There can be no doubt that the recent economic reform policies of
Burma will significantly impact output, productivity and, hopefully,
improve the standard of living for the vast majority of citizens. The
country has already made strides in opening and liberalizing the
economy, but will face considerable challenges as it emerges from
decades of isolation. Statistical measures put growth at an annual rate
of over six percent with the expectation that a surge in foreign
investment will make a substantial contribution to the economy in the
future.
Although the conventional wisdom is that the market and political
reforms are a significant positive step, Burma’s current level of
development continues to trail all of its neighbors and income disparity
is already becoming an emerging issue. The construction boon in the
cities and tourist areas can be readily observed, but take a ride to the
countryside and a different story emerges. Much of the farming methods
of small landowners are not only noticeably similar to those of the
pre-reform period, in some remote areas little has changed in the past
thousand years.
A significant factor contributing to the urban versus rural income
inequality is that the vast majority of investment in Burma is
concentrated in the urban sector, despite the fact that only one-third
of the population lives in these areas. The construction of five-star
hotels and office space continues to receive investment priority and
tends to continue even if a glut occurs. Overseas development aid has
too often placed emphasis on providing opportunities for companies
associated with the aid-provider rather than the recipient.
While Burma’s endowment in natural resources may bode well for
advances in agricultural production, a major cause of poverty among
Burma’s rural people, both individuals and communities, is lack of
access to productive assets and financial resources. This population is
characterized by high levels of illiteracy, inadequate health care and
extremely limited access to transportation and social interaction.
As the World Bank has reported, the 60 million people of Burma have
literally been in the dark for too long with three out of four living
without reliable electricity. Roughly 30 percent of Burmese do not have
access to safe water and the rural poor face harsh environmental
conditions and frequent natural disasters.
As the level of income disparity increases, it is feared that it may
portend social unrest down the road, perhaps resulting in a return to a
more controlled economy and populace. The inability to gauge the extent
to which the government may react to this situation creates an
environment of uncertainty that may negatively impact the rate of
economic growth that is necessary to move Burma significantly forward in
the development process.
It is only natural that the transition to a market economy results in
changes in income distribution. This phenomenon is certainly not unique
to Burma. The unleashing of the forces of competition and the
entrepreneurial spirit, for example, gives incentive to individuals and
firms to improve their economic standing. The allure of profits provides
the catalyst for innovation and encourages new investment both from
within the country and from abroad. Those willing to take risks and
possessing specific skills should be rewarded accordingly.
Theoretically, these benefits should significantly contribute to
economic growth and in the long-run spread to all sectors of the
economy.
The standard model of the market economy, however, generally does not
factor in such variables as corruption and influence peddling, factors
that give certain groups special privileges and unfair access to
resources. Such phenomena, often labeled as crony capitalism, are not
unique to developing countries, but are a growing trend in the developed
countries as well. These elements distort the market mechanism enabling
some to gain substantially at the expense of many segments of the
population. Being told that in the long-run benefits of the market will
trickle down to everyone is little consolation for the malnourished
peasant or unemployed factory worker who places precedence on obtaining a
subsistence standard of living in the present.
Addressing this trend before it becomes severe and expanding the
benefits of the market economy to all is an issue Burma policymakers
must address now and in the future. If not, the social costs of the
emerging inequitable distribution of income may come to haunt all
sectors of the economy.
Dr. Dennis McCornac is an economist specializing in
economic development and the economies of East Asia. He is currently the
Interim Director of Global Studies at Loyola University Maryland in the
USA.
source: DVB
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