Yes, that’s what the latest report from the United Nations (Economic and Social Survey of Asia and the Pacific 2006) is telling us and policy makers in the country’s planning bodies had better take heed. The report acknowledged that the region has proved to be resilient in the face of global shocks, including rising prices and slowdown in global trade, and has been growing robustly in the last decade or two, yet it also noted that economic growth has not been able to soak up joblessness in the region. Inequality is also on the rise.
Nowhere is this observation more true than in the
The old economic theory says that economic growth necessarily addresses poverty, as higher volumes of economic activity require the hiring of more workers. This wisdom still holds, but the reports also says that the relationship between growth and job creation has been weakening lately, owing to a host of factors—including high birth rates and technological change (e.g. computerization, downsizing, among others).
The study also points to the pervasive of fiscal incentives that cheapened capital, thus providing more incentives among factory managers to substitute machines where they could have hired more workers.
But the most important reason is the lack of the appropriate policy environment for small and medium enterprises, thus raising the cost of entrepreneurship. This problem is especially true in the
The government’s failure to provide adequate economic infrastructure linking the countryside to the economic centers has constrained the spread of economic activities, thus limiting the capability of the economy to generate more jobs. In the last several decades, the bulk of the government infrastructure spending has been concentrated on urban areas, thus deepening the rural-urban divide. The urban bias of the government infrastructure policy, therefore, may have contributed to the growth of urban-based outsourcing industry; but this emerging industry itself is not capable of generating broad-based economic growth.
Overall, what the report tells us is that high economic growth alone, as in the experience of