Economic growth in East Asia has been widely hailed as a success story. Industrial output and world market shares have increased substantially although recent turmoil in the region's currency markets illustrates some underlying weaknesses. But what is the relationship between this growth and poverty levels? Has there been a trade-off between growth and equity, as is sometimes argued? The research shows how poverty has generally decreased in step with economic growth in East Asia. It goes on to ask: how far did poverty reduction policy create the environment for such growth in East Asia?

Thirty years ago, East Asia was an impoverished region where average incomes were comparable to those in sub-Saharan Africa today. Growth rates were slow and predictions forecast a bleak future of increasing poverty and economic decline. Subsequent economic successes meant the region has recorded the most sustained and rapid growth this century. At the same time, the incidence of people living in poverty has fallen from 1 in 3 to 1 in 10. This trend shows that economic stagnation and poverty are not inevitable. The research looks at the experience of East Asian countries, drawing on macro-economic evidence and data from Oxfam's work with the poor in the region.

Principal findings indicate that:

• Growth in East Asia has resulted in high levels of poverty alleviation due partly to relatively even income distribution patterns.
• Growth in East Asia was predicated on policies promoting equity, including social investments (particularly in the health and education sectors), provision of opportunities in employment and promotion of rural development.
• East Asia's success has been achieved not through the "trickle down" to the poor of wealth created by others but through the active participation of poor people as producers of wealth. Investment in the creation of opportunity for poor people has brought human development in its own right but it has also acted as a springboard for economic success.
• Much poverty remains in East Asia. The poor are often exploited and displaced or adversely affected by environmental problems. The development of participative political structures which might challenge this situation is lacking. Economic reforms in the 1990s have also tended to widen inequalities as progress towards human development has slowed.

Policy recommendations arising from the report underline the need for:

• Public investment to create free and high quality basic health and education services, accessible to the poor.
• Industrial development strategies that maximise employment opportunities to ensure both growth and poverty alleviation.
• Pro-poor rural development policies, including agrarian reform and infrastructural support for smallholders in production and marketing.
• A reallocation and mobilisation of funding in order to pay for these measures at the national and international levels. This should include deeper and accelerated debt relief from the international community for countries which undertake commitments to transfer savings into basic services and more effective protection of priority social sector budgets under structural adjustment.

Source(s):
Growth with Equity: An Agenda for Poverty Reduction. Oxfam International Report, K. Watkins (1997) Full document.

Funded by: Oxfam International (1997)

id21 Research Highlight: 1998-Feb-18

Further Information:
Kevin Watkins (Senior Policy Adviser)
Policy Department
Oxfam
274 Banbury Road
Oxford
OX2 7DZ
UK

Tel: +44 (0)1865 312326
Fax: +44 (0)1865 312600
Contact the contributor: kwatkins@oxfam.org.uk

Oxfam UK/I