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Rising inequalities in income and access to employment and social services in Asia are casting a shadow over its unprecedented economic boom, and governments and the private sector need to work together to make the benefits of growth more inclusive, says a new book from the Asian Development Bank (ADB).

Poverty, Inequality and Inclusive Growth in Asia: Measurement, Policy Issues, and Country Studies, edited by Juzhong Zhuang, Assistant Chief Economist in ADB’s Economics and Research Department, examines the growing discrepancies in wealth and persistent gaps in access to social services that have emerged during Asia’s extraordinary economic expansion in recent decades, and lays out policy options to address inequities and support inclusive growth.

Over the past 20 years, the region’s per capita gross domestic product has expanded almost three-fold, with the percentage of people living in extreme poverty ($1.25 a day or less) nearly halved. At the same time Asia is still home to two-thirds of the world’s poorest people, while in a large part little progress has been made on key social indicators, such as child and maternal mortality rates. Despite market liberalization and globalization creating new wealth and economic opportunities, inequalities in both income and non-income indicators have widened in many countries, particularly between large urban centers and the countryside.

“Developing Asia’s stellar growth rates have masked rising inequality, leading to two faces of Asia – one shining and the other suffering,” said Mr. Zhuang. “Merging them will be a development challenge for many years to come. Inclusive growth with its focus on creating economic opportunity and ensuring equal access will play a pivotal role in narrowing the gap.”

The book – which draws on research papers carried out by ADB economists and their collaborators – looks at recent trends of income and non-income inequality and poverty in the region; discusses the underlying driving forces; examines the concept of inclusive growth; and provides in-depth analysis of key policy pillars of an inclusive growth strategy, including employment, access to public services, social protection, and governance and institutions. The book also includes six country studies presenting detailed information on growth, poverty, and inequality dynamics in the People’s Republic of China (PRC), Nepal, the Philippines, Thailand, and Viet Nam.

It says an effective inclusive growth strategy needs to focus on high growth to create productive jobs, social inclusion to ensure equal access to opportunities, and social safety nets to mitigate risks and cushion the most vulnerable groups. To do this, governments should address existing policy, governance and institutional weaknesses, promote social inclusion, and invest in, and improve access to, basic services.

“Fighting poverty and inequality by focusing public policy on improving delivery of basic health care and education services, especially to the disadvantaged, strengthening social protections and significantly increasing the productive employment opportunities of a wide population should be a minimum agenda to which developing Asia’s policy makers must commit,” said Mr. Zhuang.

The book notes that many economies in the region, including India and PRC, recognize the potentially negative social, economic, and political consequences of increasing inequality in access to economic opportunity, and are now embracing inclusive growth as the central element of their development plans.

At the conclusion of the 40th World Economic Forum Annual Meeting, participants pledged to rethink, rebuild and redesign the global economy based on sustainable principles. The sense of the Meeting, echoed by Lawrence H. Summers, Director of the US National Economic Council (NEC), was that the world was experiencing “a statistical recovery and a human recession.” “We are not out of the woods yet,” said Michael Oreskes, Senior Managing Editor of the Associated Press. “The recovery is still very fragile in many developed economies.” Principled leadership is key to stabilization.

“At the end, it’s an interdependent system,” said Josef Ackermann, Chairman of the Management Board and the Group Executive Committee of Deutsche Bank; Member of the Foundation Board of the World Economic Forum; and Co-Chair of the World Economic Forum Annual Meeting 2010. “If you lose the support of society, you are not going to achieve your corporate objectives.”

Job creation is critical to sustainable recovery. There is a role for all to play in job creation, underscored Patricia A. Woertz, Chairman, President and Chief Executive Officer of Archer Daniels Midland (ADM), and Co-Chair of the World Economic Forum Annual Meeting 2010. “And retaining jobs is as important as creating new ones.” The recession also demonstrated that the world must hear better the voices outside of the G8. “The self-confidence of emerging nations is completely different,” said Azim H. Premji, Chairman of Wipro, and Co-Chair of the World Economic Forum Annual Meeting 2010. He warned that in India and China “if services are put under severe, unreasonable restrictions, you will get tariffs overnight.”

“If you have lost the trust of societies, you cannot just respond technically, you have to respond morally,” said Ackermann. Rowan D. Williams, Archbishop of Canterbury, United Kingdom, urged participants to take collective responsibility for the future by being individually responsible now. Living responsibly in the present means living within ecological limits to ensure the security of work and food. “Responsibility for the future means being responsible for a vision of humanity which excites and enlarges us,” he added.

Key Achievements:

• At the 40th World Economic Forum Annual Meeting 2010, participants found that the global recovery is fragile, and now is the moment to rethink values as the world rebuilds prosperity
• All countries in the G20 and beyond should find new pathways to sustainable growth and job creation
• Concretely, Bill and Melinda Gates, Co-Chairs of the Bill and Melinda Gates Foundation, which is a founding partner of the GAVI Alliance, pledged US$ 10 billion to vaccinate over 8 million children in the next decade
• Former US President William J. Clinton announced a joint initiative between the World Economic Forum, the Clinton Global Initiative and the UN to support Haiti’s long-term reconstruction
• Canadian Prime Minister Stephen Harper, South Korean President Lee Myung-Bak, Mexican President Felipe de Jesús Calderón Hinojosa and French President Nicolas Sarkozy all set forth agendas for global engagement to prevent future crises and to promote sustainability and principled growth
• Since its launch 10 years ago, the Global Alliance for Vaccines and Immunisation (GAVI) has saved over 4 million lives and has immunized an additional 256 million children in the world’s poorest countries

If long-term global problems are ignored, the economic crisis could lead to a social crisis

In his opening address at the World Economic Forum Annual Meeting, President Nicolas Sarkozy of France said that it will not be possible to emerge from the global economic crisis and protect against future crises if the economic imbalances that are at the root of the problem are not addressed. “Countries with trade surpluses must consume more and improve the living standards and social protection of their citizens,” he remarked. “Countries with deficits must make an effort to consume a little less and repay their debts.” The world’s currency regime is central to the issue, Sarkozy argued. Exchange rate instability and the under-valuation of certain currencies lead to unfair trade and competition, he said. “The prosperity of the post-war era owed a great deal to Bretton Woods, to its rules and its institutions. That is exactly what we need today; we need a new Bretton Woods.” Sarkozy said that France would place the reform of the international monetary system on the agenda when it chairs the G8 and G20 next year.

In his address, Sarkozy also called for an examination of the nature of globalization and capitalism. “This is not a crisis in globalization; this is a crisis of globalization,” he said. “Finance, free trade and competition are only means and not ends in themselves.” Sarkozy added that banks should stick to analysing credit risk, assessing the capacity of borrowers to repay loans and finance economic growth. “The role of the bank is not to speculate.” He also questioned the rewarding of high compensation and bonuses for CEOs whose companies lose money. Capitalism should not be replaced but it has to be changed, the French president declared. “We will only save capitalism by reforming it, by making it more moral.”

Speaking before Sarkozy, Doris Leuthard, President of the Swiss Confederation and Federal Councillor of Economic Affairs, told participants that the international community has to bridge the gap between rhetoric and reality as it tackles major challenges such as the global economic crisis, climate change and the Doha Round of multilateral trade negotiations. “We must all sit down together in a responsible manner, bring our part of the solution to the table and allow a conclusion to be reached that benefits us all.” While “rhetoric and reality all too often diverge by large margins,” Leuthard said, the bottom line is that “people need jobs and a salary.” She concluded: “We have talked enough. It is now time to get moving.”

Earlier, World Economic Forum Founder and Executive Chairman Klaus Schwab warned of the consequences if countries are too preoccupied by domestic problems and ignore long-term challenges such as global warming. “We hope that governments don’t become overwhelmed by internal issues and constraints to the detriment of exercising the necessary global stewardship.” Added Schwab: “We run the risk that 2010 becomes the year of the social crisis following the financial crisis of 2008 and the economic crisis of 2009.” He noted that one of the top priorities for this Annual Meeting is to encourage entrepreneurship and job creation.