Whither the North-South gap?

During much of the Cold War, the central dilemma of development economics was how to reverse the growing economic gap between the rich and poor countries of the world. In recent years, the World Bank has declared a victory on that front. The Bank asserts that not only is the gap no longer growing, but indeed that it has begun to narrow. Moreover, the Bank claims, the free market policies it has spearheaded are at the core of the developing country turnabout that is closing the North-South gap. This article challenges the World Bank assertion of a narrowing North-South gap. Rather, we argue, economic data from the World Bank and other United Nations agencies suggest that the North-South gap continues to widen in all but roughly a dozen Third World countries, and there remains a net flow of resources from most Southern nations to the North. The Bank bases its claim of a closing gap on two primary assertions: that the economies of the developing countries are growing faster than industrial countries' economies, and that large net capital flows are now flowing into developing countries. Based on an examination of World Bank and United Nations data, this article refutes both of these assertions. We first compare the growth rates of Northern versus Southern countries. Then we survey the nature and levels of the financial flows between North and South. As we discover, a major problem with the Bank's gap closing projections is that they are based on aggregate data and often on the strength of only one to three years of data from the early 1990s. Disaggregating the data paints a vastly different picture of the dynamics and consequences of these economic flows and trends for the majority of developing countries. A closer and longer look at North-South data reveals that, while the gap may be closing between a few developing countries-particularly the 10 'big emerging markets' (BEMS) pinpointed by the US Department of Commerce' and the industrial countries, the vast majority of Third World countries are slipping further behind the North. We focus on the World Bank not only because it is the major donor to the Third World. In recent years, its influence has outstripped its lending and it has become the preeminent source of policy advice and development research and