobs, and transfer knowledge and technology to emerging economies. At the same time, remittances from migrant workers in advanced economies provided a crucial source of income for millions of households in poorer nations, further contributing to poverty reduction.

International organizations, such as the World Trade Organization (WTO), the International Monetary Fund (IMF), and the World Bank, supported this process by promoting trade liberalization, providing financial assistance, and encouraging structural reforms. The MDGs, adopted in 2000, set ambitious targets for reducing poverty, improving health and education, and promoting sustainable development. These global efforts helped to create an environment in which developing countries could grow and prosper.

The End of the Convergence?
However, the golden age of convergence between rich and poor countries has now slowed, if not reversed. Several factors have contributed to this shift. First, the global financial crisis of 2008-2009, while initially thought to be a problem for advanced economies, eventually hit developing countries hard. The slowdown in global trade and investment, combined with falling commodity prices, especially in oil-dependent economies, dampened growth prospects for many emerging markets.

Second, rising global inequality within countries has become more pronounced. While the gap between rich and poor countries narrowed, income inequality within nations, both developed and developing, widened. The benefits of globalization have not been equally shared, with wealth concentrating in the hands of a few. This has led to social unrest, political instability, and a growing backlash against globalization in many parts of the world.

Third, geopolitical tensions and the rise of protectionism have created new challenges for the global economy. The trade war between the United States and China, the world’s two largest economies, has disrupted global supply chains and increased uncertainty. At the same time, rising nationalism and anti-globalization sentiments in advanced economies have led to a reevaluation of trade policies and international cooperation.

Fourth, the COVID-19 pandemic has exacerbated these trends, hitting developing countries disproportionately hard. The pandemic has reversed years of progress in poverty reduction, with millions of people pushed back into extreme poverty. It has also highlighted the weaknesses in global health systems and the unequal access to vaccines and medical care.

The Impact on Global Inequality
The slowing of the convergence process has significant implications for global inequality. As rich countries rebound from the pandemic with large-scale fiscal stimulus packages and vaccination campaigns, developing countries are left struggling to recover. The divergence in economic recovery is widening the gap between rich and poor countries once again.

In addition, the rise of automation and digital technologies threatens to further entrench inequality. While advanced economies are well-positioned to benefit from technological advancements, many developing countries lack the infrastructure and skills to take full advantage of the digital economy. This digital divide risks leaving large segments of the global population behind, exacerbating existing inequalities.

Conclusion: A New Era of Divergence?
The era of rapid convergence between rich and poor countries may be over, but the future is still uncertain. Globalization, technological innovation, and international cooperation have the potential to reignite the process of economic convergence, but only if the challenges of inequality, protectionism, and geopolitical instability are addressed.

As the world moves forward, policymakers must prioritize inclusive growth, ensuring that the benefits of globalization and technological progress are shared more equitably. Without concerted efforts to address the root causes of inequality, the dream of a more equal world may slip further out of reach.

In this context, the role of international institutions, such as the IMF, World Bank, and WTO, remains critical. These organizations must adapt to the changing global landscape, promoting policies that support sustainable and inclusive development. Only by working together can the world hope to reverse the current trends and create a future where all nations, rich and poor, can thrive.

 

Economic Unit/North America Office
Al Rawabet Center for Research and Strategic Studies