The great divide

No matter how efficient a society strives to allocate scarce resources, there is always that segment that doesn’t get enough share of the pie. In most parts of Asia, for instance, you feel the rising consumer affluence as you stroll through the busy shopping malls and dining hubs, but then reality bites when you see mendicants or a colony of shanties.

In East Asia and the Pacific region, 14.3% of the populace live on U$1.25 a day, the threshold for extreme poverty. The poverty headcount in my country, the Philippines, is higher than the average at 18.4%, while that in China, which has seen a prolonged high-growth period (albeit on a slow landing now), is 13.1%. We are even luckier than South Asian neighbors India and Bangladesh, whose ratios are 32.7% or 43.3%, respectively, or even compared with Nigeria (68%), Madagascar (81.3%) or Liberia (83.8%), where living on U$1.25 a day or below is the rule rather than the exception.

Percentage of people living at $1.25 a day or less (source: World Bank)

It is not just the scourge of the developing world, however. A report from the Organization for Economic Cooperation and Development (OECD) says that the average income of the richest 10% of the OECD population is about nine times that of the poorest 10% and the disparity has widened in the past two decades. Thus, mendicants exist even in Western cities such as New York or Paris.

As reflected by the World Economic Forum Global Agenda Councils survey, the issue of global income disparities is the most underestimated trend, and this year’s lower poll weight of 14% from 22.8% probably only highlights how underestimated it is. It’s a ticking time bomb just like the one that sent Marie Antoinette and Louis XVI to the guillotine during the French Revolution. Widening disparities can fuel socio-political unrest, territorial disputes, extremism and stunt growth prospects.

But as developing countries increasingly realize that they must seek an inclusive growth model, this issue spawns more questions than answers. Is plutocracy the natural order of mankind? Is globalization to blame? Should we otherwise be living in that classless society envisioned by socialists? How effectively can benefits/tax systems, social safety nets, changing technologies, corporate social responsibility, civil society, social entrepreneurship fill the gap?

What’s certain is that multilateralism and regionalism can play a key role. Beyond expanding healthcare, education, infrastructure, financing and job opportunities within one’s territory, experts say rethinking cross-border trade and investment systems, human capital flow and official development assistance may spell the difference. And given what we’ve seen from the recent global crises, we can’t leave everything to market forces.

Named one of 20 Most Influential Women in the Philippines, Maria Doris Dumlao is Senior Business Reporter at the Philippines Daily Inquirer and a member of the Global Agenda Council on South-East Asia

Photo: Slums are seen along a river with the skyline of Makati, Manila’s financial district, in the background. Cheryl Ravelo / Reuters