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Towards Equitable Growth. Dr. Mah-Hui LIM Asia-Pacific CSO Consultation on a Just & Transformative Development Agend Bangkok August 23-24, 2013. Two Mega-Trends/Issues in 21 st Century. Rising inequality amidst growth What’s the relationship between state and market?. - PowerPoint PPT Presentation
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Towards Equitable Growth
Dr. Mah-Hui LIM
Asia-Pacific CSO Consultation on a Just & Transformative Development Agend
Bangkok
August 23-24, 2013
Two Mega-Trends/Issues in 21st Century
Rising inequality amidst growth What’s the relationship between state
and market?
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International Context
International economy in worst crisis since Great Depression
Global slow growth hitting Asia economies esp the export-led ones
Asia’s growth, like elsewhere, accompanied by rising inequality
Trickle down theory of growth - discredited
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Inequality Statistics in Asia & Pacific
13 of 36 Asian economies had Gini index of 40 and above
11 Asian economies with 82% of Asia’s population experienced worsening inequality
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Why Is Inequality Increasing?- Functional Income Distribution
Not simply technology, trade, skills, education, social services etc
More fundamental – the way income is distributed btw capital and labor
3 approaches to GDP – Expenditure Y=C+I+G+X-M Production Y= Agr+Ind+Services Income Y= Lab+Cap+Tax-Subsidies
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Wage Growth falling behind Productivity Growth due to globalization forces: Global arbitrage of labor with >1 billion
entrants into global lab market Declining bargaining power of labor Export-driven growth based on wage
competitiveness = wage & labor repression
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Why Is Labor Share of GDP Declining?
Consequences of Rising Inequality
1) Social and political instability “If wages for the average U.S. worker do
not start to rise more quickly, political support for free markets may be undermined (Greenspan: 2007)
2) Unsustainable Growth–IMF study While its possible to produce growth
spells.. Income distribution is the most robust predictor of sustained growth
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Consequences of Increasing Inequality
Financial Instability Under-consumption for majority & with
financialization > debt bubble Over-saving & financial investment for
minority > asset bubble
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What To Do? Ex-Ante
Wages rise with productivity growth to support healthy aggregate demand- should not be less than or more than to be sustainable
Minimum wages based on average productivity plus inflation
Countries coordinate on exchange rate and wage rates rather than each offering lowest wage & racing to the bottom
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What to do ex-post
Restructure fiscal system Change tax system is now favoring
capital rather than labor Higher capital gains tax, death duties More progressive income tax More social spending on education,
health, public transportation, social security etc
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