The rising inequality and the World Economic Forum

The Philippines’ trailblazing economic accomplishments in the past few years are enough leverage for the World Economic Forum (WEF) to be held in the country, according to the organizers.

The meeting highlights the growing importance of Asia throughout the world. The last decade saw the emergence of Asia as the most dynamic region in the world, leading the way in both economic growth and poverty reduction.

The average annual growth rate of the gross domestic product (GDP) of both developed and developing countries in the Asian region from 1990 to 2010 was pegged at 7% while the rest of the world’s growth remained stagnant or only moderately increased.

According to the Asian Development Bank (ADB), an estimated 700 million people were lifted out of poverty because of this impressive growth. Much of this growth was powered by the world’s two emerging economic superpowers – China and India – with Indonesia coming up fast as one of the wealth frontiers of Asia.

It is not surprising therefore that in the 2013 Forbes magazine report of the richest people around the world, 19 of the top 100 billionaires are from Asia, with India, China, and Hong Kong having the most number of billionaires.

Another Forbes list shows there are 83 billionaires in just 5 countries in the region, specifically Indonesia, the Philippines, Singapore, Malaysia, Thailand, and Vietnam. This is a testament to the phenomenal growth that is happening in the region.

The 2012 Julius Baer report estimated that Asia will have 2.8 million “high net worth individuals” or individuals with at least $1 million in investable assets by 2015, with India, China, and Indonesia at the forefront of this pack.

Unshared growth and inequitable progress

This stunning growth and wealth creation are occurring side by side with tremendous poverty and worsening inequality.

Equity gaps are widening – the rich get richer and the majority who are poor are left behind with little or no access to opportunities created by this growth, let alone to the basic services they so direly need.

The Asian Development Bank (ADB) estimates that at least 1.7 billion people in the region still struggle to make both ends meet with $2 a day, with 700 million of them mired in abject poverty as they struggle to live with less than $1 per day.

The Food and Agriculture Organization estimated at least 572 million people in Asia are chronically hungry and a huge percentage are undernourished. This is a bitter irony since the region is home to two-thirds of the world’s food producers—family farmers, rural women, and small fishers.

Indeed, while economic growth benefitted some, millions continued to fall through the cracks.

In an Oxfam report titled “Working for the Few: Political capture and economic inequality” released last January in time for the WEF in Davos, it was revealed that the “85 richest people own the wealth of half of the world’s population.”

The clearest picture of the widening inequality in the region is the fact that while most of world’s newest millionaires hail from Asia’s two emerging economic superpowers – China and India – these two countries are also home to the world’s poorest.

In both countries, the majority of the population lives under crushing poverty. The World Bank estimates that at least 32% of India’s population lives below the international extreme poverty line of $1.25 per day. Factor in the size of India’s population of 1.27 billion and you get a sense of the scale of the problem.

Meanwhile, while China experienced the highest growth in the entire world it also has the record for having the highest Gini coefficient – common measure of income inequality, where a higher Gini coefficient means higher rates of inequality – in developing Asia. Indonesia also made great strides in terms of growth per GDP and reducing poverty but 30 million Indonesians continue to battle poverty, with another 60 million living just above the poverty line which could tumble back in case of economic shocks. Indonesia’s Gini coefficient has been increasing as well and was pegged at 41 percent in 2012.

This situation, is largely mirrored in Southeast Asia where the second best performing economy after China—the Philippines—continues to grapple with the dilemma of poverty, hunger and unemployment figures continuing to rise despite high rates of growth.

Women have also been excluded from the benefits of this growth. Women make up more than half of the population in Asia, but they are not given equal access to resources. Only 12 percent of the 3 million landowners in Asia are women.

Ironically, the same policies (globalization, technological innovations, market reforms—structural adjustment, trade liberalization, and privatization policies) which produced exceptional economic growth are blamed by civil society groups as having exacerbated, if not caused the pervasive poverty and gaping inequality in the region. The ADB in a series of articles tackling inequality also acknowledges that the same forces responsible for Asia’s growth are also driving inequality higher.

Asia is second to Africa as the destination of land investments globally. Parallel to this, however, is the increasing cases of land grabbing in the region depriving small farmers and food producers of control over land and other natural resources. Also, opportunities created by this growth often require skills that are often held for example by those who had access to education, a basic service that is until now not universally provided for by all governments in the region.

In spite of the rosy picture of economic growth for a region, there is a growth that is not shared by all, a progress that is not inequitable.

Pork scam:  Inequality of power

In the Philippines alone, even if the government is trumpeting its 7.2 economic growth and the credit rating upgrades from Standard and Poor’s, Moody’s and Fitch Group, 11.8 million households consider themselves poor with 8.8 million households are food poor according a Social Weather Station (SWS) survey  

Joblessness is pervasive with a rate of 27.5 and the Gini coefficient has remained stagnant despite social and economic measures that are aimed at reducing the same.

Clearly, growth alone does not produce the desired broad social benefits such as poverty and hunger reduction. Wealth created from surging economic expansion has been captured by a relatively small minority with the means and the right connections.

Extreme concentrations of wealth in the hands of the few have promoted inequality, perpetuating poverty since wealth also redounds to power and influence.

In the Philippines, for example, inequality is threatening democratic institutions and access to public funds. The pork barrel scam is a concrete example of how inequality undermines equal access to wealth.

The privileged few like the Napoleses and our honorable senators and representatives of the House used power and influence to further tilt the balance in their favor by channeling their PDAFs at their own disposal. This is a clear illustration of how the wealthiest individuals and group can capture power at the expense of the majority who are mired in poverty. This proves that a massive concentration of resources is a significant setback to inclusive political systems and economic growth.

What can be done

But extreme inequality is not inevitable. It can be reversed quickly by addressing its root causes —imbalances in political and economic power, lack of access to productive resources, poor people’s vulnerability, and lack of adaptive capacity to climate change shocks, lack of women’s access to resources, and the lke.

In their respective settings and adopt policies at the national level, which will provide basic infrastructure and services aimed at levelling the playing field for the poor.

There are also measures that can be undertaken regionally that can help support these national initiatives aimed at addressing inequality.

The Association of South East Asian Nations (ASEAN), as an integrated community by 2015, can respond to this challenge by implementing policy measures that will help reduce inequality while still fostering economic growth. It can encourage its member states to provide basic infrastructure and services that can help spread growth opportunities and provide access to this by the poor. It can adopt a regional regulatory framework that will protect communities of small farmers and food producers from unfair land investments and land grabbing. It can promote women’s equal access to resources.

As the region’s growth is also hostage to extreme weather, ASEAN can take an active role in global climate negotiations to argue support for climate change adaptation and disaster risk reduction initiatives for the region.

Together, we can work towards reversing the rising trend of inequality which seeks to dismantle even the limited and hard-fought gains achieved against poverty and injustice. But unless policies are put in place specifically targeted at reducing the yawning equity gap, the ranks of the poor will continue to grow while the wealthy thrive. -Rappler.com 

Carmina Flores-Obanil is Oxfam’s East Asia GROW Campaign Officer. Jed Alegado is Oxfam’s Media & Communications Officer in the Philippines.