This contribution addresses the question of whether growth convergence can be sustained in the global economy without compromising welfare and without causing major crises. It employs a simplified stock‐flow analytical framework to examine the proposition that the pace and pattern of global growth is conditioned by ‘under‐consumption’ in some regions of the world and ‘over‐borrowing’ in other regions. A baseline projection using the Cambridge‐Alphametrics model (CAM) illustrates consequences of resumed global imbalances after the 2008–2009 crisis. An alternative scenario exemplifies the case in which China and India shift towards internal income redistribution and domestic demand‐orientated policies and suggests that this will not be sufficient to correct global imbalances or induce improved growth rates in other developing regions. Finally a more ambitious development perspective is simulated. Such a scenario requires internationally‐coordinated policy efforts, with a greater role for governments in the management of demand, income distribution and environmental sustainability, as well as measures to reduce instability of exchange rate and commodity markets.

This article assesses the effects of combining fiscal austerity with policies aimed at reducing labour costs and, in doing so, sheds new light on current policy debates. Taking a global perspective, the authors explore the aggregation problem by proposing a stylized analytical macro-model with explicit distribution dynamics. In this framework, flexibilization policies that suppress the labour share trigger global feedbacks that result in a downward spiral, with contraction even in export-led economies. The initial gains of more competitive economies are shown to be ephemeral. In the long term, the world economy is essentially wage-led and responds positively to coordinated Keynesian stimuli.

A major issue today is whether globalization of the world’s labour, capital and product markets, together with rapid economic growth in India and China, will have an adverse effect on workers in the US and other advanced countries. Simulations of different scenarios using the Cambridge‐Alphametrics Model of the World Economy indicate that, at a bloc‐disaggregated level, there are severe supply‐side constraints relating particularly to natural resources (energy and raw materials) that thwart the expansionary demand effects of fast growth in India and China. This analysis is based on long‐term trends in the world economy prior to the current global financial crisis. However, for the sake of completeness, it also comments on the likely implications of this crisis for the USA and other advanced country workers.Development, Industrialization, Growth convergence, India/China, US workers,

Following United States withdrawal, the Trans‐Pacific Partnership agreement (TPP) is likely to be replaced or complemented by a series of bilateral deals between the US and TPP partners. In this case, TPP will shape trade, finance and public policy globally even without formal US participation. Proponents of TPP emphasize its prospective economic benefits, with economic growth increasing due to rising trade volumes and investment. Widely cited projections suggest modest GDP gains after 10 years, varying from less than half a percentage point in the USA to 13 per cent in Vietnam. However, these projections assume full employment and constant income distribution in all countries, excluding some of the major risks of trade liberalization. This article provides alternative projections of the TPP's economic effects using the United Nations Global Policy Model, which allows for changes in employment and income distribution. Using this model, the authors obtain very different results. They find that the benefits to economic growth are even smaller than those projected with full‐employment models, and are negative for Japan and the USA. More importantly, they find that the TPP will likely lead to losses in employment and increases in inequality.

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