Accessibility links

Breaking News

Hong Kong: Analysis From Washington--Those Left Behind

Washington, 24 September 1997(RFE/RL) - The growing disparity between the rich and poor, particularly in countries making the transition from communism to free markets and democracy, represents a time bomb that could explode in the near future.

That somber message was delivered by World Bank President James Wolfensohn in speech on Tuesday to the opening session of the World Bank/International Monetary Fund annual meeting in Hong Kong.

Wolfensohn said there was both good and bad news in the economies of Eastern Europe and Eurasia now undergoing the transition.

On the upside, reforms in these countries have made future progress likely, including integration into the world economy.

But on the downside, many of the old and unemployed are suffering as a result of turbulence caused by the shift in these countries toward market economies and by the globalization of the economy.

And the World Bank leader concluded with an appeal for a world-wide effort to ensure that no one, including those now living in poverty, will be left out of what he called the new global prosperity.

Wolfensohn's warning contrasts with the generally upbeat comments of others at the Hong Kong meeting. Russian, Chinese and representatives of other countries have advertised the success of their reforms, and Western bankers have generally echoed their words.

But in fact, the problem he points to may be even larger and more serious than he suggests.

First, the problem of increasing income inequality exists not only within countries but between them.

As Wolfensohn said, the shift from communism to free markets has been accompanied by a radical differentiation of incomes in those formerly communist societies.

In the past, no one was able to amass great riches, but few were allowed to sink into totally disabling poverty. Now that has changed, and the appearance of both a new rich and a new poor has disturbed and angered many in these countries.

At the same time, the globalization of the market that has taken place simultaneously with the collapse of communism has led to a further differentiation of the wealth of nations, with some countries obviously gaining in wealth and others lagging behind.

That too has disturbed many of the people living in wealthy countries and angered many who believe that their poverty is contributing to the wealth of others.

Second, growing democratization around the world means that people who are suffering from reforms use the ballot box to seek to recover their position. Authoritarian regimes in the past often ignored the anger of their own population; more open and democratic ones cannot. And as Wolfensohn implies, the poor especially if numerous can press their case by voting or by mass pressure of one kind or another.

In countries where the number of the new poor is relatively large, either because of an aging population or massive economic dislocation, such pressure could easily overwhelm both democracy and a market economy.

And third, political leaders well-intentioned or not are increasingly likely to exploit the anger of those left behind to advance their own causes at home and abroad.

Politicians in a variety of countries are already playing to groups that have suffered as a result of economic and political change. In countries that have been doing relatively well, these leaders often call for little more than protectionism.

In countries that have suffered more, at least some politicians have advocated a return to the past, the use of force against neighbors they perceive to be doing better, or an alliance of poor countries against richer ones. To the extent that any of these positions gains support -- something that has happened in the past -- a great deal more than economic reform or democracy may be at stake.

And consequently, Wolfensohn's most important contribution in this speech may be his implicit warning that the conventional wisdom about democracy and free markets may be wrong.

Neither of these systems is inevitable or forever, and both are at risk if the world ignores the way in which they can now interact.