In the 1960s, economic theorists divided the world into a hegemonic industrialized “North” and an exploited and impoverished “South.” In this dense, data-rich milestone of a study, a group of World Bank experts argue that the rise of the Southern economies—including those of Brazil, Mexico, and other countries in Latin America—has disrupted this simple dichotomy and created a more differentiated and intertwined international economy. (In the financial sphere, however, the Northern capital centers—New York, London, Frankfurt, and Tokyo—retain their traditional dominance.) As an increasingly globalized region, Latin America depends for its future on the extent and quality of its external connections. In reaffirming the value of openness, the authors argue that trade and investment boost growth not only through efficiency gains but also by serving as conduits for learning and technology diffusion, which in turn depend on where countries fit into global supply chains. In a finding certain to raise hackles in some parts of the developing world, the study argues that “trade linkages with the North could indeed yield higher growth payoffs than trade with the South.”
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