The Asia Development Bank has warned Asia’s rapid economic growth is widening the gap between rich and the poor and undermining stability as a result. In its annual report, the bank said it witnessed an increase in Asia’s inequality measure by approximately 38 points in comparison to Latin America and Africa where it is less than average.
China, India and Indonesia have seen significant growth in the gap between rich and the poor in recent years.
Distribution of Wealth
Changyong Rhee, ADB’s chief economist, explained to BBC that Asia, back in the 1960s and 1970s, was doing enough to ensure that growth rates did not affect the region’s development and enacted policies that managed to reduce the gap.
However, the sudden explosion of economic development and rapid enrichment of a few during the last decade has pushed the rich-poor gap wide open. The ADB expert said that the wealthiest 5% of the population in most Asian countries now account for 20% of total expenditure. On the other hand, he added, hundreds of millions of people are finding it hard to have a decent access to education, housing and health care services, thanks to rampant inflation and rising cost of living.
“The policy makers are more aggressive and have become more responsive to growth division as people have become 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,” Rhee explained.
“People are asking for more. Not only are they asking for bread, but they are asking for a more even distribution of bread.”
The ADB uses the Gini coefficient to quantify the inequality gap where, the higher the figure, the bigger the problem.
As per the ADB report, the Gini coefficient in China jumped to 43 in 2010, from 32 in the early 1990s. The figure hit 37 from 33 during the same period for India. In Indonesia, it increased 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 Rhee. Social tensions, rising out of such situations, can undermine governments and lead to populist politics, he added.
Some Good News
Despite the doom and gloom, economists note that Asian economic growth is expected to keep growing steadily, hitting 6.9% in 2012 and 7.3% next year. Inflationary pressures are also expected to cool down in times ahead.
ADB findings also suggest that number of people living below poverty line of $1.25 (AED4.60) decreased by 430 million from 2005 to 2010. The bank demanded the policy makers in the region to ensure future economic expansion is more evenly distributed in order to be widely acceptable and practical.
“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,” Rhee concluded.