Inequality Gap Grows in Asia, United States

Homes of rich and poor
Homes of the rich and poor in Hyderabad, India.
Photo by Dan Morales via Flickr

In a new study, the Asian Development Bank (ADB) reports that the gap between the rich and poor in many Asian countries, particularly China, has grown significantly in recent decades as economies have boomed. The United States is struggling with the same issue as new technologies such as the Internet converge with fluid and speculative economic markets, bolstering the “super-rich,” according to The Observer.

Although poverty rates in Asia are declining and inequality rates in the region are lower than in parts of Latin America and sub-Saharan Africa, 15 of the 21 countries the ADB surveyed experienced a proportionate widening in people’s incomes since the early 1990s, according to the report. Among the worst affected were Bangladesh, Cambodia, China, India, Laos, Nepal, and Sri Lanka. In only six countries—Indonesia, Mongolia, Malaysia, Kazakhstan, Armenia and Thailand—did relative income inequality narrow over this period. Meanwhile, “absolute” inequality—the actual dollar differences in incomes—increased virtually everywhere in Asia between the 1990s and 2000s.

“Growing inequalities can weaken social cohesion,” observes Ifzal Ali, the ADB's chief economist. The Bank warns that urban-dominated economic growth has created high levels of migration to cities and a dearth of foreign investment in rural areas. This, combined with large differences in educational access, has caused the living standards of the wealthiest in society to improve at a much faster rate than the poorest populations.

In the United States, meanwhile, the number of “severely poor” people—those living at or below half the poverty level—is at a 32-year high, according to The Observer. Yet the number of U.S. billionaires has also increased, from just 13 in 1985 to more than 1,000 today. In 2005, an estimated 227,000 new millionaires emerged, many bolstered by lucrative financial hedge funds. The wealth of all U.S. millionaires that year was $30 trillion, or more than the gross domestic products (GDPs) of Brazil, China, the European Union, Japan, and Russia combined.

“We in America are heading towards ‘developing nation’ levels of inequality…. What does that say about us? What does that say about America?” Robert Frank, author of a new book about the super-rich, Richistan, told The Observer. He noted that large wealth disparities have historically been indicative of looming depressions, such as the panic of 1893 that followed the U.S. “Gilded Age” spawned by railways and industrialization.

For both regions of the world, experts suggest that better management of public funds would help ease inequalities. In the United States, one solution would be reducing tax breaks for the rich, according to The Observer. In the 1950s, some 33 percent of federal income came from companies, but by 2003 this had fallen to just 7.4 percent. “If you look at the impact of the last 20 years it seems pretty clear that trickledown just does not work,” Paul Buchheit, economics professor at Chicago’s Harold Washington College, told The Observer.

The ADB recommends that in Asia, more money should be spent on education, training, and health care. Asian governments should also decrease disparities between rural and urban investments to ensure that employment opportunities are more widely available, according to the report.

This story was produced by Eye on Earth, a joint project of the Worldwatch Institute and the blue moon fund. View the complete archive of Eye on Earth stories, or contact Staff Writer Alana Herro at aherro [AT] worldwatch [DOT] org with your questions, comments, and story ideas.