This paper applies an interpretation of how globalization and governance (G&G) interact with convergence given Cape Verde and Mozambique’s particular geographical and historical contexts. We hold that development success under globalization entails, necessarily but not exclusively, positive market perceptions regarding the orientation and predictability of policies as well as the accompanying institutional arrangements. As such, a positive G&G interaction with respect to a comparator group can usefully be defined as success notwithstanding the inexistence of a universally applicable development model. In practical terms, we first identify macro-level policy and institutional combinations underpinning successful trade diversification (an indicator of globalization) and income convergence (an indicator of governance) in the sub-regions of West and Southern Africa. We then assess to what extent these combinations apply to both countries using an empirical analysis. We find that trade openness drives convergence and export diversification in Western Africa (which is becoming more diversified) while convergence is instead driven by economic and political freedoms in Southern Africa (which is becoming more specialized). Our empirical analysis is complemented by a case-study narrative of Cape Verde and Mozambique’s long-term development, which allows us to also identify the following common drivers: moving towards a market economy; opening up to regional and global trade; increasing economic and political freedom; pursing macroeconomic stability and financial reputation; ensuring policy continuity (especially in the industrial and trade sectors) and focusing on human development (especially education and poverty reduction). Moreover, both countries reveal convergence compared to their sub-regional peers when looking at average GDP per capita and indicators of financial reputation and good governance. While these findings are insufficient to conclude that convergence will be sustained, the positive interaction between trade and financial globalization, on the one hand, and good governance and democracy, on the other, may help explain the observed diversity of the Portuguese-speaking African community, which includes three other countries (Angola, Guinea-Bissau and São Tomé e Príncipe).
The large US current account deficit over the last decade – and the corresponding surpluses in China and elsewhere – have been interpreted in two very different ways. Many mainstream economists view the phenomena as primarily the outcome of a low rate of national saving in the United States, beginning with a large budget deficit (the other half of the “twin deficits.”) In this first view, the current account deficit is unsustainable, and will eventually result in a sharp depreciation of the dollar. But this unsustainability view has been challenged by a variety of other economists, with equally impeccable credentials. This paper enumerates eight arguments that they have given as to why we need not worry about the current account deficit. The paper is skeptical of all eight, and sides with the unsustainability view. But they deserve a hearing. The eight are: 1. The siblings are not twins. 2. Alleged investment boom. 3. Low U.S. private savings. 4. Global savings glut. 5. It’s a big world. 6. Valuation effects pay for it. 7. Intermediation rents pay for it. 8. Bretton Woods II.