(4 of 5)
The ADB report quoted earlier claims that worsening inequality limits the poverty alleviating impact of economic growth. "Poverty rates would have been lower had the economies in question been able to achieve the growth in mean per capita expenditure that they did but with their previous and more equal distributions."
Which brings me to the proverbial million dollar question Is it even possible for these two to go hand in hand? Is economic growth that is driven by free markets and loose regulation, as is the one that has been embraced by many Asian countries over the last two decades, compatible with an egalitarian society? Or is such a growth the very agent that kindles inequality in the first place?
A cursory analysis seems to support the latter proposition. A capitalist economy rewards with income
being the reward initiative, skill, education, labor and capital. The fewer of these you possess, the less
is the eventual reward you walk away with. Empirical data further reinforces this sometimes anecdotally
perceived causality. As shown in the charts below, income inequality started rising after a brief drop a
few years into the launch of the Chinese economic reform in the late 1970's and hasn't looked back
since. Likewise, inequality in India also began its consistently upward climb only after the liberalization
reforms were launched in 1991.
It is not my intention however to prosecute economic liberalism for the ills of inequality. To do so would be to close one's eyes to the body of evidence that indicates otherwise. A comprehensive study published in 2007 by the Economic Freedom Network testified that there is nothing inherent in the idea of a free economy that worsens the state of its poor. (11) On the contrary, the authors of the report found that the freer a country is economically, the higher the income of its poorest, together with a better average income, life expectancy, and environment.
The real agents of inequality lie not in free-market driven growth itself, but one level below, in how this growth has traditionally been unevenly distributed across geographical regions (urban vs. rural) and industry sectors (non-agricultural vs. agricultural). (6)
And herein lies the understanding that guides us to the answer to Asia's biggest challenge today. Income redistribution or social redress measures as solutions are incomplete, ineffective or worse because they often follow from a case of mistaken provenance of economic inequality. Numbers that demonstrate a worsening inequality aren't so much a disease that needs a cure, but more a symptom indicative of the real malaise that unevenly distributed economic growth offers uneven opportunities across peoples, translating into unevenly distributed income and hence economic inequality.