Rising Asia, Growing Inequality |

Rising Asia, Growing Inequality

20110930_Roundtable468The Roundtable on “Rising Asia, Growing Inequality”, which was attended by a full house of about 220 guests, students and media, saw a lively debate on the nature of inequality witnessed today and the sense of injustice amplified by the social media, which is in turn facilitated by rapid technological change.

Perceptions of Inequality

We have witnessed “an attitudinal change” towards inequality, said Dean Mahbubani. As the US and Europe grapple with slowing economic growth and the threat of recession, “inequality is becoming a big theme in the West”, Rachman said, highlighting a perception that “inequality in the West comes from the rise of Asia due to downward pressures on wages of the unskilled”, a consequence of globalisation as employers scour the world for lower wages, hollowing developed Western economies. But many neglect to give China credit as her flood of cheap exports have lifted generations out of poverty by giving them access to goods and services hitherto unaffordable, such as Africans using cheap made-in-China hand phones to improve rural communications, evaluating global commodity prices to reduce the prohibitive costs of brokers and facilitating mobile banking, he said.

“People can tolerate rising inequality at the point where everybody was being a little bit better off,” Rachman said, even if it was a “wealth illusion” created by easy credit. It is when the wealth disparity widens to a point where people feel injustice that problems arise, in recent times leading to mass protests that threatened and even toppled governments, the panel agreed. 

Even in countries undergoing growth and prosperity, such as Singapore and Malaysia, resentment against the top tier is rising, Raslan said. He attributes this awareness in part to the rise of social media: “We see what the rich and powerful are doing and we are not happy. It (equality) is not just a product of societies going through a painful recession. You see it in periods of growth.”

As growth slows and economic troubles mount, “even in the developed countries, the air is getting sucked out of the middle class,” Rodin said. “People are falling at the bottom” even in developing countries where there has been extraordinary growth, deepening inequality, she said. “To understand this, we need to look at the structural situation” which many governments are not dealing with, and not merely blame it onoutsourcing and lower costs that comes with globalisation, she said.

One has to deal with a growing class of people who witness wealth increasing without benefiting them, she said, adding, “We have focused too much globally on counting on the number of jobs and not the quality of jobs.”

Structural Inhibitions

Indonesia, which underwent a dramatic economic re-modelling after the 1997/98 Asian financial crisis, has managed to reduce poverty while widening the gap between the poor and the rich, Baswedan said. He identified the developmental gap between the urban centre and rural society as a structural problem impeding fair growth and wealth distribution, and recommended a review of the education system. “The economy is developed as an urban-rural model,” he said. “Our education system is designed to supply urban life. Our education is not designed to enable you to live in a non-urban setting and (being) able to produce.”

One has to distinguish between short-term and long-term inequality, T.N. Srinivasan, Yong Pung How Chair Professor at the LKY School, said from the floor. The concern over inequality is also over the unfairness of how the rich have acquired their wealth, he said. “Are we focusing too much on inequality without discussing the fairness in bringing it about?” he asked, cautioning the audience to distinguish between the notion of inequality increasing at the start of globalisation versus the notion of it being a feature of globalisation.

“There needs to be some justice in economic growth,” Ton said. People don’t mind Microsoft founder Bill Gates being rich as much as they resent those who obtained wealth through corrupt means or in her words, “acquiring vast expanses of land for crumbs”. Raslan emphasised the link to values in leadership where socio-economic capital is unfairly used for personal economic gain.

One lesson from the West in dealing with inequality lies in the punishment for graft, Rachman noted. “The US and Europe still have an expectation that those who are corrupt and break the law will end up in jail.” This recourse to the law provides an important valve for societal anger. In Asia, where there is anger over corruption, there is a sense that there is not only inequality but that there is no recourse to law, he said. 

“Inequality matters now compared to 40 years ago because we were more equal because we were all poor,” Baswedan said. “The challenge in the long run is to ensure everyone is moving up the ladder, not only addressing equality but those behind who are moving up. Access to education is key.”

Education is needed to mould people’s expectations of government services so that they expect more public service, and thus change is driven by demands from the denizens, rather than dictated by the supply set by governments, he said.

Inequality can in part be addressed by maintaining a “reasonable balance” between state and market forces to generate the kind of infrastructure for growth and thereby, services to provide for the fair distribution of wealth to alleviate poverty, said Fu. China, the world’s most populous country and now its third-largest economy, is grappling with the issue of achieving this balance and what it means for China and the world, he said.

“Ultimately for a market to be productive, we must have technology for China to open up to the world,” he said. Governments must also improve taxation processes to be able to fund future improvements and achieve the balance between state and market, he said.

Globalisation should be about the movement of three forms of capital – physical capital, human capital and social capital, Fu said. “In manufacturing, China has neglected human capital,” he said. “Labour is used instrumentally, neglecting aspects of human capital such as education.” And as peasants move from the countryside to cities, “it’s just human capital moving” while “social capital is lacking” as workers lack the support they received in rural areas, which in turn “depresses the income” and exacerbates inequality, he said.

In Vietnam’s case, Ton lamented that there was “not enough thinking given to public services such as education and health,” and that “without clear rules of engagement and a division of roles between the state and the market, the savage market wins all the time,” resulting in the worst outcome for the country’s public hospitals and public state-owned schools. She added, “When it comes to the provision to human services, a proper analysis is needed before opening up to market forces.”

In Indonesia, the largest economy in Southeast Asia and fourth most populous country in the world, infrastructure building is largely focused on the western islands of the archipelago, resulting in geographical inequality, Baswedan said. “When we talk about inequality, there is inequality in terms of income but also in terms of geography, which sets us apart in ASEAN. It’s not just between urban or rural, educated or not educated, working or not working, but those who happen to live in the remote areas across the archipelago, so a different strategy must be adopted.”

Decentralisation, facilitated by legal reform in the past decade, has both helped speed up the provision of services and spread corruption in local institutions, he noted. Eradicating corruption and enforcing the rule of law is key, he said, agreeing with Rachman.

Health and Equality 

On the matter of health and inequality, the findings of Asian Trends Monitoring provoked robust discussion. While Vietnam and Malaysia have a similar life expectancy of 64 years, Malaysia has more than quadruple the rate of obesity (45 per cent versus 10 per cent for Vietnam) and the worst indicator for diabetes in the ASEAN countries, prompting Raslan to urge the government to intervene more by controlling subsidies for sugar production.

Where Vietnam also shines is the low rate of maternal deaths, ATM data showed. Ton provided a heartening statistic, noting that coverage of health services is countrywide, resulting in about 95 per cent of births being attended by trained health workers. About 86 per cent of Vietnamese women make pre-natal visits to check on the health of the baby and themselves, she added. Improved access to clean water and sanitation and road networks has helped reduce mortality rates, Ton said, underscoring the importance of infrastructure to public services. “The doctors are able to come to your aid easily” as a result of good roads, reducing maternal deaths, she said. The main challenge is among ethnic minority women, who are not receiving the same quality of services, she added.

Vietnam’s model is a shining light for other developing countries in the region, where the gap between rural and urban women in terms of access to skilled care during childbirth remains wide, namely Laos, Cambodia, the Philippines and Indonesia, according to ATM data.

Rice has also become the staple in Indonesia, where previously it was mostly a staple for Sumatrans, Baswedan noted, raising concerns over the dependency on one crop and the potential for widening inequality when availability to the main source of protein is threatened. Now, the Southeast Asian region consumes the most rice in the world, about 62 kg a year, he said. The impact of climate change should be considered when calibrating policies that address inequalities, Rodin said.

Women in the Equality Debate

The roundtable Q&A also provoked a discussion on how inequality may or may not have disadvantaged women and the wider implications for society, in a question raised by Dr Astrid Tuminez, Vice Dean (Research) at the School. 

Raslan observed that “Malaysia is facing a fundamental challenge where university enrolment is now 70 per cent women, and 30 per cent guys,” a ratio that is reflected in the enrolment into civil service positions. “How will Malaysian Muslim men cope with the fact that Muslim women are doing so much better? ‘ he noted, adding that in the corporate sector, employers also prefer to hire women. 

Ton observed that in Vietnam, the starting point was balanced with equal ratios of men and women on higher education. Women “start losing out in civil service and career promotions” and one-third of small- and medium-sized enterprises are owned by or headed by women.

Fu noted that tenets of Confucianism that reinforced paternalism in China as an agrarian society were less relevant in a post-industrialised society where intellectual heft carried more weight than physical might.

Indonesia has culturally been more open to equal opportunity for women, Baswedan said. “Women are doing well in terms of numbers attending, and scores achieved.” However, it has not translated into seats in the legislature, he noted, and therefore policy-making.

 

For more on the Roundtable and data from the ATM team, please click here.

By Claire Leow, a senior manager for research and dissemination at the LKY School.

 

Multimedia: Webcast Part 1 , Part 2 | YouTube

 
Synopsis:

As Asia’s stature has risen, the shadow it has cast has also grown longer. No examination of its success story is complete without looking at the negative and often un-intended consequences. In three decades, China has lifted 400 million out of poverty to an urban middle class, according to The Economist. Yet 58 per cent of the adult population have no access to financial services, according to data gleaned by Asian Trends Monitoring, a research project at the Lee Kuan Yew School of Public Policy.

Looking across Asia, Southeast Asia’s tiger economies are themselves stories of economic miracles, developments that have created inequalities within their own societies and between neighbours in access to basic financial, health, education, and social services. The risk is taking these for granted, to have “poverty fatigue” or “inequality fatigue” and neglect to examine the underlying causes and correlations.

The LKY School has produced a special issue of the Asian Trends Monitoring (ATM) Bulletin which focuses on this contradictory narrative of “Rising Asia: Growing Inequalities”, to highlight how growth can inadvertently create circumstances that reduce the economic resilience of marginal communities.

In the area of infrastructure, there is much to learn from each other. China has been very successful in building basic infrastructure and providing access to water, sanitation and electricity, especially in rural areas. How can developing countries in Southeast Asia, such as Laos, Cambodia and Indonesia, learn from its experience? Why has Vietnam been much more successful in providing access to water, sanitation and electricity than its neighbours in the Mekong area? Indonesia, with the world’s third-largest population, has developed its urban areas and lifted its middle class, but struggles to provide rural access to infrastructure. The data is examined by the ATM team. 

Despite Southeast Asia’s economic success, large populations remain unbanked. More than 1 billion people in ASEAN and China have no access to financial services, ATM says. Yet ownership of mobile phones is rising across the board, which enables access to financial services and an opportunity to reduce transaction costs for consumers and businesses. The Philippines and Vietnam now have more than 100 mobiles per 100 people, while more than 70 per cent of their population do not have access to financial services, the ATM data shows.

Mobile telephony is increasingly giving users Internet connectivity, though not evenly throughout the region. Malaysia is on par with Vietnam, the Philippines and Thailand in terms of mobile phone users, but it stands out when we look at Internet connectivity. Twice as many Malaysian now have access to the Internet as compared to Thailand or Vietnam, according to ATM data.

Despite Asia’s economic success, the region continues to be plagued by chronic diseases. The latter are fast increasing in Malaysia, which has the worst indicators for obesity and diabetes in ASEAN. Both Malaysia and Vietnam have a life expectancy of 64 years but Malaysia has more than four times as many overweight adults, putting it at greater risks of higher health costs and risks to economic prospects. Singapore has the lowest dietary consumption of the ASEAN-10 and the third-highest incidence of adult obesity, ATM data shows. 

In Indonesia, the percentage of stunted children is rising. More than half the population in Myanmar, Laos, Cambodia, Vietnam and Indonesia also use solid fuels for cooking, resorting to wood or coals. The World Health Organisation reports that children under five years of age are up to 2.3 times more likely to contract acute infections of the lower respiratory tract if exposed to indoor pollution from the use of solid fuels. Addressing inequality to energy access will indirectly address the impact on chronic diseases.

The ATM data throws up some surprises. Among the bright spots, Vietnam is one of the top regional performers in reducing maternal deaths.

Within countries, rising inequality can weaken social cohesion and adversely affect prospects for economic growth, Haruhiko Kuroda, president of the Asian Development Bank, has said.

Speaker(s):

Professor Kishore Mahbubani, Dean, Lee Kuan Yew School of Public Policy; Dr. Judith Rodin, President of the Rockefeller Foundation; Dr. Anies Baswedan, President, Paramadina University and one of Indonesia’s leading public intellectuals; Professor Fu Jun, Executive Dean, Peking University School of Government, Beijing; Mr. Gideon Rachman, Chief Foreign Affairs Columnist, Financial Times; Mr. Karim Raslan, writer and consultant based in Indonesia and Malaysia; and Senator Ton Nu Thi Ninh, President, Founding Committee of Tri Viet University, Vietnam.

 

Date:
Friday, 30 September 2011
Time:
1.30 p.m. - 3.00 p.m.
Venue:

Auditorium, Level 3, Block B, Faculty of Law,
NUS Bukit Timah Campus
469G Bukit Timah Road
Singapore 259776

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