Inequality, poverty and our oligarch

IT has been 44 years since the late Nobel Lauriate Gunnar Myrdal finished his monumental 10-year study Asian Drama: An Inquiry into the Poverty of Nations. That tome helped re-arrange the thinking of world leaders about poverty and in particular poverty in Asia. It boosted government policymakers in rich and poor countries alike, and in the United Nations, who were pushing their brands of anti-poverty programs.

Unfortunately, despite all the work and the expense through the years of trillions of US dollars on efforts to radically reduce the rich-poor gap, it appears that poverty in Asia and the gap between the economic North and South of Asian societies are still the same as in the years when Gunnar Myrdal was researching and writing his classic study.

Asian Development Outlook 2012 (or ADO 2012), the annual assessment of Asian prospects by the Asian Development Bank, says that despite our continent’s being these days the part of the world experiencing rapid economic growth—therefore the growth vanguard of the global economy—Asia continues to be home to some of the Earth’s poorest.

And in Asia shocking inequality persists. ADO 2012 reports that in our continent, the richest one (1) percent of all households account for six (6) to eight (8) percent of all income. In most of the Asian countries, some 20 percent of all income are in the hands of the wealthiest five (5) percent.

Why has this happened? Could it be because the policies that came to dominate the planning designed by the leaders of the West and the UN, and the Asian leaders they mentored, were products of the Malthusian mindset of economists and sociologists like Gunnar Myrdal. They saw in population growth in Asia the great enemy of prosperity and economic growth, ignoring the reality that many Asian countries have experienced both high population growth and astonishing economic growth.

Growth of inequality

ADO 2012 shows that the inequality in share of income has been increasing. “Another 240 million people could have been lifted out of poverty over the past 20 years if inequality had remained stable instead of increasing as it has since the 1990s,” said ADB Chief Economist Changyong Rhee at the media briefing to present the report.

ADO 2012 revealed that the Gini coefficient, the measure of inequality now used among the key economic indicators of a country, grew substantially in Asia’s three most active and high-growth economies, China, India and Indonesia. [Named for Corrado Gini, the Italian statistician-social scientist who developed it, the Gini coefficient (also called the Gini index or Gini ratio) is a measure of the inequality among values of a frequency distribution, like levels of income or educational attainment].

ADO 2012 reports that unequal access to education, health and other public services has contributed greatly to growing inequalities, which further hinders the poor from availing themselves of opportunities to raise their living standards.

It gives the sad details that Asia’s poorest families have school drop-out rates five (5) times higher than richer families and that babies born to poor families have a 10 times higher chance of dying at birth than babies born to rich families.

“Inequality leads to a vicious circle, with unequal opportunities creating income disparities, that in turn lead to dramatic differences in future opportunities for families,” Rhee said.

ADO 2012 observes that the inequality, particularly between rural and urban areas, and between coastal and inland provinces, is bolstered by the highly uneven distribution of new technology, infrastructure and investment.

“Skill premiums have risen in many countries, and better educated workers are enjoying much higher income growth,” says the report.

The report also says that technological progress favors capital over labor. The share of labor income in the gross domestic product (GDP) is declining while the share of capital is increasing in many countries. It says that labor is abundant while capital is scarce, which contributes to the decline of the labor income share

Will the oligarchs fight Philippine inequality?

The ADB report urges Asian governments to choose policies that will reduce inequality—such as those that will create more and higher quality jobs, increase educational and health services and expand social protection. ADO 2012 favors conditional cash transfer (CCT) programs.

The report recommends policies that switch fiscal spending from untargeted price subsidies, such as on fuel, to targeted transfers. It recommends more equitable revenue sharing, more investment in infrastructure to reduce imbalances between developed and lagging regions.

The ADB report warns that letting inequality fester will cause instability. Indeed, the poorer regions will end up being the site of protests and even rebellions.

Unequal distribution of wealth and opportunities has been a constant characteristic of the Philippine political economy.

Many well-meaning observers of Philippine society, including the World Bank and the ADB itself, have been gently urging the Aquino administration to pay more attention to the work of reducing the rich-poor gap.

No one can disprove the fact that when the Aquino administration took office, it took over a Philippine economy that was growing at 7.6 percent. After only a year under this administration, the economy shrank to a gross domestic product of 3.7 percent. This was the result, Budget Secretary Florencio Abad himself admitted, of the policy to constrict infrastructure spending. Other cabinet departments also virtually froze its activities in response to the Palace order to make sure that every project was transparent and free from any kind of corruption.

The administration has decided to spend more on infrastructure building and other massive employment-creating activities.

Our economy is again enjoying a growth trend, thank God.

But the fight against inequality that ADO 2012 describes must be waged with more fervor.

Unfortunately, those who should be leading this fight are none other than the leaders of the executive branch in the Palace and in the LGUs, the lawmakers and the judges. But these leaders are precisely men of the oligarchy, the dynastic elites who created the unequal system that their families have flourished in.