Blog
Poverty, Income Distribution and Well-Being in Asia during the Transition

by Manuel Montes

Active social protection policies that address issues of the health, education, safety, and security of the general population are necessary to sustain efforts at dismantling state planning in order to expand markets.

This seemingly paradoxical proposition is the key conclusion of the study on "Poverty, Income Distribution, and We ll-Being in Asia during the Transition" which evaluated the social impact of market-oriented reforms among both "successful" market reformers and those that experienced deep recessions during transition. Inattention to these issues puts at risk the determined efforts of countries as diverse as Uzbekistan, Mongolia, and Vietnam to improve the lot of their peoples by joining the world economic community. Failures in these efforts have potentially wide-ranging consequences not only in terms of social violence and the spread of illegal activities, but also in terms of the freedoms and economic prospects of the affected populations.

Inequality in China. © Department of International Development Cooperation, MFA, Finland/Matti Remes
Inequality in China. © Department of International Development Cooperation, MFA, Finland/Matti Remes

The study takes a serious look at the impact on social outcomes of the different patterns of transition in the Asian countries, from the 'Asian gradualist-model' (as in China and Vietnam), a 'Russian-type' reform model characterized by rapid liberalization and stabilization and severe output losses (as in Kazakhstan, the Kyrg y z Republic, and Mongolia) or the 'unsustainable procrastinating approach' characterized by limited liberalization, slow stabilization, no structural reforms and limited output losses over the medium term (as in Turkmenistan and Uzbekistan).The study analyzes the pattern of significant increases in inequality, temporary or permanent regressions in health and education coverage, the emergence of a large, floating migrant population (with the attendant spread of urban slums), the erosion of social cohesion, and the spread of anti-social activities in both successful countries and those countries experiencing deep recessions. Because the sample of Asian transition economies included economies that experienced sharp declines, those that experienced rapid growth, and those that only grew more slowly, it provided a laboratory that permitted researchers to distinguish the social impact of the transition itself, the nature of the transition strategy, and the role of social policies.  The WIDER study shows that even countries which experienced sustained growth in the process of economic reform such as China have show unmistakable signs of deep social strain.

In those countries where growth has been rapid, as in China and Vietnam, poverty declined substantially. However, these benefits were not evenly spread and have created the risk of leaving certain sectors of the populace in a permanent state of poverty, a situation that did not exist during the central planning period. In countries where output had shrunk, people at the low end of the income ladder have slipped into poverty, often in a situation of 'shallow poverty' where people move easily back and forth, into and out of poverty. In these cases, the creation of new avenues of employment and the return to growth can reduce the incidence of poverty.

angle2002-2_img1.JPG

However, output collapses have severely curtailed the ability of the state to support social programs and to undertake growth-oriented interventions. The restructuring of the role of the state in the economy has been accompanied by changes in the responsibility of state-related agencies in the provisioning of health, education and other basic social services, both at the national and sub-national levels.  Where cutbacks in public provision have been severe, the impact has been dramatic.   Maternal mortality increased in Central Asia and in Mongolia as healthcare systems collapsed, contraceptive provision was reduced and abortion rates increased.

The imposition of user fees in education in many countries and loss of teachers to better paying jobs in successful transition countries such as Vietnam have created new and widening gaps in access to education.​

Rising crime has been a common feature in the Asian transitions, whether it was accompanied by growth or deep recession. Registered measures of murder, rape, muggings and armed robberies have soared in many of the countries studied. The weakening ability of the state apparatus to fight crime is one reason for the trend, along with increased opportunities for corruption. Higher crime rates also reflect the growing tensions created by the broader social outcomes of the transition, including the widening income gap, rising unemployment and the acceleration of social stratification.

angle2002-2_Page_09_Image_0001.jpg

Because women almost everywhere experience discrimination and suffer from poorer health indicators, literacy rates, enrollment ratios, and contend with limited political participation, gender equality is an important indicator of overall well-being.

In Asian countries where the transition has been accompanied by growth, the welfare of women has improved in some respects, such as in the choice of employment, though worsened in others, such as in the provision of healthcare for children. In countries that experienced sharp economic downturns, the adverse effects have been more pronounced among women than among men. Women accounted for a larger share of layoffs linked to economic restructuring, especially in state-owned enterprises.

Manuel F. Montes is the co-author of a recent WIDER study Poverty, Income Distribution and Well-Being in Asia During the Transition , with Lu Aiguo, who is a Senior Fellow at the Institute of World Economics and Politics, Chinese Academy of Social Sciences in Beijing. Manuel Montes is currently Programme Officer for International Economic Policy at the Ford Foundation in New York.

This article is based on the study Poverty, Income Distribution and Well-Being in Asia During the Transition edited by Aiguo Lu and Manuel F. Montes, published in the series Studies in Development Economics and Policy, by Palgrave Macmillan, 2002.