Fixing the Other Asia: Keeping the Miracle Alive

Bruce Koppel

From Foreign Affairs, January/February 1998

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Summary:  Asia's economies are in trouble, as a contagion of plunging currencies and economic instability has taken hold on the continent. But the miracle is not necessarily over. Asia's leaders must move beyond economic liberalization and address the deep-seated problems of the other Asia-not the rich, booming Asia, but the poor, rural, ignored one. To keep the miracle going, the entire population must be brought into the action. That will mean making difficult choices, like investing in agricultural productivity, education, and social services, but the region's leaders can't afford not to.

Bruce Koppel is a Senior Fellow at the East-West Center in Honolulu and is currently a Visiting Professor of Politics and Economics at the Fondation Nationale des Sciences Politiques in Paris.

Asia's economic miracle is in trouble. Last summer Thailand, famed for its economic growth and macroeconomic stability, witnessed an epidemic of plunging currencies and stock prices-called bahtulism by some-that is now spreading throughout the region. The crisis has forced Thailand, as well as Indonesia and South Korea, three of the Asian miracle's brightest stars, to seek multibillion dollar bailouts from the International Monetary Fund. Even Japan has taken a hit. Long the vanguard of Asian economic growth, in December 1997 it was forced to allow the shutdown of two of its largest financial institutions, which were tens of billions of dollars in debt, sparking fears that the contagion of economic distress would lead to further failures among that country's troubled banks and destroy its halting attempts at economic reform. Headlines roared, "Thunder Over Asia" and "Asian Economies: More Myth Than Miracle?" as commentators sharpened their pencils, preparing to write the miracle's epitaph.

But while recent events in Asia are certainly more than mere "glitches in the road," as President Bill Clinton has called them, the Asian miracle is not necessarily over. The region's economic troubles indicate only that the easy part of its economic transformation has ended. Asian leaders have guided their countries through rapid economic growth over the last two decades, privatizing state assets, attracting foreign investment, increasing savings, and strengthening exports, but now they must face a more difficult second generation of challenges. These include deepening economic reform, combating corruption, widening political and social inclusiveness, and assuming greater environmental responsibility. These new challenges are primarily those of the "other Asia"-that large, excluded sector of the region that has not uniformly benefited from the economic expansion of the Asian miracle. This is where most Asians live: it is rural and poor and suffers from the traditional economic and social problems of the Third World, and it is where policymakers must focus their energies and resources. Bringing the other Asia into the mainstream of growth will require difficult choices-choices that will determine whether historians decide that what happened to Asia in the latter half of the twentieth century indeed was a miracle or merely a myth.

A MIRACLE DENIED

The slightest mention of Asia conjures up images of skyrocketing growth, abundant wealth, and little poverty. While economic development has definitely brought about a decline in absolute poverty in Asia, the rate of decline has only been slightly greater than the rate of population growth, so the number of poor remains very large. Today, half of Asia's population-1.5 billion people-makes less than $500 per year.

Asia's poverty can be linked to the traditional problems of its rural areas: high population growth, low labor and land productivity, land shortages, and deteriorating natural resources. But there are also new forms of poverty. People are being displaced by the loss of forest and agricultural land to development projects, there are increasing numbers of migrant agricultural workers, and unemployment even among the more educated is rising. In Asia's major cities, where 40 to ...

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