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ADB’s Rajat M. Nag Examines Asia’s Inequality, Challenges to Stability

December 5, 2012

ADB's Rajat Nag in conversation with David Arnold

ADB’s Rajat Nag (front) in conversation with Asia Foundation President David Arnold. Photo/Whitney Legge

Last week, ADB Managing Director General Rajat M. Nag appeared in a candid conversation with Asia Foundation President David Arnold at the World Affairs Council in San Francisco. The two discussed Asia’s rapid growth, the widening gap between rich and poor, and challenges to the region’s stability. Below are highlights from Mr. Nag’s remarks.

Inequality in Asia

Asia has gone through a phenomenal transformation in the last four decades. Asia has managed to achieve in one generation – 40 years – what has taken other parts of the world 100 or even 200 years. This tremendous growth has lifted hundreds of millions of people out of poverty, and led many to call the 21st century the “Asian Century.”

Asians today are richer, healthier, more educated, and live longer, and this is great success story. But what this story hides at the same time is the fact that the rising tide of Asia’s economic growth has not lifted all boats because that growth story is based on the assumption that all boats will rise with the rising tide. But if there is a hole in the hull of a boat, then those boats won’t rise. This has resulted in a situation in Asia where 600 million people are still without access to clean water, 1.8 billion are without access to improved sanitation. This is an Asia that is as real as the bright one. These two faces of Asia are both real, but unfortunately, diverging.

One should argue that rising inequality is a social justice issue. Inequality is an unacceptable state of human affairs. But there is also an economic reason to worry about inequality as it dampens the growth process. Therefore, Asia cannot grow and then worry about inequality; growth has to be inclusive. People must be able to participate in and benefit from that growth process. We need to increase access to opportunity through investments in health and education. People have to be well enough, healthy enough, skilled enough, and educated enough to participate in the process. The governments of Asia have a choice: you have to pursue growth, but it has to be inclusive growth.

Green Growth

Asia, like many other places, has followed a paradigm of “grow now, clean later.” That is unsustainable, and Asia is already paying the price for it: since 1990, Asia’s share in worldwide CO2 emissions has more than doubled. Without aggressive efforts toward low carbon growth, this share will rise to nearly half the global level by 2030. China is now the largest greenhouse gas emitter, India is following suit. In a situation like this, the environmentally unsustainable path that we are following will essentially and ultimately compromise growth itself.

The alternative to green growth is not just less growth. Instead, the alternative is probably going to be catastrophic, and could result in some dramatically damaging consequences. The longer we wait to adopt green growth as the preferred paradigm, the higher the costs of clean up will be. The choice that Asia has today is not to reduce growth, but to grow green. Neither the developing countries nor the developed countries by themselves can solve the problem.

Urbanization

In the next 40 years, the urban population in Asia will almost double from 1.6 billion to 3.1 billion. Our cities will become the epicenter of economic life, higher education, innovation, and technology development. But these cities will put huge demands on services and governments, and will obviously be major sources of energy consumption. Urbanization will also lead to increasing environmental risks associated with natural disasters. The rural to urban migration is ongoing; China became more urban than rural in 2011, and this trend is apparent and obvious throughout. Asia will need to adopt a new approach toward urban development by building more compact and eco-friendly resilient cities and making sure that governance structures are able to cope.

Good Governance

Good governance is more than just eliminating corruption. Good governance is about institutions, it’s about accountability, it’s about making sure that there are rules and regulations, and most importantly, that they are applied.

Let me mention two words in Sanskrit: the first word is niti, and the second is nyaya. Both words in Sanskrit roughly mean “justice.” But there is a very important, nuanced difference. Niti refers to rules and regulations. Nyaya refers to realized justice. It recognizes the role of niti in shaping rules and regulations, but also recognizes the reality in its application. You can have all the niti in the world, but if you don’t have nyaya, then you don’t have good governance. In Asia over the last several decades, we have gone some distance in getting the niti in place. What we also need to have is nyaya. We can’t have only courts, but we must have courts that can dispense justice rapidly and of course fairly.

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