Growing Asian inequalities
Monday, 13 August 2007
MANAGING economic growth maintaining social equilibrium is difficult. It is a big challenge confronting many of the Asian countries. After more than a decade of development efforts, China and Nepal are now said to be having the highest rich-poor gap in Asia. According to a recent Asian Development Bank (ADB) study, the inequality between the richest 20 per cent and the poorest 20 per cent in China is increasing the fastest. The study, which covered 20 other developing Asian countries, spread from central Asia to South East Asia, has also found that the rich-poor gap has been growing in majority of them. Against other measure besides income, such as education, health and land ownership, the gap is also visible. India and Pakistan have worse records in these aspects. Bangladesh has been found ahead of India, with better records, in terms of infant mortality, child nutrition and primary education.
These unpalatable findings suggest that economies create inequalities within societies, among their different groups of citizens, at the early stages of transformation from their weaker conditions. The faster the economic growth the wider can be the initial rich-poor gap. ADB's chief research economist has reportedly warned that growing disparities could fuel greater social conflicts, "from street demonstrations to violent civil wars" in some countries. He said there is a correlation between rising inequality in Nepal and conflicts in some of its provinces. But neither the economist nor the study report has advanced any recommendation on how to resolve the problem of inequalities precipitating social convulsions. But the ADB economist said 'forces of globalisation, which favour coastal cities and hooked educated English-speaking people into world trade, do mean some inequality may be inevitable'. In that, he might have pleaded for acceptance of certain inequalities as inevitable outcomes of economic dynamism, without which any society, however ambitious, will have to maintain its traditional social equilibrium through restricted entrepreneurship and eventual economic stagnation.
The present example of the fastest growing rich-poor gap in China, the world's most rapidly expanding economy now, explains how rapid economic transformation initially results in expanded inequalities. However, if the engine of growth moves on, facilitated by proper modulation of policies to retain and reinforce its tempo, economic growth itself ensures distributive justice by expanding job opportunities and then raising the demand for workforce, which instigates pay hikes. Business competition in production, procurement and sale also drives prices down to steadily lift the wage earners and the salaried people to better social status. What then is important for a developing economy is keeping the wheel of its progress functional by greasing it with appropriate policy supports.
Yet the government and the entrepreneurs in a dynamic society have to appreciate the latent danger of public anger being fuelled by their unfulfilled expectations and exploding untimely, without waiting for a higher level of economic development to automatically establish the cherished distributive justice through a process of expansion of employment opportunities and enhanced personal incomes. While economic growth should be accelerated greatly to overtake the process of heating of public anger so as to reach the benefit of development to as many people as possible for creating a positive demonstration effect, welfare benefits for the extreme poor should be expanded to remind them all that the society has not forgotten them. Nepal's orgies have basically originated from the forgetfulness of the privileged about the downtrodden in their society. No society, including the one in this country, should commit the same mistake.
These unpalatable findings suggest that economies create inequalities within societies, among their different groups of citizens, at the early stages of transformation from their weaker conditions. The faster the economic growth the wider can be the initial rich-poor gap. ADB's chief research economist has reportedly warned that growing disparities could fuel greater social conflicts, "from street demonstrations to violent civil wars" in some countries. He said there is a correlation between rising inequality in Nepal and conflicts in some of its provinces. But neither the economist nor the study report has advanced any recommendation on how to resolve the problem of inequalities precipitating social convulsions. But the ADB economist said 'forces of globalisation, which favour coastal cities and hooked educated English-speaking people into world trade, do mean some inequality may be inevitable'. In that, he might have pleaded for acceptance of certain inequalities as inevitable outcomes of economic dynamism, without which any society, however ambitious, will have to maintain its traditional social equilibrium through restricted entrepreneurship and eventual economic stagnation.
The present example of the fastest growing rich-poor gap in China, the world's most rapidly expanding economy now, explains how rapid economic transformation initially results in expanded inequalities. However, if the engine of growth moves on, facilitated by proper modulation of policies to retain and reinforce its tempo, economic growth itself ensures distributive justice by expanding job opportunities and then raising the demand for workforce, which instigates pay hikes. Business competition in production, procurement and sale also drives prices down to steadily lift the wage earners and the salaried people to better social status. What then is important for a developing economy is keeping the wheel of its progress functional by greasing it with appropriate policy supports.
Yet the government and the entrepreneurs in a dynamic society have to appreciate the latent danger of public anger being fuelled by their unfulfilled expectations and exploding untimely, without waiting for a higher level of economic development to automatically establish the cherished distributive justice through a process of expansion of employment opportunities and enhanced personal incomes. While economic growth should be accelerated greatly to overtake the process of heating of public anger so as to reach the benefit of development to as many people as possible for creating a positive demonstration effect, welfare benefits for the extreme poor should be expanded to remind them all that the society has not forgotten them. Nepal's orgies have basically originated from the forgetfulness of the privileged about the downtrodden in their society. No society, including the one in this country, should commit the same mistake.