24 Oct 2015

In countries like Indonesia and Vietnam, the benefits of growth have predictably and disproportionately accrued to those with economic power and influence. The idea that market reforms materially improve the lifestyles of poor farmers relies on the oft-discredited notion of trickle-down economics; the latest wave of growth has clearly eluded such individuals. In a recent commentary, Kristijan Kotarski describes the “financialization” of the Chinese economy as “the rising leverage of financial and non-financial firms and the growing influence of financial elites.” He cites research indicating that as much as 86 percent of increases in inequality can be attributed to housing values. Debt and property are tools of wealth creation available primarily to those who can take investment risks. Hence, pro-wealth policies benefit only a narrow group.

Asia’s economic growth is an impressive accomplishment, but metrics such as global city rankings fail to account for the plight of the economically disenfranchised. According to Credit-Suisse, by 2020 the number of Chinese millionaires will increase by 74 percent, to 2.3 million – still only one tenth of 1 percent of China’s total projected population, but constituting an ever-growing share of the country’s wealth. The surprising fact that inequality has worsened since the 2008 financial crisis is actually no coincidence; the super-wealthy were protected by mitigating policies such as America’s $700 billion bank bailout. The inability to establish a political consensus on the extent of redistribution is a convenient excuse for ideological purists to abandon redistributive policies altogether. Improving conditions for the poor does not require absolute and universal re-distribution. However, there is a line beyond which inequality is too high; 1 percent owning more than the other 99 percent crosses that line. “Who decides how much inequality is unacceptable?” is no longer an excuse for inaction.

Asit K Biswas, Visiting Professor, in The Diplomat, 23 October 2015