|
The Asian Development Bank is again heckling the
Philippines, noting the widening gap between the rich and the poor
in the country and the rest of the developing Asia, and claiming
this gap is a threat to growth.
Before ADB came to life in 1966,
Asia was a very prosperous region. Forty-one years after ADB, the
bank itself is complaining. ADB should be the last to whine about
what has happened to the region. If anything went wrong, then ADB
should gamely take part of the blame. It failed in its mission.
ADB’s “Key Indicators 2007”
says “the poor are still lagging behind in the region’s rapid
development even as poverty rates decline. Both relative and
absolute inequality have increased in most parts of developing Asia,
the report adds. While relative inequality is concerned with
proportionate differences in incomes, absolute inequality is
concerned with actual dollar differences in incomes.”
The bank measures inequality thru
what it calls the Gini coefficient where zero is perfect equality
and 100 is perfect inequality, and uses expenditures as a basis.
Inequality is a good measure of growth because a country, like the
Philippines, may be posting high growth rates (6.9 percent in GDP in
the first quarter) and still the ranks of the poor swell. That means
growth doesn’t filter down to the masses and is captured or
enjoyed only by the rich and the very rich. If such a situation
persists, you create a social volcano and unstable governments. This
is what happened in Nepal.
Inequality has risen
significantly in Bangladesh, Cambodia, the People’s Republic of
China (PRC), Lao PDR, Nepal and Sri Lanka between the 1990s and
2000s.
In the case of China, notes the
bank, the Gini coefficient is estimated at around 47 in 2004, closer
to figures associated with Latin American economies and less
reminiscent of the “growth with equity” experience of developing
Asia’s original newly industrializing economies, such as Korea and
Taipei.
Absolute inequality has increased
virtually everywhere between the 1990s and 2000s, asserts ADB. The
richest improved their standards of living. The poorest did not.
Expenditures of the “rich” (top 20 percent) increased much more
than those of the “poor” (bottom 20 percent). This has happened
even in Indonesia and Malaysia where relative inequality declined.
In societies where wealth is
concentrated in the hands of a few, ADB warns, “there is a danger
of policy levers being captured by the rich for their own benefit
and a weakening of the institutional foundations of the growth
process.”
So, what is causing the gap
between rich and poor to widen in developing Asia?
The report identifies unevenness
in growth in incomes across urban and rural areas, leading and
lagging sub-national regions, and highly educated households and the
less educated as important factors associated with increases in
inequality.
In China, sharpening income
disparities between coastal and interior regions have been driven by
its increased openness.
However, weaknesses and
imbalances in policy have also been at play. In several cases, slow
growth in rural incomes has resulted from weaknesses in public
investments in rural infrastructure and a policy environment that
has kept private investment away. Meanwhile, growth in urban areas
has been insufficient to absorb surplus labor from rural areas.
Instead, new opportunities generated by urban growth in developing
Asia have favored the highly educated, further aggravating the
earnings gap between the rich and poor.
The ADB doesn’t blame itself
for the widening gap. It blames “the interplay between
market-oriented reforms and globalization.” If you ask me, market
reforms and globalization exacerbated income disparity. But the
basic problem, poverty, was not solved by the bank.
This same income disparity has
prompted the Nobel Peace Prizewinner Mohammad Yunus to complain
that “the world is not flat,” contrary to what Thomas Friedman
says in his bestseller. Yunus says 6 percent of the world’s income
goes to 60 percent of the population. For this 60 percent who gets
just six percent, the so-called flat world doesn’t exist.
One problem with ADB is that it
threw massive loans into infrastructure buildup without paying much
attention, as it does belatedly only now, with helping provide basic
education, decent water supply and cheap medicines, and enabling the
poor to create jobs for themselves.
The experience of Yunus’s
Grameen Bank and Elizabeth Lee’s “Ur Van, Ur Business”
programs is that you can train the poor to create livelihood for
themselves and not rely on dole-outs from the government.
ADB offers three solutions each
of which garbed in grandiose and esoteric language. Try to
understand what the following solutions mean:
“First, complementary policies
that can counter the negative distributional impacts of
market-oriented reforms are needed.”
“Second, a concerted effort
involving a partnership between the public and private sectors is
needed to develop new economic activities and industries that
generate new employment opportunities that do not bypass the
poor.”
“Finally, policy makers have to
focus on radically improving the quality of basic health care and
education available to Asia’s disadvantaged.”
Go figure that out.
biznewsasia@gmail.com
|
