Farha Mirza and Shruti Shila Saikia
INTRODUCTION
The uneven distribution of income is directly proportional to the prevailing income inequalities. Income inequality is influenced by monetary as well as non-monetary dimensions (we will target this issue in detail, further in our paper). A crucial question that lies before every country’s government is – “whether to tackle inequality or boost growth first?”, they are so engrossed in finding an answer to this question that they often tend to ignore the fact that both the issues are interdependent and can be achieved simultaneously.
Asia as a region is a host to both squandering wealth at the top and atrocious human development at the bottom level. This indicates a presence of the ability to make a living but the absence of delivery of basic social services. Many research studies show the excessive accumulation of wealth in the hands of a very small proportion of the population and on the other hand a large proportion of the population not able to fulfil even the basic needs like hunger. Now, this brings us to our second important keyword of the topic – “Global Hunger Index”.
The English Oxford dictionary defines Hunger as ‘a feeling of discomfort or distress caused by lack of food.’ This is a simple definition, but the impact created by the population experiencing hunger every day in their lives can prove to be very negative on the global level. The Global Hunger Index (GHI) is a mechanism designed to extensively measure and track hunger at global, regional and national levels. The purpose of GHI is to create awareness and understanding among the people in order to fight against hunger.
Asia as we have discussed before, Asia is a region with some countries performing glaringly poorly at GHI but at the same time, it is a region producing people with extravagant wealth. Why is this so and how can we deal with this problem? These are the two imperative questions that we are going to focus on in our article. For a better understanding, we have carried out detailed case studies of the major countries of South Asia.
INCOME INEQUALITY IN ASIA
In Asia, the concentration of large amounts of wealth in the hands of higher-income groups makes it even more difficult for the lower-income groups to gather physical and human capital such as the land, education or even the most basic amenities such as good health and sufficient food to satisfy one’s hunger. For eg. At the beginning of 1980s, the average income of India grew but it went entirely in the hands of the super-rich. This in turn causes a negative impact on the labour productivity and growth potential of the economy, making it stagnant.
Asian countries showcase a serious problem of lack of access to education further leading to wage disparity. As the group that has access to proper education displays higher proficiency thus increasing their value in the labour market, while decreasing the value of the group that lacks proper education because they are considered as having less efficient or ‘inferior’ skills when compared to the educated lot. This cycle continues and causes an offset to equality of opportunity undermining social stability. According to the report of the International Monetary Fund (2015), Income Inequality obstructs growth, causes a crisis and weakens the aggregate demand. Now, the accumulation of income by the richer groups, in turn, forces the lower the income groups to switch to the unsustainable consumption outcomes. Relative income equality is imperative for sustainable consumption.
While we have examined the negatives of income inequality we must not ignore the benefits of the inequality that it has generated. Inequality of income causes a significant impact on the behaviour of individuals as well as households pulling them out of their leisure activities and making them hard working. As we have seen the strong relationship between education and wage disparity, so the income inequality establishes a zeal in lower-income groups to gain more education leading to the removal of unequal distribution of income. Income inequality has also motivated individuals to act collectively, for eg. The lower-income groups in some South Asian countries have come together and formulated Self Help Groups (SHGs). The SHGs are the financial intermediary committee usually composed of 10-20 local women or men who choose to come together in order to improve their living conditions.
Although income inequality might prove to be beneficial in some cases, it culminates in the slowdown of the economy in these countries that stimulates global imbalance.
CHALLENGES IN ACHIEVING INCOME EQUALITY The three major challenges that act as obstacles in achieving income inequality are:
Corruption
Asia has some of the most corrupt countries of the world – namely Myanmar, Thailand, Pakistan, Vietnam and India. These countries incorporate a bribery rate ranging from 40% to 67% as per the Transparency International. Corruption impacts the efficiency of the population of these countries by ruining their working capacity. (Gupta, 2017)
Automation
Oxford Dictionary defines automation as “converting a process or facility to operate automatically”. Automation acts as a threat to developing countries. It won’t necessarily eliminate the jobs but while these countries try to compete with the robots, it will reduce the wages lower than before which is seriously a matter of concern. (Kelly, 2018)
Gender inequality
Women in Asian societies have traditionally been victim to discrimination in political, social, economical and all other spheres. Discrimination against women makes it difficult for them to work and thus contribute to the development that lowers the pace of growing economy in these countries. Many Asian countries have made laws to fight corruption and for the safety of women. Countries can fight the threat of automation if they decide to work collectively. Asia as a whole has shown a sign of improvement but still, there is a difficult and a long road ahead
Correlation of Income Inequality with Hunger Index in Asia:
In recent years, Asia has shown an exemplary model of progress and development. The rise of many countries as emerging economies of the world shows the effective implementation of policies and moving ahead of traditional protectionism by integrating their economies with the world economy. In the last few decades, many of the developed countries have outsourced their manufacturing units to countries like China, India, Singapore, Philippines and Vietnam. It was motivated by many factors like cheap labour, raw materials, liberal policies adopted by the Asian countries by reducing tariffs and quantitative restrictions. This has led to an increase in Purchasing Power Parity of the countries.
However, economic growth was not uniform in the continent. It has been characterised by an ‘extreme income gap’. Even in the emerging economies like China, India and South Korea, equitable economic development has not taken place throughout the country; there is a huge rural and urban income gap. This extreme characteristic of the income gap has led to extreme poverty too. Even though Asia has been able to eliminate poverty to some extent, it has slowed down recently. East Asia and Central Asia has reduced poverty by up to 3% (World Bank, 2018). There is an extreme income gap in the countries of South Asian countries. Moreover, economic development is not uniform throughout the continent. The polarization of the rich and the poor in the Asian countries can undermine the welfarist goal of these emerging economies in Asia which helped them to improve their Purchasing Power Parity.
The extreme inequality of income has negated the efforts to achieve zero hunger in the continent. The Global Hunger Index of the countries is very low. The four indicators that are considered to determine the value of the Global Hunger Index are undernourishment, child wasting, child stunting and child nourishment (Grebmer et al., 2020). These indicators are ultimately determined by the income of the people. According to Oxfam, in India the richest 1 percent hold more than four-times the wealth held by 953 million people who make up for the bottom 70 percent of the country’s population. Moreover, the total wealth of all Indian billionaires is more than the full-year budget (The Economic Times, 2020). On the other hand, India ranked 94 out of 107 in the Global Hunger Index. The situation is similar in most of the countries of Asia (Indian Express, 2020). This shows the necessity for policies to bridge the income gap between the rich and the poor to achieve zero hunger index.
The Necessity of Progressive and Egalitarian Policies to Bridge Income Gap and Achieve Zero Hunger in the Region:
The governments of Asia must immediately implement effective policies to bridge the extreme income gap between the rich and poor to remove any obstacles to achieve a zero hunger index in the country. The Asian countries need to understand that to be a major economic power, it has to ensure sustainable economic development for everyone. This does not mean that the progress of the corporates should not be controlled to a large extent because, in developing countries, they encounter many hindrances in competing with their European counterparts. However, taxes should be increased to some extent so that income inequality is not magnified.
The Asian Development Outlook 2012 (ADB 2012) highlights three sets of policy to reduce extreme income inequality in Asia:
(i) efficient fiscal policies to scale back inequality in human capital with a view to addressing rising skill premiums relative to low wages of unskilled workers
(ii) interventions to reduce spatial inequality; and
(iii) policies to make growth more employment-friendly with a view to increasing labour demand and hence labour’s share in national income. (Zhuang, et al., 2014)
Investment in education is very important to end extreme income inequality. The state must ensure to make education viable for everyone. It must not be a privilege for the people. The egalitarian policies to ensure sustainable income and eliminate income inequality can remove the hurdles to achieve zero hunger. Moreover, the state should also ensure an effective Public Distribution System for the poor and make sure the target group is aware of the scheme.
Conclusion:
The continuance of development is very necessary for Asia to ensure sustainable growth of the region. Most of the countries of the region were colonies of the west and they have faced many hurdles. But they have finally got an opportunity to be an important voice in the world forum. The Asian countries need to implement pro-people policies so that wealth is not just accumulated only in a few hands. The countries need to make sure to allow the voices of the people to epoch through democracy. The countries need to be aware of the situation and most important of all spread awareness among the target groups about the policies implemented for their benefit.
Reference:
Decline of Global Extreme Poverty Continues but Has Slowed: World Bank (2018), World Bank ttps://www.worldbank.org/en/news/press-release/2018/09/19/decline-of-global-extreme-poverty continues-but-has-slowed-world-bank Wealth of India’s richest 1% more than 4-times of total for 70% poorest: Oxfam (2020), The
Economic Times
https://economictimes.indiatimes.com/news/economy/indicators/wealth-of-indias-richest-1-more -than-4-times-of-total-for-70-poorest-oxfam/articleshow/73416122.cms?from=mdr Gupta, T., Asia’s Five Most Corrupt Countries, (2017) Forbes
https://www.forbes.com/sites/tanvigupta/2017/03/13/asias-five-most-corrupt-countries/
Global Hunger Index 2020: India ranks 94 out of 107 countries, under ‘serious’ category (2020), The Indian Express
https://indianexpress.com/article/india/global-health-index-2020-india-6757899/
Grember, K., Bernstein, J, Wiemers, M., Acheampong, K., Hanano, A., Higgins, B., Chéilleachair, R., Foley, C., Gitter, S.,Ekstrom, K., Fritschel, H., (2020), One Decade To Zero Hunger Linking Health And Sustainable Food Systems
Kelly, L., Asia’s Wealth Gap Is Among The Largest In The World: What Can Leaders Do To Fix It? (2018), Forbes
https://www.forbes.com/sites/ljkelly/2018/02/02/asias-wealth-gap-is-among-the-largest-in-the-w orld-what-can-leaders-do-to-fix-it/?sh=5cc58595a436
Zhuang, J., R. Kanbur, and C. Rhee. (2014). Rising Inequality in Asia and Policy Implications. ADBI Working Paper 463. Tokyo: Asian Development Bank Institute.
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