The Impossibility of Convergence in a Capitalist World System

In “Technology, Finance and Dependency: Latin American Radical Political Economy in Retrospect,” Matias Vernengo takes another look at dependency theory especially as it pertains to the development of Latin America since the development of the theory. In particular, he looks at how to reconcile the fact that several periphery countries have in fact been able to industrialize despite dependency theory. For Vernengo, the dependency has transferred from the trading of goods to a more financial peonage, one where debt is the controller of the nation’s destinies at the periphery.

I think having a look at Dependency theory is important because for me so much of economics is both relational and a process. I think it is too easy to look at a developing country and say to yourself, “Oh that is so sad, we must do something!” This idea springs forth from the idea that nations exist in a vacuum and not as part of some world-system. Vernengo looks at both the Marxist and the Structural traditions of dependency theory and sees that their commonality lies in the agreement that “the core of the dependency relation between the center and the periphery lies in the inability of the periphery to develop an autonomous and dynamic process of technological innovation” (552). Vernengo argues that the focus on the technological is wrong as it is finalization that has trapped the developing nations in their peripheral role. In my view of the argument, I am more sympathetic to Vernengo’s argument. In the course of my lifetime I have seen dollar flows come in and crash Mexico and Russia and South East Asia and Argentina etc. This is not to discount Baran or Prebish or the schools they worked in. Capital has many tentacles.

What thinking about dependency theory has done for me is to make me think of the totality of the system so that we are not looking at individual nations in isolation. What this does is make me somewhat pessimistic about the possibility of growth. I was thinking specifically of some mathematical truisms. For example, if a country has an initial GDP per capita of 50 units, and they can grow their output in one year by four percent, at the end of the year, they will now have an output of 52 units. If this can be sustained year over year, we would laud this nation for growth over and above what rich nations would do, even if we would point out that a higher level of growth would be expected from developing nations because they are not at the technological frontier. The problem with looking at one nation in isolation is that if you look at a comparative nation that is twice the size of the first nation. The second nation has an initial GDP per capita at PPP of 100. This second nation only must grow at a two percent rate to equal the absolute gain of the first nation. If the growth rate of the country twice the size maintains the growth that is half of the smaller country, the gap between the countries will never close. At some point there will have been enough growth that the fifty-unit gap will be trivial, but we all know what the master said about the long run.

I was interested in taking this thought away from the thought experiment and into the real world. What I did was to go to the World Bank Website, and I pulled their data for GDPs per capita for purchasing power parity. Aware of the limitations of GDP per capita in not catching the distribution of output internally, it was still a good first pass for what I was interested in seeing, as its standardized output per person. I then took the GDPs and expressed them as a ratio of the least developed country in 2017, here the Central African Republic. The CAR GDP per capita in 2017 was just under 726 dollars at purchasing power parity. What is enough to make a person pessimistic is to see just how high the ratios go. My pessimism driven though experiment was too optimistic. There are 45 statistical divisions with a ratio higher than 50. The implication here is that mathematically is that if any of these nations with a higher GDDP per capita than the Czech Republic grows two percent, then the Central African Republic needs to literally double its economy over a year to keep up.

This is mathematical truism makes me wonder about the possibility of convergence, as even China, which has been lauded as a growth miracle over the past thirty years, only has a ratio of 23, meaning that in comparison to the richest countries, per person it is only a quarter of the size. So much of its growth in absolute terms has been the sheer number of people China has. So if we look at that as our best case, if we really want to talk about the possibilities for convergence, we would need to be thinking about much slower growth or even-degrowth in the core countries, and I have a feeling that politically that is a very heavy lift because the core countries do not want people looking at development in terms of a world system, but would prefer that people look at the poor countries and ignore that there is a structural cause and that there is an ahistorical reason that the people of Niger are in need.

Works Cited

Vernengo, Matias. “Technology, Finance, and Dependency: Latin American Radical Political Economy in Retrospect”. Review of Radical Political Economics, Volume 38, №4, Fall 2006, 551–568

Work Bank. GDP per capita, PPP (current international $). (n.d.). Retrieved from https://data.worldbank.org/indicator/ny.gdp.pcap.pp.cd

 

GDP Per Capita Ratio 2017
Country Name	Ratio
Central African Republic	1.00
Burundi	1.01
Congo, Dem. Rep.	1.22
Niger	1.40
Malawi	1.66
Mozambique	1.72
Liberia	1.77
Sierra Leone	2.10
Madagascar	2.14
Togo	2.29
Gambia, The	2.34
Guinea-Bissau	2.34
Haiti	2.50
Burkina Faso	2.57
Uganda	2.57
Ethiopia	2.62
Chad	2.67
Afghanistan	2.72
Rwanda	2.81
Low income	2.97
Kiribati	3.00
Mali	3.05
Guinea	3.09
Benin	3.13
Heavily indebted poor countries (HIPC)	3.30
Solomon Islands	3.34
Zimbabwe	3.35
Yemen, Rep.	3.58
Nepal	3.71
Comoros	3.78
Least developed countries: UN classification	3.84
Lesotho	4.03
Tanzania	4.06
IDA only	4.15
Tajikistan	4.40
Vanuatu	4.42
Kenya	4.53
Sao Tome and Principe	4.62
Senegal	4.75
Micronesia, Fed. Sts.	5.09
Cameroon	5.12
Kyrgyz Republic	5.13
IDA total	5.24
Sub-Saharan Africa (excluding high income)	5.27
Sub-Saharan Africa	5.28
Sub-Saharan Africa (IDA & IBRD countries)	5.28
Pre-demographic dividend	5.29
Bangladesh	5.33
Tuvalu	5.41
Cote d'Ivoire	5.42
Mauritania	5.44
Cambodia	5.52
Zambia	5.54
Papua New Guinea	5.78
Marshall Islands	5.84
Fragile and conflict affected situations	6.13
Ghana	6.19
West Bank and Gaza	6.73
Sudan	6.75
Honduras	6.87
IDA blend	7.41
Congo, Rep.	7.50
Pakistan	7.61
Moldova	7.85
Nicaragua	8.05
Nigeria	8.09
Pacific island small states	8.19
Tonga	8.21
Myanmar	8.49
South Asia	8.95
South Asia (IDA & IBRD)	8.95
Samoa	9.13
Angola	9.15
Vietnam	9.33
Uzbekistan	9.46
Cabo Verde	9.50
Lao PDR	9.67
India	9.72
Lower middle income	9.91
Timor-Leste	9.94
Bolivia	10.41
El Salvador	11.03
Guatemala	11.23
Guyana	11.24
Morocco	11.32
Philippines	11.49
Belize	11.72
Eswatini	11.90
Ukraine	11.94
Jamaica	12.46
Jordan	12.61
Bhutan	12.91
Fiji	13.16
Armenia	13.29
Early-demographic dividend	13.34
Dominica	13.80
Namibia	14.39
Georgia	14.72
Kosovo	14.79
Low & middle income	15.08
IDA & IBRD total	15.45
Egypt, Arab Rep.	15.96
Ecuador	15.96
St. Vincent and the Grenadines	16.18
Tunisia	16.41
Middle income	16.69
Indonesia	16.92
Sri Lanka	17.68
Mongolia	17.80
Albania	17.83
Paraguay	18.02
Bosnia and Herzegovina	18.06
Peru	18.51
South Africa	18.59
Middle East & North Africa (excluding high income)	18.71
Middle East & North Africa (IDA & IBRD countries)	18.86
IBRD only	18.94
St. Lucia	19.23
Nauru	19.50
Colombia	19.94
Lebanon	19.95
Latin America & Caribbean (excluding high income)	20.39
Palau	20.42
East Asia & Pacific (excluding high income)	20.53
East Asia & Pacific (IDA & IBRD countries)	20.75
Grenada	20.83
Suriname	20.88
Algeria	21.02
Macedonia, FYR	21.06
Serbia	21.25
Brazil	21.33
Latin America & the Caribbean (IDA & IBRD countries)	21.65
Caribbean small states	21.73
Latin America & Caribbean	21.77
Dominican Republic	22.08
Maldives	22.94
China	23.15
Iraq	23.28
World	23.35
Arab World	23.36
Botswana	23.40
Costa Rica	23.52
Azerbaijan	23.97
Upper middle income	24.50
Late-demographic dividend	24.51
Thailand	24.62
Turkmenistan	24.79
Gabon	24.90
East Asia & Pacific	24.99
Mexico	25.17
Barbados	25.51
Belarus	25.95
Montenegro	26.66
Libya	27.04
Middle East & North Africa	27.42
Europe & Central Asia (excluding high income)	28.33
Argentina	28.63
Iran, Islamic Rep.	28.71
Bulgaria	28.86
Europe & Central Asia (IDA & IBRD countries)	29.38
Mauritius	30.73
Uruguay	31.08
Small states	31.42
Antigua and Barbuda	32.33
Equatorial Guinea	33.59
Panama	33.71
Chile	33.94
Russian Federation	35.17
Other small states	35.56
Croatia	36.21
Kazakhstan	36.41
Turkey	36.53
Romania	36.72
Greece	38.02
Hungary	38.72
Latvia	38.84
St. Kitts and Nevis	39.36
Central Europe and the Baltics	39.94
Poland	40.12
Seychelles	40.31
Malaysia	40.57
Bahamas, The	41.92
Trinidad and Tobago	43.50
Slovak Republic	43.55
Portugal	43.63
Estonia	43.73
Europe & Central Asia	44.99
Lithuania	45.45
Cyprus	47.53
Slovenia	48.03
Czech Republic	50.04
Spain	52.34
Israel	52.71
Korea, Rep.	52.81
Puerto Rico	53.54
Aruba	54.29
Italy	54.31
Malta	56.53
New Zealand	56.63
European Union	56.74
Oman	57.41
France	59.03
United Kingdom	59.60
Japan	59.62
OECD members	59.73
Euro area	60.13
Finland	61.80
Post-demographic dividend	63.91
Canada	64.34
High income	65.17
Bahrain	65.47
Belgium	65.90
Australia	66.75
Sweden	69.16
Germany	69.76
Denmark	70.75
Austria	72.18
Netherlands	72.32
Iceland	73.22
Saudi Arabia	74.08
Cayman Islands	80.14
North America	80.22
United States	82.01
Norway	84.60
Hong Kong SAR, China	84.77
San Marino	87.35
Switzerland	89.14
Kuwait	99.10
United Arab Emirates	101.77
Ireland	104.21
Brunei Darussalam	108.60
Singapore	129.36
Luxembourg	142.91
Macao SAR, China	158.58
Qatar	176.84