1. The Past and Future of Economic Growth Dani Rodrik SW31/PED-233/Law School 2390 Spring 2013

2. The (changing) global distribution of income Source: Rodrik (2012), via data from Milanovic (2011)

3. Where are individual countries in the global distribution of income? Would you rather be rich in Nigeria or poor in the U.S.? Nigeria China U.S.A.

4. Accounting for the rise in global inequality over the long term

5. The Great Divergence

6. The origins of the Great Divergence: industrialization and de-industrialization

7. income level (labor productivity) institutions trade, global integration geography Which are the most important links, how do they differ across contexts, and why? culture The “deep determinants” of development

8. income level (labor productivity) institutions trade, global integration geography Geographical determinism: resource supplies, public health environment, access to trade routes, state formation… culture The “deep determinants” of development

9. income level (labor productivity) institutions trade, global integration geography Cultural determinism: the “protestant ethic”, Confucianism, innate proclivity to entrepreneurship, thrift, etc. culture The “deep determinants” of development

10. income level (labor productivity) institutions trade, global integration geography Trade fundamentalism: globalization, imperialism… culture The “deep determinants” of development

11. income level (labor productivity) institutions trade, global integration geography Institutions fundamentalism: property rights and contract enforcement culture The “deep determinants” of development

12. What about agency? Ideas, institutional innovations, political strategies…  Exogenous background conditions that change slowly are obviously important, but can they fully explain:  The successive shifts in economic (and political power) from Spain/Portugal to Britain to U.S.?  Japan after Meiji restoration (1868)?  South Korea and Taiwan since the early 1960s?  China after 1978?  Latin America and Africa’s repeated growth-stagnation cycles since 19 th century?  The diversity of institutional patterns among “successful” societies?  The divergence in economic performance among poorer nations despite intensification of globalization? A constant cannot explain a change. Future may be less pre-determined than many of the established theories would suggest

13. The two imperatives of economic growth 1. “Fundamentals”: building broad capabilities in the forms of human capital and effective public institutions  Takes time, requires broad-based complementary investments, and produces steady but moderate growth 2. “Structural transformation”: emergence and expansion of modern industries  Requires narrower range of reforms (that are often sectoral) to remove/compensate for costs modern industries face, and produces rapid growth until dualism eliminated The set of policies required to foster these two dynamics overlap, but are not same In particular, role of unconventional policies to stimulate new industries (as in East Asia)

14. A typology of growth outcomes

15. A typology of post-war growth outcomes