The New Development Paradigm

The two major threats facing the effort to lift developing Asia out of poverty are the ongoing economic crisis and climate change, according to a speech by the President of the Asian Development Bank, Haruhiko Kuroda.

Southeast Asia is one of the most vulnerable areas of the world to the dangers of climate change – so many people live next to coasts with rising sea levels and next to rivers which may have increasingly irregular flows in the future. Rice-growing on mainland Southeast Asia in particular relies on wet paddy field agriculture and the amount of water required may be unavailable in future.

The economic crisis has caused significant contractions of regional economies as the export industries have been badly hit and migrant workers are being forced to return home, losing the substantial remittances that would have been paid.

So, to meet these challenges, Haruhiko Kuroda recommends the adoption of a new paradigm for development: which means, in fact, placing more emphasis on domestic consumption and consumption and on promoting technologies to deal with climate change. Encouraging domestic consumption (it happened here under Thai Rak Thai of course) would help to reduce vulnerability to external shocks, which is one of the main problems faced by Thailand. So, when something bad happens, people spend less money and exports are hurt. To counter this, particularly in the principal exporting countries (China, Thailand, Vietnam and so forth), it is necessary to let people become a little better off – that’s the mass of the people, not just the privileged elites. Once the working people can afford to buy things for themselves and their families, their demand substitutes for (in bad times) or complements (in good times) demand from overseas. It also makes the people themselves happier and more willing to participate in promoting the stability of the country, which also has a number of other benefits.

However, it does mean that (as I have observed elsewhere) the age of the low labour cost manufacturing age has past – let people add more value and pay them more is the way forward.