377

VI

ECONOMIES IN

DEVELOPMENT

AND TRANSITION

The liberal international economy created after 1945 and the increase in international
finance and trade (discussed in previous sections) have helped produce
unprecedented levels of national and global growth. Within this broad pattern of
economic success, however, there are important variations. While some countries
and people enjoy the highest standards of living in human history, many more
remain mired in poverty.
Indeed, the gap between the richest and the poorest people on earth not only is
large but also is growing wider every year. The richest one-fifth of the world’s
population currently enjoys 86.0 percent of global consumption expenditures, while
the world’s poorest one-fifth accounts for only 1.3 percent. And while the ratio
between the income of the richest 20 percent and the poorest 20 percent of the
world’s population was 30:1 in 1960, it grew to 45:1 in 1980 and then to 82:1 in
1995.
This pattern is replicated at the level of individual countries as well. Where all
developing countries have seen their GNP per capita rise from 5.0 percent of the
industrialized countries in 1960 to 7.0 percent in 1995, the “least” developed
countries (those with a GNP per capita of $300 or less) fell from 3.5 percent to
1.8 percent. These income trends are repeated in the areas of trade, savings, and
investment.^1 While economic growth has increased over the post-1945 period,
raising the average standard of living around the globe, the gaps between the
world’s wealthiest and poorest societies have increased even faster. As Jeffrey A.
Williamson points out in Reading 28, the comparisons between current trends—
in income differentials both among countries and within them—and those of the
nineteenth and early twentieth centuries is illuminating and potentially worrisome.
For decades, scholars and practitioners have debated the sources of economic
growth and the best strategies for producing rapid increases in standards of living.
Many analysts argue that development, at least in its initial stages, requires that
the country insulate itself from more established economic powers and stimulate
key industries at home through trade protection and government subsidies. Indeed,
Alexander Hamilton, the first secretary of the treasury of the United States, argued