William Pesek is an award-winning Tokyo-based journalist and author of "Japanization: What the World Can Learn from Japan's Lost Decades."
Is Asia's era of rapid poverty reduction behind it? The World Bank certainly seems to think so.
The lending institution put out some dire economic numbers last week. Its prediction that global growth would contract 5.2% in 2020, thanks to the risks of coronavirus, got the most global attention. Advanced economies would shrink 7%, it said, while the gross domestic product of East Asia and the Pacific would fall 0.5% -- the worst performance since 1967.
But more worryingly, it predicted that the turmoil could tip 70 million-100 million people globally back into extreme poverty, that is, living on less than $1.90 a day. Only three weeks ago it said that would be 60 million. This is a risk Asian leaders must internalize fast.
This is hardly the first time this year that the World Bank or its sibling, the International Monetary Fund, has spooked markets. In April, the IMF said that 87% of economies, or 170 countries, would see "income per capita shrinking during 2020."
That same month, the World Bank turned heads with its "third shock" warning. On top of the trade war upending export markets and the coronavirus outbreak, we were now seeing the deepest synchronized downturn in nine decades.
Even these new figure will almost certainly be subject to downward revision as the pandemic persists -- perhaps sharply so, if second waves of infection force governments to extend, or reinstitute, lockdowns. This could be as bad as an 8%-10% fall in global GDP.
This gets us to the real worry: complacency by governments which do not understand that this is an existential moment in Asia's poverty battle, which lifted 665 million people out of extreme poverty in the two decades to 2018. Countries like Indonesia and the Philippines, which moved a touch above technical poverty lines, could all too easily drop back.
The pandemic coincides with the unraveling of the globalization trends that propelled Asia to its post-1997 heights. Efforts since that crisis to trim tariffs, simplify bureaucracy, improve infrastructure and attack corruption raised competitiveness and living standards and reduced poverty.
This liberalization process helped East Asia avoid the worst of the 2008 subprime meltdown. As U.S. growth plunged, heady demand from China helped the region stand its ground. Then came Donald Trump. The China trade war the U.S. president launched in 2018 was already disrupting supply chains when COVID-19 arrived.
The risk is particularly acute given China's troubles. China's economy shrank 6.8% between January and March. The enmity between Trump and China's President Xi Jinping could easily result in an expanded trade war. Bottom line, there are no growth engines on which Asia can rely.
This requires bold and creative solutions. Such policy ingenuity has been in short supply since the 1990s. The export-driven growth model that served Asia so well is now in tatters. The top-down fiscal and monetary stimulus that helped safeguard growth is rapidly being exhausted. Asia can forget sizable tourism income anytime soon. Remittance inflows are drying up.
The answer now is microeconomic retooling on a grand scale. Rather than pouring government money into giant public works projects or managing exchange rates, developing Asia must bail out households. Though dozens of countries, including Japan, Singapore and South Korea, have taken this route, emerging Asia tends to direct most rescue spending at big-ticket projects.
Many governments are indeed extending cash to workers. But the magnitude of payouts must be more ambitious. Equally important, leaders need to create deeper and wider social safety nets that keep cash flowing in the longer run. Better access to affordable health care and education is vital to keeping workforces healthy and productive. It would offer the shock absorber many nations lack to stop families from sliding down the per-capita-income ladder.
Governments should devise credible unemployment insurance systems to reduce economic insecurity. Increased public aid for basic nutrition requires urgent attention.
In a report last month titled "Coronavirus vs. Inequality," the United Nations Development Programme warned that the pandemic "is ruthlessly exposing the gaps between the haves and the have nots, both within and between countries."
The UNDP has been a vocal advocate of the "universal basic income" model, that is, a guaranteed payment to each person every year. The point, the agency says, is to "ensure urgent recovery measures and longer-term social protection, especially for the disadvantaged and marginalized."
This being Asia, we are talking about hundreds of millions of people on the edge of personal financial reckonings. It is a dismal foundation on which to build a region tipped just six months ago to own the 21st century. The pandemic is exposing a growth model in need of rapid revision.