Tuesday, 16 November 2021
Since the 1980s, the World Bank has been closely associated with the Washington Consensus — a set of policy prescriptions that urged developing countries to deregulate their markets and curb government spending in exchange for development aid. But in early 2016, the Bank's former Chief Economist Francois Bourguignon recommended the exact opposite.
Concerned over increasing levels of income disparity in most parts of the world, Bourguignon explained that the free market policies of the previous three and a half decades enabled “developing countries to get closer to the developed world.” But it also created “a new elite within those countries while leaving many citizens behind, thus increasing domestic inequality.”
To address this growing malady, Bourguignon proposed that “states should pursue policies aimed at redistributing income, (and) strengthen the regulation of the labor and financial markets.” He further encouraged governments “to equalize living standards among their populations by eliminating all types of ethnic, gender and social discrimination; regulating the financial and labor markets; and implementing progressive taxation and welfare policies.”
Economists from the International Monetary Fund (IMF) went even further, claiming that global inequality is the consequence of the neoliberal ideology that their own institution had so enthusiastically promoted. In an essay written by Jonathan Orsy, Prakash Loungani and Davide Furceri, the authors argued that neoliberalism was “oversold,” since “both openness and austerity are associated with increasing income inequality,” which significantly lowers “both the level and durability of growth.”
Nowhere is this problem more apparent than in the Asian region. Prior to the pandemic, the continent was viewed as a hub of economic activity, reaching an average annual growth rate of 7% from 1990 to 2010. This meant a three-fold increase in Asia's per capita GDP, from US$1,602 at the beginning of the period to US$4,982 at the start of the previous decade.
But Asia's prosperity only benefitted a small segment of the population, prompting the United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP) to state in a 2018 report that “economic growth has not been inclusive, leaving millions of people in a disadvantaged and precarious situation.” Using the region's Gini coefficient, the UN agency noticed a significant increase in income inequality during a two-decade period, rising 5 percentage points from 33.5 in 1990-1994 to 38.4 in 2010-2014. And increased income inequality, for many Asian countries, meant a higher concentration of wealth among the top 10% of the population.
This problem has been further exacerbated by COVID-19, which has already wiped out 140 million jobs in 2020. And it doesn't end there. The Asia-Pacific will continue to suffer as 89 million people slide into poverty due to the economic disruptions caused by the pandemic.
If there's a section of society that seems unaffected, it's the world's billionaires who managed to increase their wealth by US$3.8 trillion in the last year alone.
Aware of the enormity of the problem, this issue of PRAKSIS examines that root causes of social inequality in Asia and highlights the efforts that progressives in the region are undertaking to end this ongoing scourge. Particular attention is given on the efforts of social democrats to ensure fair access to societal goods and the equitable distribution of public resources.
This edition begins with a think-piece from Veronica Alporha, which analyzes the “gargantuan gap between the rich and the poor in the Philippines.” Utilizing her skills as a historian, Alporha claims that the rapid expansion of the service sector has fueled the country's economic growth in the 2010s. Its feeble manufacturing sector, however, meant that few permanent jobs were created, which eventually led to long-term employment instability and greater income inequality. Fortunately, Alporha sees much promise in Akbayan Party, which is leading the campaign to “democratize healthcare, push for land reform, advance the rights of women, and empower workers” in the Philippines.
With almost 19% of the population living below the poverty line, Nepal's income disparity is largely due to the unequal ownership of arable land. Though several land reform initiatives have been launched since the 1950s, journalist Kamal Dev Bhattarai observes that “they have not produced the desired results.” Part of the problem, he argues, is the tendency of political parties “to form their own (land reform) commission whenever they gain political power.” To address this challenge, Bhattarai proposes that a permanent mechanism be established under the supervision of “land experts, not party leaders.” If land reform is properly implemented, Bhattarai is confident that Nepal's existing absolute poverty rate will decline to 4.9% by 2030.
While inequality has been a persistent challenge in the tiny Himalayan nation, it is a relatively recent phenomenon in Indonesia that only began in the early 1990s. Looking at the various factors that could explain this trend, Mikhail Gorbachev Dom noticed that rural wages had declined in recent years, even as the informal sector of the economy continuous to grow. As a consequence, millions of Indonesians are not able to move out of poverty since they could not find employment in the formal labor market. For this reason, Dom sees the importance of forging partnerships between universities and the private sector so that they can build the “engineering ecosystem that can absorb much of the labor force.” At the same time, the government has to expand its existing social transfer programs which, Dom believes, is the initial step in “building a rudimentary welfare state.”
In a related essay, Damianus Bilo of NasDem Party outlines the measures that the Joko Widodo administration has undertaken to address inequality. Hoping to spread development across the entire archipelago, the government has devised a strategy that would advance agrarian reform, improve commerce, modernize vocational training and education, and extend housing benefits to the urban poor. Bilo also underscored NasDem Party's pivotal role in all these efforts, with three of its senior cadres having been given ministerial posts in the Widodo Cabinet.
In contrast, the political space in Thailand is more constricted, due to the fusion of neoliberal economic dogma and outright authoritarian rule. This condition, according to Thammasat University's Sustarum Thammaboosadee, has perpetuated social inequality, which has been further worsened by the COVID-19 pandemic. Because of this growing income disparity, “the idea of the welfare state and social democratic policies have (now) become central issues in Thai politics.” As Thammaboosadee points out, social democratic principles “are no longer fringe questions confined to progressives,” but have now been embraced by the academe, civil society and by mainstream opposition parties.
In Malaysia, Jaideep Singh of the think-tank Research for Social Advancement (REFSA) notes that “the discourse on inequality” is often done “through the lens of ethnicity.” This was largely a legacy of British colonial rule, which forced the peoples of the country into their respective ethnic bubbles. But after the racial riots of 1969, the government began to “to address societal imbalances” by reducing poverty and by addressing inequality among the ethnic Malay, Chinese and Indian communities.
While these efforts have created “a slow path to convergence in household incomes,” Singh remarks that “inequality in Malaysia today is no longer just about skin color” since there is now growing income disparity within the different ethnic communities. This is partly due to the rural-urban gap, which has widened in the last 30 years, “with development generally concentrated in the west coast of Peninsular Malaysia and around Kuala Lumpur.” At the same time, the country has over four million migrant workers who are mostly underpaid and work under difficult conditions. For this reason, Singh calls for “the expansion of needs-based assistance.” This means developing a package of programs that provide “long-term targeted basic income for all residents,” including migrant workers since “they contribute to the labor market and the economy.”
Focusing on the social effects of COVID-19, the article by Singh's REFSA colleagues Raja Ahmad Iskandar Fareez and Morgan Loh argues that the pandemic has created two Malaysias, with the privileged “cooped up in their own homes,” while “the less privileged have to endure a much harsher reality.” Though conceding that “the pandemic itself did not cause this inequality,” the authors point out that “it did widen the gap between the haves and have-nots.” This is partly due to the failure of the National Alliance government, which only has a “wafer-thin majority” in parliament. Concerned with keeping their fragile hold on power, “policymakers were denied the chance to formulate much needed policy responses to effectively address the wide-ranging impact of the pandemic.”
However, the authors still assert that the government must be more vigorous in its “intervening role to minimize job losses.” If left unchecked, Raja and Loh argues that “the chasm between these two Malaysian realities will only grow bigger.” With 768,700 Malaysians dropping out from the labor force, the authors call for the expansion of the Wage Subsidy Programme to enable companies to retain more employees. They also see the need for stronger social safety nets that will provide universal childcare benefits, as well as monthly cash aids to affected households.
However, inequality is not purely economic since it also has a gender dimension. This was clearly argued by journalist Akanksha Kumari, who points out that “women worldwide face high rates of unemployment due to job losses or leaving work post-maternity.” The problem is particularly acute in India which, as Kumari claims, “is among the bottom five countries in terms of women's participation in the health and economic partnership sectors.” She cites unpaid care as one of the “significant causes of gender disparity.” To address this problem, Kumari believes that “education and healthcare should be made free” even as employment opportunities are increased “so that all citizens can become self-reliant in a true sense.”
In the battle against inequality, Japan offers a viable model. In his essay, Parliament member Shōichi Kondō argues that “Japan had a strong allergy to the term socialism,” which is why no leftwing party has achieved long-term political dominance. However, its robust economy has allowed the country to narrow income disparity, creating a large middle class. That being said, Japan is not free from challenges. Kondō believes that his country can still improve the condition of women. He points out that while they have a Basic Act for Gender Equal Society, it “does not uphold gender equality but only aims at joint social participation by men and women.” At the same, their laws only guarantee equal employment opportunities, but not gender equality at the workplace.
Mongolia also provides lessons in addressing social inequality. In his essay, Amarbat Uurtsaikh asserted that the country “has focused on the economic, social, and cultural rights of its citizen,” since the Mongolian Revolution of 1921. Despite its achievements, the government is still trying to develop “comprehensive anti-discrimination regulations,” so that it can better address inequality “on the bases of sexual orientation, gender identity, disability and marital status.”
This issue of PRAKSIS also includes two special articles on the future of social democracy. Reflecting on the recent elections in Germany, Marc Saxer of the Friedrich Ebert Foundation wrote that the Social Democratic Party gained victory by developing a “strategy of building bridges between different lifeworlds.” It is based on a framework which he calls transformative realism, which “builds broad platforms on which people with different interests, identities, worldviews and values can come together to jointly fight for a better future.” It offers the premise that “the multiple crises crippling our societies cannot be pushed through by any single social group,” and that “only a broad societal alliance can muster the vast power resources needed to drive through the necessary policy changes.” Marc Saxer further clarifies that transformative realism eschews leftwing populism, since the alliances that it seeks “demarcate themselves from the extreme fringes.”
For his part, Thomas Meyer sees the results of the German elections as a repudiation of neoliberalism and a possible “new start for social democracy.” In a conversation with the staff of PRAKSIS and Socdem Asia, Meyer emphasized the need for social democrats to address the two main challenges of our time — the ecological crisis and negative globalization. For a social democratic renewal to occur, he argues that “it is necessary to create a new synthesis by addressing the question of globalization and the question of ecological destruction.”
This issue offers no magic bullet. But the actions that our contributors have outlined provide us with a path towards a more just and equitable future.
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