Economic Growth and Development

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The big problem is that so many countries have consciously tried and failed
to catch up, often making a successful beginning, experiencing rapid economic
growth for a decade or more but then falling back into slow growth or stagna-
tion without making any substantial impact on the enormous gap in incomes.
We may associate Sub-Saharan Africa with relative economic failure in the
decades since independence, but between 1967 and 1980 ten countries experi-
enced annual economic growth of more than 6 per cent, including Gabon,
Botswana, Congo, Nigeria, Kenya and Côte d’Ivoire. Much of Africa then
lurched into two decades of economic stagnation after the 1980s. Pakistan is
not associated with economic success but was one of the fastest growing
economies in the world in the 1960s. Argentina has spent much of the twenti-
eth century as a developing country plagued by stagnation, hyperinflation and
political violence but in ca.1900 its GDP per capita was double that of Italy and
probably slightly higher than Germany’s.

The five key concerns of this book

The importance of sustained economic growth

There are important debates about the impact of inequality and what, if
anything,should be done about it. The 2009 book by Richard Wilkinson and
Kate Pickett, The Spirit Level: Why Equality is Better for Everyone,
contributed to a very lively debate about the negative social and economic
consequences of inequality within countries. Debates about the morality and
efficacy of foreign aid, particularly the rather passionate disagreements
between economists William Easterly and Jeffrey Sachs, have focused atten-
tion on global efforts to reduce inequality between countries. This book is
concerned with the origins rather than the impact of inequality and so its first
concern is with the ‘Great Divergence’: those long years after 1500 or 1800
when steady economic growth of no more than 2 or 3 per cent per year in
Western Europe created those massive inequalities we see today. As the exam-
ple of Norway and Burundi showed it is not a decade of rapid growth that
makes the big difference; it is, rather, long years of sustained economic growth.
Sustained economic growth has a remarkable impact on average incomes.
An economy that began with an average income of $100 per person would
have seen average incomes rise to $1,200 after 250 years of annual growth of
1.0 per cent, $4,100 with annual growth of 1.5 per cent and $14,100 with
annual growth of 2.0 per cent. With growth of 2.5 per cent that economy would
have become one of the richest in the world with average incomes of almost
$50,000 per person.
The emphasis on sustained economic growth reminds us not to pay too
much attention to growth rates in a single year or differences in growth rates
over several years or indeed to the recent global slowdown. What is more
important is that growth rates over the last two centuries in India and China

4 Introduction

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