It's good to be rich – especially in Asia. But according to a new study by the Asian Development Bank, the region's yawning wealth gap could undermine the world's most dynamic economies, including China and India. “Widening disparities in standards of living can threaten the growth process,” concludes the bank's book-length report, “Key Indicators 2007,”released today.
The gap itself is not new, to be sure. But the ADB study warns of looming dangers. By the numbers, China's rich-poor divide has growth nearly as wide as Latin America's, it says. And in India more than a quarter of all children in poor households are underweight for their age, compared to just five percent for the rich. Worst of all, the ADB argues, the wealth gap has stunted Asia's ability to lift its poorest citizens above the $1-per-day poverty line.Had more egalitarian norms of the past been maintained, it concludes, poverty rates in a handful of countries -- including China and Vietnam -- would be half what they are today. The data points illustrate a dramatic reversal.Beginning in the 1960s, Japan, South Korea and Taiwan all narrowed their rich-poor divides during periods of peak growth, thereby debunking textbook development theory, which then held that income gaps invariably widened as economies industrialized. Yet since the late 1990s Asia has shifted to a growth model in which the Haves are reaping most of the gains of today's boom, leaving the Have Nots to scrimp and grumble. Experts blame freer markets, the proliferation of high-tech manufacturing and services requiring educated workers and the relative underperformance of rural sectors – problems for which no easy policy fixes exist.
The political implications are stark. Populist politicians and pressure groups are demanding wealth redistribution in increasingly shrill tones; civil unrest sparked by unbalanced development is on the rise. The nightmare scenario is unfolding in Nepal, where Maoists have waged a “people's war” against the constitutional monarchy since the mid-1990s. Not coincidentally, Nepal boasts Asia's widest wealth gap.
