This article was submitted by the author to, and published here by, Cultural Streams International.
Sustainable Economic Growth & Quality
of Life in Asia
By Rajat M. Nag
Asia has reasons to hold its head high and celebrate
its economic success. It is a journey that began with Japan emerging as an
industrialized nation, followed by the
ascension of Asia’s “newly industrialized economies (NIEs),”
and more recently the emergence of new economic powerhouses—the People’s
Republic of China (PRC) and India.
The region has come a long way and shown tremendous
resilience in overcoming famines, energy crises, market meltdowns, and economic
downturns. Developing Asia galloped at an average rate of over 8 percent in the past three years. Asia’s economic and
social transformation can be witnessed from Beijing to Bangalore and from Seoul to Singapore. Asia's rise in the 20th century is really a
reemergence to the position it held in the world economy prior to the
industrial revolution. It is estimated that in 1820, Asia represented
58% of global GDP—a figure that fell to 27% by 1920 and just 19% by 1940.
Today, Asia's share of the world economy, including Japan, exceeds 35%
and it is not inconceivable that it could climb back to its historic high
within the next two decades.
While these are indeed reasons to rejoice, it is sad
to see that the rising economic tide has not lifted all boats in the region. The
region still remains home to the majority of the world’s poor.
Miles To Go……
Behind the gates of the wealthy food
lies rotting from waste. Outside it's the poor who lie frozen to death.
(8th century Chinese poet Du Fu)
Rapid economic growth and existence of millions of
poor have given birth to what we say are the “two faces of Asia”—one that is
witnessed from the glitzy towers of Mumbai and Shanghai and the other seen in
the gloom covering the slums of Jakarta, Manila, and Mumbai. The phenomenal
success of pulling millions out of destitution in the region and the transition
of economies like South Korea and Singapore to developed nation status through adoption of
outward-oriented development policies are achievements that other developing
regions dream to emulate. Asia is now home to some of the world's fastest growing
countries, expanding at near double digit rates or even faster, and some of
them emerging as global economic powers. On the other end of the spectrum, we
have economies that remain stuck in the poverty trap and continue to perform
weakly, and some are in post-conflict situations and face a grim future.
This growing economic dualism poses a threat to
sustaining Asia’s dynamic growth and social cohesion. Asia today
stands at a crossroad, where it can either embrace policies that help it to
grow at a blistering pace and lift millions out of grinding poverty or simply
continue to move ahead at a roaring speed leaving the poor behind.
The “two faces of Asia”
need to converge to sustain growth and maintain social harmony in the region as
well as within the countries. There can be only one Asia—one face of Asia, with
opportunities open to all, an Asia and Pacific where every individual can live
with dignity—free of poverty and sharing in prosperity.
The task of meeting this challenge should not be
underestimated. Even by conservative estimates, there would be 1.5 billion of
poor in Asia by 2015 with incomes less than $2 a day. This means
that a large number in Asia will still have to eke out a daily existence on less
than the cost of a Starbucks latte. The PRC would have 237 million of poor and India 791 million. During the next decade, the challenges
of poverty will not disappear, but they will certainly evolve in form and
dimension. Growth in Asia has helped to lift millions out of poverty in the
past few decades but at the same time the earnings gap and hence quality of life gap between the rich and poor has also
widened in many parts of the region, particularly Bangladesh, Cambodia, Lao PDR, Nepal, and Sri Lanka.
While rising inequality is indeed worrisome, waging an all-out
battle against poverty is the only way to merge the “two faces of Asia”
and close the development gaps. And in this battle, rapid and sustainable
growth remains the best weapon in our arsenal to combat poverty and bring a
change in the quality of lives
of the poor—the bypassed and the marginalized of Asia.
According to our estimates, every 1% growth has been associated with an almost 2%
decline in poverty incidence on average.
Rising income inequalities are emerging as a new
challenge for policymakers and have the potential to threaten stability and prosperity
of the region. But we need to recognize that some inequalities are not always undesirable.
We have to distinguish between bad
and good inequalities. For example, individual efforts that foster innovation,
entrepreneurship, and growth through market instruments—what we call “good
inequalities,” should be rewarded and not penalized. On the other hand, an
individual’s circumstances such as religious background, parental education,
geographic location, and caste (as in India) are exogenous and outside of an individual’s
control. These can lead to creation of what we call “bad inequalities.” Here,
the state needs to consciously make efforts to reduce such “bad inequalities” through
targeted and effective public policy interventions.
Many
Faces of Poverty
“Recall the face of the poorest and the weakest
man whom you
may have seen, and ask yourself, if the step you
contemplate is going to
be of any use to him.”
(Mahatma
Gandhi)
Poverty
has many faces in Asia, changing from place to place and across
time. We have to unleash new waves of opportunities and explore new sources of
growth so that the benefits are reaped by all. However the reality on the
ground now is an Asia-Pacific where two-thirds of the world’s poor live—an
Asia-Pacific where about 685 million do not have access to improved water
supply and 2 billion do not have access to improved sanitation. Well over half
of the world's undernourished, and of those living in slums, live in Asia. And 43 out of
every 100 children who die before reaching age 5 are born in Asia.
Take
India, which has
experienced blistering economic growth in the past decade. While about 5 out of 100 children are severely underweight among the
richest 20% of households in India, it is heart-wrenching
to see that this share is as high as 28 per 100 for the poorest 20% of
households. A recent UNICEF analysis done in conjunction with India’s health ministry,
also found that 46 percent of children below the age of 3 suffer from
malnutrition. That’s a disturbing figure, and it is worse than even in sub-Saharan Africa (35%). Within India, the impact of
poverty and interregional non-income inequalities are perhaps most starkly
illustrated by infant mortality rates—which are eight times higher in Orissa
than in Kerala, and more than twice as high for mothers with no education than
for those with a secondary education or better.
The
persistence of absolute poverty and lack of access to basic human necessities in
many parts of developing Asia is a stark
reminder that the benefits of rapid economic development have not been shared
by all. Such multiple deprivations and erosion of human dignity cast a shadow
on Asia’s bright
economic landscape.
Creation of and Access to Opportunities
“Development requires the removal of
major sources of unfreedom: poverty as well as tyranny, poor economic opportunities
as well as systematic social deprivation, neglect of public facilities as well
as intolerance or overreaction of repressive states”
(Amartya Sen, Development as Freedom)
Asia
has to invest in creating opportunities that are needed to lift millions out of
destitution and ensure that these opportunities are accessible to all. Redistribution
of income is not the solution to reduce poverty. Rapid growth is necessary to
create opportunities that can be accessed by all and help alleviate the misery
and sufferings of millions living in abject poverty.
While growth
remains the best panacea for reducing poverty, unless we remove or at least
reduce some of the major binding constraints affecting the poor, strong growth itself
can remain elusive and inequalities will continue to persist in societies. For
example, the poor, who generally lack access to even basic banking and
insurance, are in no position to undertake many of the profitable activities
that fuel investment and growth. This is in turn creates a vicious cycle in which low growth results in
high poverty and high poverty acts as a brake against growth.
Poverty cannot be conquered without significant investments
in health, education, human resource development, and social safety nets to
bring more people, especially the poor, into the process of growth. No doubt, Asia
needs massive investments in physical infrastructure to sustain growth, but it
also needs equally large, if not larger, investments in social infrastructure
to provide the poor with access to services and employment opportunities.
We believe that Asia
will need some $3 trillion over the next ten years for energy, transport, utilities,
and telecommunications infrastructure. At current rates of investment, less
than half of such demands will be met. And governments on their own will not be
able to meet these huge demands for infrastructure; private sector
participation, to say the least, will be critical.
Countries that generate rapid, environmentally
sustainable economic growth and create decent and productive employment will
beat poverty as well as build the foundations for political and social
stability. The most effective way to win the war against poverty and inequality
towards improving quality of life,
is through sustaining developing Asia’s high growth rate, creation of high quality physical
and social infrastructure, and generation of jobs to absorb millions of rural
poor who still depend on farm income alone for livelihood.
Governance reforms that strengthen and create
institutions are also essential to ensure that the poor can access economic
opportunities created by rapid growth. We have to make sure that development
does not exclude the poor and marginalized sections of society, and economic
and market fluctuations do not inflict sufferings on the vulnerable. Developing
Asia has to keep its foot on the pedal to ensure that
growth remains buoyant and helps to lift millions out of their daily
sufferings. But growth has to be inclusive so that the benefits are shared
equally by all. If we fail to address this challenge, the glitzy towers of Manila and Mumbai will continue to be ringed by slums and
threaten both the economic progress and social cohesion of one of the most
dynamic regions of the world.
Yesterday
is gone. Tomorrow has not yet come. We have only today. Let us begin.”
(Mother
Teresa)
-----
Rajat M. Nag, a Canadian national, is the Managing Director
General of the Asian Development Bank.
***** If you would like to comment on this article, click here COMMENT. *****
Please include reference to this article in your comment
