Why Poor Countries Can No Longer Catch Up to Developed Nations

Why poor countries stopped catching updavidoks.blogThe rise and fall of the Great Convergence
Growth in underdeveloped countries from 1995 to 2015 was a temporary bubble. Rather, it encouraged premature deindustrialization in developing nations. Once the bubble burst, growth plummeted, and the structural gap between rich and poor nations widened.
At the end of 2025, three economists published an essay that could be considered "the most important article of 2025."
They gave it a blunt, no-nonsense title: "We were wrong about convergence."
According to basic economic theory, poor countries should naturally grow faster than rich countries.
The 'Solow-Swan Growth Model,' a core framework of economics textbooks, clearly predicts that poor countries undergo 'catch-up growth' by rapidly approaching developed nations, eventually reaching 'economic convergence' where the economic gap between the two narrows.
However, from a certain point in the 21st century, this did not happen. Convergence as described by theory could not be found anywhere in reality; instead, the income gap between developed and poor nations continued to widen incessantly.
One explanation was that the reason poor countries failed to run faster than developed nations in the past was due to unfortunate environments.
In other words, it was believed that growth was merely being held back by wars and civil wars that swept through developing countries in the mid-20th century, misguided government policies, and dysfunctional institutions. It was thought that once these adverse conditions proved to be 'temporary problems' and disappeared, the dazzling catch-up growth predicted by economic theory would finally arrive.
But now, the growth rate of poor countries has plummeted below that of developed nations once again. In the essay, they wrote, "The harsh reality has changed again," adding, "The era of unconditional convergence seems to have ended."
Economic growth is the process of moving step by step toward the most advanced production limit attainable by humanity, namely the 'technology frontier.'
Another important logic follows here: some countries are already much closer to this technology frontier than others.
In the case of the Solow model, the conclusion is clear: poor countries sprint at a faster rate than rich countries, but as they become wealthier, their growth rate slows down, eventually converging at the level of developed nations.
Solow was awarded the Nobel Prize in Economics in 1987 in recognition of this contribution. The catch-up growth predicted by the Solow model was so common-sensical and intuitive that many people believed it was not just a theory, but reality itself.
However, there is a fatal flaw in this conviction: it is not true. The driver of change was 'Moore's Law,' the phenomenon of exponential growth in computer performance.
Poor countries did not grow faster than developed nations. Rather, over the past few decades, it was the already wealthy developed nations that grew more steeply. A famous academic paper delivered a dry death sentence to the Solow convergence hypothesis, stating that it "does not align at all with actual statistical data between countries."
The situation grew progressively worse. Instead of narrowing, the income gap between rich and poor countries was widening uncontrollably over time.
Cornered, economists searched for makeshift remedies. They quietly abandoned 'unconditional convergence'—the idea of catching up without conditions—and retreated to the concept of so-called 'conditional convergence.'
They derived a hypothetical conclusion: "If all other conditions were equal, poor countries would grow faster."
However, since it is impossible for the conditions of developed and poor nations to be equal in reality, conditional convergence was close to empty wordplay. It was nothing more than armchair speculation, conjuring up hypothetical countries in their minds that do not exist anywhere in reality.
Ultimately, there was almost no substance left in the Solow convergence hypothesis that had dominated a century.
Then, in 2018, Subramanian, Sandefur, and Patel (SS&P) published a provocative piece. At the very moment economists were about to completely discard convergence theory, they argued that convergence had miraculously returned.
"The recent emergence of convergence was a genuine result of the simultaneous improvement in per capita income in poor countries and the significant slowdown in growth in Europe and Japan, where developed nations were concentrated."
Nevertheless, the most important fact was the occurrence of convergence itself. Numerous experts prematurely celebrated their victory, cheering that Solow's dead prophecy had finally been resurrected.
In a Bloomberg op-ed, Noah Smith praised this paper, evaluating it as "the impact on the world will be beyond imagination" and stating that "countries that experienced European colonial rule in the past will exert stronger global leadership." Globalization, which tore down trade barriers, had kept its promise, and economic development was bearing brilliant fruit.
But the celebration was premature. Just a few years after boldly declaring a 'new era of unconditional convergence,' the three economists returned to announce that it was not an era of convergence after all.
SS&P pointed out two key facts regarding the end of Solow convergence.
First, the end of convergence resulted from the error of limiting 'developed nations' to just Europe and Japan, combined with the fact that the growth of poor countries has fallen off a cliff. Developed economies are not just Europe and Japan. Other developed nations, particularly the US, South Korea, and Taiwan, were still experiencing explosive growth. The more fundamental cause was that the growth engines of poor countries had completely shut down.
Second, the growth rates of African and Latin American countries have collapsed disastrously over the last 15 years. The three scholars analyzed that "the decisive blow that sent Solow convergence to its grave was the extreme growth slowdown in the two continents of Africa and Latin America."
Concluding their essay, the three scholars cited several familiar economic headwinds as reasons why the catch-up of poor countries has stopped.
Their analysis suggests that the new protectionist barriers erected by developed nations, such as the US, have stripped poor countries of their export and growth opportunities. There is no sign of this reversing in the short term. Therefore, they reached a grim conclusion, stating, "It is difficult to hold hope that the world's poorest nations will perform well in this new era."
The scholars who once excited the world by announcing the 'new era of unconditional convergence' now say that convergence is over and that hope for a better future is slim. It is a shocking and deeply despairing diagnosis.
So why did the growth of poor countries collapse all at once in the mid-2010s, as if by agreement?
Currently, the economic structure of developing countries is seriously distorted. Investment in manufacturing has completely dried up. Furthermore, a disastrous collapse always awaits at the end.
The annual per capita income growth rate in Mozambique plummeted to 0.3% between 2014 and 2024. During the same period, Zambia's growth rate also crashed to 0.3%.
Within these countries, no independent accumulation of industrial capacity—the ability to innovate technology and increase productivity on their own—has occurred. If they had possessed independent technological prowess and a solid industrial base, growth would not have stalled like this, nor would they be struggling so desperately to recover after the bubble burst.
The remaining manufacturing capacity in these poor countries has actually regressed. The 'premature deindustrialization' (the phenomenon where the manufacturing base collapses before industrial development reaches its peak) warned about by economist Dani Rodrik has manifested as a terrible reality.
The true culprit that shattered great convergence was the growth collapse of African and Latin American countries that have lost their factories.
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Looking at recent trends, it seems the only way poor countries can quickly catch up to developed nations is through low birth rates.