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Development Theory: Convergence, Catch-Up or Leapfrogging? A Schumpeter-Minsky-Kregel Approach

  • Leonardo Burlamaqui
  • Rainer Kattel
Part of the Levy Institute Advanced Research in Economic Policy book series (LAREP)

Abstract

Mainstream development theories differ in many ways. However, they share two key assumptions, which are adopted by most policy makers and embed the ‘governance’ of trade, knowledge and finance under the World Trade Organization (WTO) treaties and its multiple descendants. The first assumption is that all economic activities (or all innovations) have inherently the same growth inducing potential, and the second is that free trade is the best regime for enabling all countries to scale up their comparative advantages and develop. The implication of those assumptions is clear: In essence, under a free trade regime, eventually all countries should converge around a certain level of development, provided that they have ‘law and order’ and ‘save’ in order to be able to invest. Yet, there is growing evidence both from heterodox and (discontent) neoclassical economists that at least the convergence corollary — that however long it may take, eventually all development is toward a shared equilibrium-is in fact not what the data shows us. (See, for example, Ocampo, Kregel and Griffith-Jones 2007; Reinert 2007 and Rodrik 2007). There are some well known examples: measured in 1990 international dollars, South Korea had in 1950 almost exactly the same GDP per capita as an average African country (around 860 GK dollars); by 2012, the difference was twelve-fold.1 However, diverging fortunes between regions (such as Africa versus East Asia) and within regions (such as Sweden vs. Greece) seem to be rather the norm in the international economy.

Keywords

Foreign Direct Investment Gross Domestic Product Development Theory World Trade Organization Credit Default Swap 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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Copyright information

© Leonardo Burlamaqui and Rainer Kattel 2014

Authors and Affiliations

  • Leonardo Burlamaqui
  • Rainer Kattel

There are no affiliations available

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