05 Oct 2013

The Promise of Coming Together, the Reality of Being Different

The essential premise of the convergence thesis is that all economies will eventually converge to similar per capita income levels, as poor developing economies grow faster relative to developed economies. The convergence thesis focuses mainly on the examination of institutions which underpin economic growth and development in the now-rich economies and how they can be emulated and supplanted in different contexts.

In The World is Flat, Thomas Friedman alluded to an economic convergence in commerce and business that resulted from increasing integration of national economies with the global economy. Kishore Mahbubani in The Great Convergence argues that, not only is there a convergence in income levels, but also in living standards and human development. And, the process of convergence is upheld by the acceptance of modern science, logical reasoning, transformation of the social contract and multilateralism. The book is laced with warm optimism that 88% of humanity will soon converge to and experience the living standards now available to the richer, Western developed countries.

His essential thesis is that this unprecedented convergence has geopolitical repercussions, which are not understood by the ‘West’, and the multinational institutions it dominates.

And now, the world needs to reassess how it conducts its affairs. Essentially, the countries today no longer resemble “a flotilla of…

separate boats”; rather, they are “193 separate cabins on the same boat” in search of a “captain or crew”. Mahbubani looks to reforming global institutions in response to these recent trends.

This is not the first time that Professor Mahbubani has put forth this thesis. Earlier, he has documented the rise of Asia, celebrated the economic prowess of its burgeoning middle class, questioned ‘western’ arrogance and plotted the trajectory of their economic and geopolitical decline in his previous writings. He has developed the convergence thesis further in this, his fourth book, but he leaves the skeptical reader unconvinced on many counts.

It is a giant leap of faith that the G20 ‘saved the world’ in the 2008-09 economic crisis, and that it could be considered a model going forward. The substantive monetary easing in advanced economies was outside the agreed upon stimulus framework by the G20. Economies did what they had to do to resuscitate growth in spite of the G20 framework.

While it helps Mahbubani’s argument to pitch “the West” against “the rest”, it is unclear if the world can indeed be so neatly divided into two. Asia is far from united on several fronts. China, Asia’s fastest growing and most ‘peacefully rising’ economy, has border issues with at least South Korea, Japan, Philippines, Vietnam, and India. If India’s per capita income is projected, growing at a modest 8% in real prices, it will still continue to be a middleincome economy after three decades.

One of the most significant global trends, which Mahbubani does not reflect adequately, is changing demographics. What is peculiar about Asian demographics is that most Asian economies are going to grow old before they become rich. This impacts not only retirement, but also other economic aspects such as infrastructure, urbanisation, employment and consumption. The ageing ‘Western world’ enjoys high-income levels to support their retirement and maintain standards of living. This cannot be said about many Asian economies, including China and India.

While we are experiencing unprecedented changes in demography, economic development and living standards, we are far from replicating institutions that support economic development and fostered growth in advanced economies. Moreover, we also need to distinguish if growth in developing economies is in reality dependent on growth in advanced economies; the recent growth slowdown in the aftermath of the crisis has renewed attention in the decoupling hypothesis.

In all, Professor Mahbubani’s thesis is perhaps very far ahead of his time – his convergence thesis can perhaps only offer a view darkly seen from his rear-view mirror. It is useful to be reminded that objects in the mirror are often as distant as they seem.

Azad Singh Bali is a PhD Candidate at LKY SPP :