Affluence eludes poor crowding into Asian cities as elites capture increasing share of wealth

By , , on September 25, 2014


Low and high rise buildings in a waterfront in Bangkok, Thailand.
Low and high rise buildings in a waterfront in Bangkok, Thailand.

JAKARTA, Indonesia—Down a concrete path, between rail tracks that buzz with each approaching train and a river choked by plastic and raw sewage, Asih Binti Arif cradles her baby and reflects on dreams gone dark.

Five years ago, Arif and her husband left impoverished Madura Island, joining migrants throughout the Indonesian archipelago seeking a better life here in the capital.

Across the developing world, migration from country to city has long been a potential path out of poverty. Less and less is that true for Arif and millions of others in Asia, where the wealth gap is growing in many of the most densely populated cities in human history.

From India to Indonesia, Myanmar and the Philippines, overcrowded cities have become studies in extremes of deprivation and wealth.

The trend could worsen as the widening global gap between the richest and everyone else undercuts efforts to reduce poverty. When the rich capture a rising share of wealth, the poor and middle class typically suffer. Experts say other problems tend to follow: poorer health, less education, family breakups, crime and unstable societies.

“With inequality, the impact of growth on poverty eradication is muted,” said Indu Bhushan, an Asian Development Bank official.

Indonesia’s inequality measure rose from 30.8 in 1999 to 41.3 in 2013 on a scale of zero to 100 where zero means everyone has equal wealth and 100 means one person has all the wealth. Such sharp increases, which reflect wealth concentrating in fewer hands, have occurred in India, China and elsewhere, too.

Against the backdrop of Jakarta’s gleaming office towers and luxury hotels, Arif’s family lives in the Tanah Abang slum. They scavenge garbage for discarded bottles, cardboard boxes and frayed clothes.

“I can’t even imagine or dream of that life,” Arif said as a train thundered past. “The gap is so big. They are in the sky, and we are on the earth.”

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In past decades, the power of industrialization allowed hundreds of million to emerge from extreme poverty.

In 1981, nearly 1.7 billion Asians were living on less than $1.25 a day. Today, the figure is about 700 million.

But vast numbers cannot aspire to rise much further. About 80 per cent of the 3.6 billion people in developing Asian countries still live on less than $5 a day, many relying on day labour, rag picking or other meagre livelihoods. Even migrants who arrived in cities years ago feel trapped in a seemingly permanent underclass.

At the same time, the numbers of millionaires and billionaires has burgeoned, creating elites that have more in common with the ultra-rich in cities such as Paris and New York than their own countrymen. Outside of eastern China and the advanced economies of South Korea and Japan, an Asian middle class has not taken widespread hold.

In Mumbai, India’s financial capital, Pandurang Bithobha Salvi, 52, is a veteran migrant from Naganwadi, a village about 500 kilometres (300 miles) away. Villagers have been heading to Mumbai since the 1950s to work and supplement meagre farm incomes. Despite India’s ascent as a business outsourcing centre, most migrants find only low-paying unskilled work.

Salvi and 20-odd men share the $130 monthly rent on their 17-square-meter (180-square-foot) room festooned with drying shirts and pants. Cramped as it is, the tiny room is a step up from Mumbai’s slums.

Across town on tony Altamount Road, billionaire Mukesh Ambani and his family luxuriate in their 400,000-square-foot (37,000-square-meter) mansion. Three years ago, Ambani moved into the 27-story structure, with three helipads, a movie theatre and recreation centre for a price reported above $1 billion.

It’s among the world’s most expensive homes in a city of 21 million people where an estimated 40 per cent live in slums without basic sanitation. The crisis has worsened since 2005, when slum dwellers made up 35 per cent of the city.

Stagnant pay and runaway inflation are putting a decent life out of reach, said Salvi, who used to work as a bus conductor and for a time could afford to have his family live with him in Mumbai.

Having given up the job because of back problems, he earns much less now as a security guard. His family returned home, and Salvi squeezed back into the village’s shared room, where sleeping arrangements are a nightly conundrum: six on a makeshift loft, 10 on a floor mat, one or two on a table, and occasionally several in the hallway.

One factor behind Asia’s widening wealth disparities, said Bhushan of the ADB, is soaring real estate prices. Affordable housing has been squeezed out by luxury apartments, hotels and malls. India’s home prices have soared 60 per cent since 2009. Prices in Indonesia, China, Myanmar and the Philippines have surged, too.

“In the past, some of us have made a better life for ourselves and our families,” Salvi said. “Such cases are becoming rarer now.”

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Asia’s ultra-rich and their offspring, with their private jets and platoons of servants, live in gated communities in a world prized by brands such as Cartier and Louis Vuitton and educate their children overseas.

Some have been enriched by the rise of industries such as online commerce and by a property boom. But most of Asia’s richest are second- and third-generation beneficiaries of family fortunes.

The World Bank and other global organizations have found that extreme poverty has declined over the past 30 years, in part because U.S., European and Japanese manufacturers brought work to poor Asian countries—textile factories to Bangladesh, for example, and electronics makers to China.

Yet experts say the decline in poverty has been slowed by the wealth gap. The Asian Development Bank estimates that an additional 240 million people in Asia would have risen out of the direst poverty if inequality hadn’t increased.

For countries such as Myanmar that are latecomers to industrialization, the challenges are acute. A treasure land of gems and tropical timber that was the world’s biggest rice exporter during Britain’s colonial era, Myanmar stagnated for decades under generals who yielded power in 2011.

Economic reforms are transforming the skyline of its biggest city, Yangon, but not the lives of people like Thein Tun Oo, whose extended family of 10 subsists in a one-room bamboo shack on the muddy banks of Pazundaung Creek.

Thein Tun Oo, a carpenter who sold his farmland to pay for his father’s failed cancer treatment, wagered everything in moving five years ago to Yangon from Bago, a region 100 kilometres (60 miles) away.

“At least here we can find some work,” said Thein Tun Oo, 44.

The family feels it has been worth years of illness and hand-to-mouth living to secure education and opportunities for their four girls, ages 4 to 17. The eldest, Po Po Aung, left school at age 7. For a time, she worked with the next eldest hauling gravel for less than 4 cents for each 20 kilogram (44 pound) basket, earning money to pay for school fees.

“We work a day and eat a day,” said their mother, Thin Thin Khaing, struggling to be heard over the engine of a gravel-hauling boat berthed beside their door.

Asked what she hopes will come of Myanmar’s reforms, including plans for factory parks that might provide better-paying jobs, Thin Thin Khaing and her husband laugh.

“We are just manual labourers, and we don’t know about such things,” she said.

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Some of Indonesia’s super-rich are known for announcing their wealth by roaring down Jakarta’s main roads in sports cars or stretching out in chauffeured Roll-Royces.

Amanda Subagio, 37, a socialite whose father founded a telecommunications and satellite empire, said the flaunting of extravagant wealth by “new money” is deepening the discontent of struggling Indonesians.

“You should be at least aware of how other people are living in this country,” she said.

The “other people” are those like Arif, the scrap collector in Jakarta’s slum, and her neighbour, Samia Dewi Baturara, who share the same shack divided by a plywood wall.

Baturara left the island of Sumatra alone last year to try to earn enough to support her two children, who stayed behind with their grandmother.

She said she earns too little to ever bring her children to the city. Yet unlike Arif, she still allows herself to dream.

As Baturara peddles coffee opposite the luxury Shangri-La hotel, she pictures herself as a guest in the exclusive world inside. She would have to work 40 days, without spending anything, to afford one night in the cheapest room.

“I imagine that I can come to the hotel and see the room,” she said. “Almost every day, I imagine how I can sleep there.”