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Friday, May 2, 2008

'Globalisation, cause for inequality in Asia'

Inequality is rising across most of Asia, partly as a result of globalisation favouring the well educated and penalising the less skilled, the Asian Development Bank said on Wednesday 30th April 2008.

The Manila-based lender said its findings did not mean Asia should turn its back on integration into the world Economy or on market reforms.

Rather, governments needed to pursue a range of policies to reverse the trend of the rich getting richer faster than the poor, the ADB said in a report released in Beijing.

To lift the incomes of the poor, the ADB called for more public investment in agriculture; better job opportunities in the rural sector and informal urban Economy; and a switch in spending from tertiary to basic education.

Alluding to the power wielded by Asia's rich elites, the report also said there was a need to recognise and limit "the very real danger that concentrations of income and wealth pose for social cohesion and growth-promoting policies and institutions".

The ADB's report, "Key Indicators 2007", acknowledged the formidable challenge of crafting policies that spread income in a way that does not sap growth.

"But the need for redistributive policies will not go away -- especially if increasing inequalities turn out to be an enduring feature of developing Asia over the next two or three decades," the ADB said.

Inequality had certainly been a salient feature of the region's development in the past decade or so, the report said.

Relative inequality has increased sharply in Nepal, China, Cambodia, Sri Lanka, Bangladesh and Laos.

In China, it is now at a level more usually associated with Latin America and sub-Saharan Africa. The country's Gini coefficient stood at about 0.47 in 2004, up from around 0.40 in 1993, according to the ADB.

In a society where income was perfectly distributed, the Gini coefficient would be zero; if all the income was concentrated in the hands of one person, it would be 1. A reading over 0.4 is considered by economists to be a cause for concern.

Absolute inequality -- measured by actual dollar differences in incomes -- has also increased virtually everywhere, with the richest 20 percent of Asians enjoying much bigger increases in living standards than the poorest 20 percent.

This trend was evident even in countries such as Indonesia and Malaysia where relative inequality had declined, the report said.

Inequality to some extent is a natural part of development. Not everyone can get rich at the same time. Wealth trickles down.

But the ADB said globalisation was playing a major role in accentuating inequality by creating more opportunities for the mobile professional at the expense of the unskilled labourer.

"Widening differentials in earnings of the college-educated vis-a-vis less-educated individuals appears to be the single most important observable factor accounting for increasing inequality," the ADB said....


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