Capitalist Development and Economism in East Asia: The Rise of Hong Kong, Singapore, Taiwan, and South Korea

By Kui-Wai Li | Go to book overview

3

Growth, inequality, and the survival cost

3.1Introduction

This chapter presents a conceptual argument against the misconceived correlation between income growth and equality, or between growth and distribution. By looking at the Gini coefficient of the four East Asian economies over the decades, it will be argued that growth and equality are separate issues, and the more relevant socio-economic goal is poverty reduction. The Gini coefficient measures the degree of income inequality (the higher the Gini coefficient, the greater the degree of income inequality, or the larger the gap between rich and poor), but it is not necessarily the best measurement of distribution. Inter-personal income comparison always shows inequality, but intra-personal income comparison can reveal how the absolute income of an individual has increased and poverty has been reduced.

The “Asian style” of poverty reduction was not the provision of “free lunches” through government assistance, but promoted self-help and the principle of “temporary” need. Welfare provision concentrated mainly on public housing and education that reduced the “survival cost” of low-income earners. A low “survival cost” enables employers to keep wages down to prolong economic competitiveness, but it also allows a greater purchasing power to be realized should absolute income rise. The discussion on poverty reduction leads to the conceptual importance of the “survival cost.” The government can create a lower “survival cost” for individuals, either by the provision of various social and welfare items or by enabling the attainment of a high endowment through education and training.

Section 3.2 elaborates on the conceptual difference between growth and equality, while section 3.3 examines the Gini coefficient and its various measurement defects. Section 3.4 turns the discussion to the importance of poverty reduction instead of equality pursuance. The various instruments and experiences of poverty reduction among the four East Asian economies are presented in section 3.5. A comprehensive concept of “survival cost” is elaborated in section 3.6, and a conclusion is given in the final section.

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