MANILA, Philippines — Asia’s efforts to improve technology and markets over the last several years have led to a widening continental gap between rich and poor. The Asia Development Bank points to a 2012 survey of 25 member nations in Asia, where more than half of respondents are critical of higher income inequality in the face of declining poverty.
A Devex report suggests that Parisian economics professor Thomas Piketty’s new bestseller, “Capital in the 21st Century,” can put the issue into perspective and help repair the income inequality gap. Devex specifically points to the release of the Asia Development Bank study Outlook 2012: Confronting Rising Inequality in Asia.
Haruhiko Kuroda, President of the Asia Development Bank, said that even in the face of stagnant global economic outlook and various sociopolitical uprisings that may shift commodity prices of things like oil, income disparity remains a chief concern.
Kuroda called for fiscal policy change and more attention to equitable access to education and technology by all, as well as infrastructure spending and “employment-friendly measures to encourage the creation of high-quality jobs.”
David Pilling of the Financial Times reported earlier in 2014 that the issues in Asia developed disproportionately to Latin America, wherein wealth and technology have growth in both areas but the inequality gap in Asia has become very exacerbated.
The Asia Development Bank, turning its attention to poverty issues, is now looking at ‘broader measures’ for nations and not relying solely on growth data, but instead including the welfare of citizens in its assessments.
Gross domestic product numbers in Asia were consistently above 8 percent in the 1990s and outpaced household consumption. Despite that, the amount of those living on less than $1.25 per day decreased during this time frame by about 440 million. Those living on slightly more per day saw their numbers fall less.
“Much of the growth, in other words, went to those who were already better off, allowing them to pull further away from the pack,” Pilling said.
Today, Asian education amounts to less than 5 percent of gross domestic product and health spending is just as low. The Asia Development Bank has been so focused on pure growth over the years that it missed the systemic consequences of its actions.
In a book review for the Sydney Morning Herald, Hugo Brown-Anderson explained that Piketty specifically explores wealth and inequality gaps in his new work.
Piketty formed his thesis by collecting and deciphering tax data from developed western nations in Europe and the United States. He concludes that the inequality gaps existing in those nations now are reminiscent of pre-World War I times and that the disparity will only continue because the rate of return on capital is higher than the rate of economic growth.
According to the review, Picketty’s solution to this trend is to create a global tax on inherited and accumulated wealth.
However, Picketty is not without his detractors. For example, Alan Reynolds, senior fellow for the Cato institute, construed the argument for increased taxation for the wealthiest. He said there is no empirical evidence that lends credence to such a policy.
Christ Giles of the Financial Times said that wealth in the hands of the rich has not resulted in vast societal income inequality, based on several of his findings.
The differences in findings are not improving conditions. Pilling points to a public Pew research poll, where the majority of all Indians consider the gap a major obstacle. Lawmakers there have disputed whether the role of government should be driving growth or improving the social standing of all. He contends that creating a stable tax base and ending corrupt practices with law enforcement are key to supporting growth and ensuring opportunity.
If any wealth redistribution were to happen, it would be under heavy scrutiny, as previous attempts have not benefited the poor.
Despite the popularity of Thomas Picketty, it is clear that his work is controversial and somewhat unsubstantiated. The realm of poverty reduction is not an exact science that can be easily quantified because there are a myriad of variables at play affecting so many.
Perhaps the questions surrounding a topic of this magnitude should focus more on power than money, as there is no clear evidence to suggest that wealth redistribution can or will work. But, ending corruption can cause lasting change.
Altering the sociopolitical landscapes of Asian nations so that lawful society can catch up to booming growth is the recipe for long-term stability and honest practices that will guarantee better futures and help solve systemic poverty.
– Dave Smith
Sources: Devex, Asian Development Bank, Financial Times 1, The Sydney Morning Herald, The Wall Street Journal, Financial Times 2