The forces of economic convergence are powerful, but not all powerful. Poor countries tend to grow faster than rich ones, largely because imitation is easier than invention. But that does not mean that every poor country of five decades ago has caught up, as today’s chart shows. It plots each country’s income per person (adjusted for purchasing power) relative to that of America, both in 1960 and in 2008. The chart appeared in the World Bank’s recent China 2030 report. If every country had caught up, they would all be found in the top row. In fact, most countries that were middle income in 1960 remained so in 2008 (see the middle cell of the chart). Only 13 countries escaped this middle-income trap, becoming high-income economies in 2008 (top-middle). One of these success stories, it should not be forgotten, was Greece.

mid income trap 2012 world bankB
Marc Saxer: ( The Middle Income Trap is usually understood as the challenge of graduation to the next growth model. Amidst social and political conflict, however, what is necessary to graduate may not be implementable politically. Innovation led growth requires a skilled workforce. However, as long as the established middle class feels abused, it is not ready to pick up the tax bill for such redistributive capacity building. Solidarity between the classes cannot be imposed, but is only possible if millions of former farmhands are integrated into the social contract. The failure to upgrade human capital, however, will make the economic growth engine stutter. The Middle Income Trap therefore needs to be understood as a transformation trap, e.g. the inability to resolve the political and social contradictions of transformation. In the race for development, the greatest challenge is to unleash the dynamic of creative destruction while maintaining political stability. Only a social compromise between established and aspirational classes can generate the political stability needed to move up the value chain. Hence, a progressive transformation project needs to lay the social foundation for sustainable development. The paradigm discourse needs to be shifted from communalist patronage and identity politics to social empowerment and economic development.