Adjustment and Poverty in Asia: Old Solutions and New Problems

This paper analyses how adjustment policies affected the poor in Asian economies, focussing on the period up to 1997. It shows that there was a significant reduction in both private income poverty and social income poverty over the previous thirty years. The adjustment policies of the 1980s led to some episodes of rising poverty, but unlike in other regions, there was no substantial increase in poverty. Countries which adjusted on their own, however, did significantly better on poverty than those who adjusted with IMF or World Bank programmes. In both cases, the main basis for the good performance was a sustained growth rate not very high commitments of national income to social expenditure, nor a progressive improvement in income distribution. Social safety nets did not play a big part. As a result when the economic crisis occurred in East Asian countries in 1997-8, there were only limited safety nets, of either a traditional or state supported kind, so that a sharp increase in poverty ensued.