Contemporary Economic and Social Policy for Inclusive Growth

Abstract

Asia’s dramatic economic growth and technological progress mask daunting development challenges. Left unaddressed, these challenges jeopardize Asia’s gains and undermine its future prospects. Asia is at a critical economic, political, and social juncture, and the changes taking place will determine how the region develops into the future. David Arnold, President, The Asia Foundation, 2016 Over the past two decades, Asian societies saw abrupt changes in their political, social, and economic spheres. Rapid and sustained economic growth lifted hundreds of millions of people out of poverty. Well over half of Asia’s residents are now middle class and Asia is the engine of economic growth across the globe. This tremendous growth and its impact, however, are by no means uniform. The extent and type of change varied within and between countries, and many populations did not reap the same benefits as others. Significant pockets of poverty still exist throughout the region. In fact, two-thirds of the world’s poor live in Asia. Recent data suggest that more than 800,000,000 Asians exist on less than USD 1.25 a day and 1,700,000,000 live on less than USD 2 (Kuroda, 2013). Life in Asia is especially challenging for populations living in the margins of ever expanding mega-cities, isolated rural areas, areas affected by conflict, and groups that are marginalized and excluded due to biased government systems and services or social prejudices. The fast pace of political, social, and economic change in Asia is particularly striking and often presents additional challenges. Technology facilitates or accelerates many changes, often too quickly to fully understand their impact. For example, the economic sphere saw a reduction in the role of agriculture, rapid urbanization, greater industrialization, and, in some areas, growth in the service sector. Wage labor has become the most common form of employment in many Asian countries, yet regular wages often cannot provide basic needs. Other challenges continue to emerge. Asia faces demographic crises with lower birth rates and ageing populations. Inequality is a critical issue globally, and, with high concentrations of wealth and power increasingly evident in Asia, inequality also takes center stage in the region. Today, profound inequalities in wealth, income, and welfare exist across Asia. Speaking to the Organisation for Cooperation and Development (OECD) in 2013 on Asia’s challenges, towards the end of his tenure as President of the Asian Development Bank, Haruhiko Kuroda characterized the challenge this way: In many countries, the richest 1 percent of households account for close to 10 percent of total consumption and the top 5 percent account for more than 20 percent. The Gini coefficient, a measure of inequality, has increased in much of the region: taking developing Asia as a single unit, the Gini coefficient has increased from 39 to 46. And the gap is not only in income. Inequality of opportunity is prevalent and is a crucial factor in widening income inequality. For example, school-ae children from households in the poorest income quintile are up to five times more likely to be out of primary and secondary school than their peers in the richest quintile; infant mortality rates among the poorest households were 10 times higher than those among the affluent households; in South Asia, women’s [labor] force participation is only 40 percent that of men’s; and in Central and West Asia, girls’ primary and secondary school enrolment levels are 20 percent lower than those of boys. For developing Asia as a whole, 1.7 billion people (45 percent of the population) lack access to sanitation (Kuroda, 2013). Across Asia, rising inequality negatively impacts many people’s opportunities, income-earning capacity, health, and well-being. In Capital in the Twenty-first Century, the French economist Thomas Piketty suggests that growing inequality between rich and poor is the normal state of affairs in market-based economic systems. Tracing trends back three centuries, Piketty argues that periods in which inequality decreases are the exception rather than the rule (2014). Piketty’s argument further complicates the idea of addressing the inequality challenges in Asia.(...)