Does Asia stall or fulfill the dream of the Pacific century?

Warnings from officials at the Asian Development Bank (Reuters by way of Stewart Ross):

Home to 3.3 billion people, Asia has led the global economy in recent years, and the rise of China and India has lifted the region's profile and influence in world markets.

But the region also has nearly 2 billion people living on less than $2 a day, including in China and India, who are most at risk from sharp rises in food and fuel prices this year.

"Sure we have had a tremendous growth story, incomes have increased, and Asia has a lot to be proud of," ADB Managing Director General Rajat Nag told Reuters.

"But you also 700 million people without access to clean water, you have 1.7 billion people without access to sanitation, you've got maternal mortality which is high, you've got child malnutrition," he said.

Around 3,000 people will gather in Hanoi for the May 3-6 meeting, and the ADB, charged with fighting poverty in Asia and the Pacific, will push the case for the region to face up to its responsibilities.

The message, Nag said, was clear: "Your rise is not preordained; it is plausible, but you've got to earn it."

"You've got to make some policy decisions now to reduce inequity, increase the basic education, address issues of governance and corruption, show leadership, have strong regional integration if you are going to avoid the middle-income trap."

That trap, where per capita income levels rise to about $7,000-10,000 and then stall, had afflicted countries in Latin America and the Philippines in Asia, he said.

By avoiding the trap, Asia would account for half of world output by 2050, from 27 percent now, with per capita income of about $39,000, in purchasing power parity terms, and billions lifted out of poverty, an ADB-commissioned study found.

"If on the other hand you get caught in the middle-income trap, the per capita income will only be about half, about $20,000 per capita, and Asia's output will account for about 32 percent," Nag said. "So the potential loss is huge."

When I talk about the big shift from extensive growth (more stuff) to intensive growth (more innovation), this is really what I'm describing.  You accomplish the basic stuff with a segment of your economy (i.e., there are still plenty of rural poor) and then it's a question of whether you can take it to the next level by cleaning up a lot of bad practices you've still got or accumulated in the process of development.  That's the progressive-era point that America hit in the late 1800s, and either you muscle past that or you get stuck.  

Essential to the process:  democracy that allows the effective articulation of society's demands for improvements, a professional civil service that reduces the corruption factor, rise of an environmental movement, effective taxation to raise funds for the public-goods improvements needed for those who aren't moving ahead, sound public education, good rules to attract investment beyond the early basics (commodities, cheap manufacturing, etc.)

All of this is to say:  there is no "Asian way" that circumvents these problems, and please, don't toss Singapore in my face, because city-states are not countries.  They will need to travel the same progressive territory that the West once did - and they will end up in the same place.  

Good news for Asia:  outside of China, Japan, Australia/NZ and South Korea, the rest of the place is just hitting its demographic dividend - that sweet spot of about 25 years in the transition from high fertility/mortality to low fertility/mortality.  One has to take advantage to make as much advance proceed as possible during this window, otherwise you run into the Chinese get-old-before-you-get-rich problem.