How covid-19 could impede the catch-up of poor countries with rich ones

IT ONCE SEEMEDGDPIMF possible that covid-19 might deliver a softer blow to poor economies than rich ones. Instead, the virus seems likely to set the emerging world back in its quest to attain advanced-economy incomes. Real per person in America shrank by about 4% in 2020, only about half a percentage point more than the average across emerging markets, in purchasing-power-parity terms. But projections made by the in April suggest that American growth is set to outpace that in the emerging world this year; with the pandemic still ravaging places like Brazil and India, poor-country growth will probably lag even further behind. More worrying still, the pandemic may reshape the global economy in ways that make continued convergence towards rich-world incomes a tougher slog. Worse prospects for poor countries will in turn make managing future crises, from pandemics to climate change, harder. The rich world should take note.Economists once reckoned that incomes in poorer economies should naturally catch up to those in richer ones, based on experience in Europe in the 19th and early 20th centuries, when industrial laggards caught up to (and frequently overtook) Britain. Backward countries could borrow the latest know-how from leading ones, the thinking went, and their limited capital base promised hefty returns to investors. In the 1950s two economists, Robert Solow and Trevor Swan, separately developed models of economic growth in which higher returns to capital in poorer countries than in rich ones lead to more investment, generating faster growth and convergence. As scholars gathered more data on more countries, however, it became clear that the 20th century was not a period of convergence, but rather of “divergence, big time”, in the words of Lant Pritchett of Oxford University.