Inequality, Trade, and Growth Nexus in the Asia Pacific
Taimur Khilji
UNDP Regional Centre Colombo
| The uncomfortable truth is that in this age of instant communication and global integration there are enormous inequalities separating human beings, with billions barely subsisting, billions working in incredibly difficult conditions, and a small elite commanding a mind-boggling degree of wealth. Kemal Dervis, UNDP Administrator |
The pattern of divergence in economic performance across Asia points to its diversity[1]. Developed economies such as Korea (ROK) find themselves among some of the poorest economies in the world such as Afghanistan. At the same time, Asia also has several of the fastest growing economies including China, India and Vietnam. Island states such as some Pacific Island Countries and Maldives, are some of the smallest economies in the world. China and India, on the other hand are the most populated countries and together house the majority of the world’s poor. In terms of governing, China has a history of over 4000 years of governance, while Timor-Leste, having gained independence in 2002, is struggling to put governance systems in place. Such diversity only suggests that each country faces its unique constraints, challenges, and opportunities that are largely characterized by context. One would naturally expect that such diversity would encourage different growth trajectories.
There are at least two Asias today. There is the Asia that has in the past half century grown at an unprecedented rate, faster than any other region. The economic successes of a number of Asian economies have been aptly deemed ‘miracles’. This is the Asia that has reaped the benefits of globalization, made tremendous strides in reducing poverty, and firmly established itself as an economic powerhouse challenging the established world order. This is the Asia that has built complex trade networks within the region based on constant intra-regional trade in electronic ‘parts and components’, where the production process has been fragmented according to dynamic comparative advantage. This is the frequently projected impression of Asia. It rests on the belief that Asia’s economic successes are largely due to its active role in the globalization process. This is Asia rising; a partially true, but nonetheless incomplete picture.
Then there is the less pristine Asia, which comprises the largest number of poor on a single continent; the number close to a billion strong. This is the Asia where 500 million people go hungry every day, most of whom live inland and work in the rural sector, away from the booming cities. It is also home to 14 Least Developed Countries (LDCs) with an average per capita income of just $ 500. The LDCs have not been able adapt to the growing demands of a more connected world. A number of countries are marred by constant conflict and political turmoil, leading to constant instability. More recently, the last couple of years have taken a further toll on the peoples of this diverse region, as food and fuel prices have disproportionately affected the people in the lowest income bracket. And most recently, it seems even the middle classes and wealthy are not completely immune, as they have seen their life savings take a tumble in a fragile and inter-dependent financial world. This paints an impression of Asia struggling and vulnerable, and one that exposes penury. This picture is again only partially true. It needs to be seen against its alter-ego—Asia rising.
When the two contrasting depictions are woven together, we can safely state that affluence is increasing in the face of extreme and persistent deprivation. The two co-exist side by side. There has been high and consistent growth, but it has been concentrated and distributed unevenly. The consequence has been widening disparities between those who have been the recipients of economic growth and those who have not benefited from it. At the regional level there is a yawning gap across countries in terms of levels of economic growth and development. Within countries, the disparities are equally as stark. The gini-coefficient, the indicator most commonly used for inequality, shows that 11 out of 16 countries in Asia and the Pacific have shown marked increases in levels of inequality. The problem is real. As we look towards the future and try to reconcile the strong, sustained and concentrated growth with the persistent and glaring poverty, the issue of growing inequality comes to the fore.
· Given the current state of worsening income inequality, how do governments and institutions begin to address the problem?
· What policy options/instruments do governments have at their disposal to address inequality?
· How does one attempt to address inequality at a regional level?
· What is the role of global and regional governance institutions?
· What role does trade play?
[1] Diversity is taken up by the Austrian Philosopher Ludwig Wittgenstein to show the many ways in which people use (a) word/s in everyday language so as avoid the trap of following strict definitions often ascribed to (the) word/s. Parallels exist in economics and politics, where consensus is often built without giving proper consideration to the varieties of experiences that together give meaning to social/economic/political concepts like inequality and economic development.
