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Nosemonkey's EUtopia

In search of a European identity

The EU and global economic growth / convergence

One of the criticisms that still gets leveled at the EU is that the Common Market is a rich kids club, and that the Common Agrigultural Policy and free movement of goods and services within the EU puts non-EU (and especially poorer / developing countries) at a disadvantage.

These criticisms are no longer as fair as they once were, with the various trade agreements due in place of being worked on between the EU and various regional blocs and individual countries, but still – as the world’s largest economy (and as the focal point of interminable debates about Usterity vs stimulus in a bid to return to growth over the last few years), there should be continual debate about the organisation’s role in encouraging or depressing global growth.

So, in the spirit of this revived blog’s professed aim to take a more global approach, let’s take a look at what a few economists are saying about how economic growth works, with a particular emphasis on the relationship between growth rates in richer and poorer countries (a concern within the EU too, what with all the recent argunents about Romanian and Bulgarian migration). Can rich countries help boost growth in poorer ones to make everyone happier and better off, reducing these jealousies and fears?

“The phenomenon of modern economic growth is fairly new. It started less than two centuries ago, but it changed our lives significantly. One of the main changes is that income gaps between countries have greatly increased. One of the main questions that concern economists who study economic growth is whether these gaps are still growing, or countries are instead converging to the same level of income. This question is empirical, but it has important theoretical implications, as our main growth theories predict convergence between countries. This question is clearly also important from a policy point of view. If the poor countries will converge to the global frontier anyway, there is no need to provide them with extensive assistance. But if there is no convergence and even divergence, then such countries need help badly.”

The conclusion? Post-crash, economists seem a bit happier to hedge their bets and readjust models. There’s evidence of convergence, but also of divergence in some circumstances. Poorer countries may well need help.

Short version: the global economy is bloody complicated and can’t easily be summarised, but a country’s economic growth will always be a) relative, and b) closely connected to the fortunes of other countries.

Note to those new to long-form Nosemonkey, having previously only encountered me on Twitter: Think of this blog as me thinking out loud. It’s often intended more for me to work out what I think about subjects I know little about as it is writing about things I do know. If you think I’m wrong or an idiot, and especially of you think I’ve missed something or should read something please educate me as to why or what. Just try and be polite about it, eh?

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