Since the Belt and Road Initiative came into being, most analyses have largely focused on infrastructure development.
But when looking at recent history, what can one really say about the nature of this integration? It seems there are three fundamental trends at work that today characterize the world economy. Three fundamental trends The first trend is a new convergence.
When the developed world grows fast, the developing world grows fast, when the developed slow down, the developing slow down. Is this linkage inevitable? Since roughly the pace of per capita income growth in emerging and developing economies has accelerated in a sustainable manner and is substantially above that in advanced economies.
This represents a major structural shift in the dynamics of the world economy. A second fundamental feature in the world economy is cyclical interdependence. New convergence and strengthened interdependence coincide with a third trend, relating to income distribution. In the United States the share of the top 1 percent has close to tripled over the past three decades, now accounting for about 20 percent of total U.
These two facts have resulted in increased divergence between the richest people in the world and the very poorest, despite the broad convergence of average incomes.
New convergence The world economy entered a new age of convergence aroundwhen average per capita incomes in emerging market and developing economies taken as a whole began to grow much faster than in advanced economies.
The sharp Complex interdependence between rich and poor countries that characterized the world since the industrial revolution in the early part of the 19th Complex interdependence is now weakening. A key question is whether this new convergence is likely to continue and lead to a fundamental restructuring of the world economy over the next decade or so.
The industrial revolution and colonialism brought about great divergence Maddison, This divergence slowed after World War II, with the Complex interdependence of colonialism, but the relative income gap remained stable on average between and For the past two decades, however, per capita income in emerging and developing economies taken as a whole has grown almost three times as fast as in advanced economies, despite the —98 Asian crisis.
Growth in emerging markets sped up in the s, followed by an acceleration in the less developed countries around the turn of the century see Chart 1. Chart 2 shows the underlying trend growth rates calculated using a statistical technique, the Hodrick-Prescott filter, to separate cyclical movement from the longer-term trend.
The delinking of the trend growth rate of emerging market countries from the s onward, and that of developing countries in the past decade, is quite striking.
Three developments explain much of this new convergence. First, globalization—through strengthened trade links and rising foreign direct investment—facilitates catch-up growth as latecomers import and adapt know-how and technology. It is much easier to adapt technology than to invent it.
Second, the demographic transition of most emerging and many developing economies that accompanied slower population growth supported greater capital intensity and faster per capita growth. At the same time, many of these countries enjoyed a golden age as the ratio of the economically active to the total population peaked.
Meanwhile, the share of the aged increased significantly in the advanced economies, particularly in Europe and Japan.
A third significant cause of convergence is the higher proportion of income invested by emerging and developing countries— Not only does investment increase the productivity of labor by giving it more capital to work with, it can also increase total factor productivity—the joint productivity of capital and labor—by incorporating new knowledge and production techniques and facilitate transition from low-productivity sectors such as agriculture to high-productivity sectors such as manufacturing, which accelerates catch-up growth.
This third factor, higher investment rates, is particularly relevant in Asia—most noticeably, but not only, in China. Asian trend growth rates increased earlier and to a greater extent than those of other emerging economies. Will this convergence continue? Projections are always risky, and some of the factors that led to convergence in the past 20 years may soon lose strength.
A good part of the catch-up growth in manufacturing has already taken place, and the reallocation of labor from low- to high-productivity sectors has also exhausted some of its potential; in some countries even rapid manufacturing growth has not generated much employment, leading to a greater labor share in low-productivity activities Rodrik, But the convergence we are referring to is the aggregate convergence of the emerging and developing world as opposed to an analysis where very small countries get equal weight with China, India, or Indonesia.
In the aggregate, at least for the next 10 to 15 years, there is substantial potential for more catch-up growth. Labor reallocation from low- to high-productivity sectors may slow down, but its reallocation from low- to high-productivity firms within even narrowly defined subsectors is likely to continue at a solid pace.
The service, energy, and infrastructure sectors may also have substantial potential for the adaptation of new technology.
Finally, the very high debt ratios that most advanced economies have accumulated will constrain their macroeconomic policies and slow investment.
This continued, if perhaps somewhat slower, convergence will profoundly transform the world economy. The economy of China will no doubt become the largest in the world, and the economies of Brazil and India will be much larger than those of the United Kingdom or France.
Cyclical interdependence There was a time, particularly at the beginning of the financial crisis in late and earlywhen it seemed the emerging markets and Asia in particular would grow rapidly regardless of what happened in the United States and Europe.
Then came the panic of lateafter the collapse of the investment banking firm Lehman Brothers.
The marked worldwide slowdown, even in China, sparked concern that the crisis that started on Wall Street could lead to a collapse of growth in the emerging and developing world. There was indeed a worldwide slowdown inwith per capita growth in the emerging markets and developing economies slowing to less than 1 percent and a decline of nearly 4 percent in advanced economies.
But the former recovered quickly, with a growth rate of 6 percent in compared with 2.Zhongming Lu, John C. Crittenden, Frank Southworth, Ellen Dunham-Jones, “An Integrated Framework for Managing the Complex Interdependence Between Infrastructures and the Socioeconomic Environment: An Application in Metropolitan Atlanta,” , Urban Studies, 54 (12), Since is well known, the advent of the nuclear age certainly brought about changes in the structure of interstate politics.
Military force, for example, turned out to . The London School of Economics and Political Science Complex Interdependence and China’s Engagement with Australia Navigating between Power and Vulnerability Yixiao Zheng A thesis submitted to the Department of International Relations of.
A well-known and respected attempt to theorize interdependence in the field of international relations is complex interdependence. In Power and Interdependence, Robert O. Keohane and Joseph S. Nye, Jr define interdependence as reciprocal effects among actors resulting from 'international.
Moved Permanently. The document has moved here. In international relations, “complex interdependence” refers to the multiple channels of interaction and agendas in interstate relations, which involve domestic stakeholders—public and private—on nonmilitary issues.
Since the Belt and Road Initiative came into being, most analyses have.