Wednesday 11 April 2012. Asia’s rapid economic growth may undermine stability because the gap between the rich and poor is widening, the Asia Development Bank has warned.
Releasing its annual report, the bank said a key inequality measure increased to an average reading of 38 in Asia.
And while that is less than the average found in Latin America and Africa, Asia’s figure is climbing as it declines in the other regions.
China, India and Indonesia have seen significant growth in inequality.
Not just bread
Speaking to the BBC, the Asia Development Bank’s (ADB) chief economist Changyong Rhee explained that Asia may be seeing a long-term shift in the way the gap between rich and poor has been managed.
During the 1960s and 1970s, Asia was better at ensuring that growth did not marginalise large chunks of the region’s population and was actually reducing the gap between the rich and the poor.
However, over the past decade the sudden explosion of growth and rapid enrichment of many people has seen the rich-poor divide grow. The ADB estimates that currently in most Asian countries the wealthiest 5% of the population now account for 20% of total expenditure.
At the same time, for hundreds of millions of people access to education, healthcare and housing has become more difficult and expensive.
The ADB’s Mr Rhee said policy makers would have to become more responsive to the growing divide, not least because people are now more aware of being left behind.
“With technology and communications, people can see how others are living all over the world, and their desire to live more equally is increasing,” he explained.
“People are asking for more. Not only are they asking for bread, but they are asking for a more even distribution of bread.”
Vicious circle
The ADB uses the Gini coefficient to quantify the inequality gap, and says that the higher the figure, the bigger the problem.
Food market in Manila where prices have been rising Asia is seeing the emergence of a stronger consumer class with greater aspirations
In its report, the ADB said that the Gini coefficient in China had increased to 43 in 2010, from 32 in the early 1990s. For India, the figure rose to 37 from 33 during the same period. In Indonesia it jumped to 39 from 29.
“Inequality leads to a vicious circle, with unequal opportunities creating income disparities, that in turn lead to dramatic differences in future opportunities for families,” said Mr Rhee.
Social tensions such as these can undermine governments and lead to populist politics, Mr Rhee said.
They can also see a split in national development between urban and rural areas, increasing internal instability and tensions.
Poverty shift?
However, it is not all bad news. Economic growth in developing Asia is still expected to keep growing steadily, coming in at 6.9% in 2012 and 7.3% in 2013. Inflationary pressures, one of the biggest headaches over the past 12 months, are seen moderating.
The ABD also found that the number of people living below the poverty line of $1.25 (£0.80) a day fell by 430 million between 2005 and 2010.
Going forward, the key will be ensuring the region’s economic expansion is more evenly distributed, the ADB said.
“Another 240 million people could have been lifted out of poverty over the past 20 years if inequality had remained stable instead of increasing, as it has since the 1990s,” Mr Rhee added.
http://www.bbc.co.uk/news/business-17673445
