Asia's coming shift: it is time for some new priorities.

• Author: Petri, Peter

After several decades of extraordinary economic growth, most Asian economies are now slowing. Asian growth is facing stiff headwinds in part from the slow recovery of the global economy. But some problems are home-grown: rising income disparities are weakening demand, environmental destruction is taking a toll, health costs are escalating, and governance failures are diverting resources from development.

In many ways, the side effects of growth are becoming impediments to growth itself. While challenging, the implications are potentially positive--the result could be better approaches to growth that lead to more meaningful development. So in this time of creative stock-taking, we ask: What has worked among the region's strategies, and what needs fundamental change?

PAST VERSUS THE FUTURE

Since the early 1990s, developing Asia has more than tripled living standards and has become a driver of global growth and prosperity. The region reduced extreme poverty--the percentage of people with incomes below $1.25 a day--from nearly 55 percent to just over 20 percent. Under some projections, Asia is seen to comprise one-half of the global output by mid-century.

What the most successful Asian economies have in common is a pragmatic, flexible pursuit of diverse policies that work what might be labeled evidence-based policy. Details vary across the diverse economies, but the successful ones use a trial-and-error approach to identify robust growth policies--outward orientation, stable macroeconomics, and high savings and investments, often in human capital. Governments (but not always state enterprises) play a large role.

Some argue for continuing the same policies that generated rapid growth in the past. But the emerging evidence calls for new priorities to continue the progress. An important debate about these priorities is taking shape--from China (fairness and social security) and India (economic rights) to Malaysia (a new economic model) and Korea (the happiness era).

Income inequality has worsened in countries accounting for 80 percent of region's population over the last decade. Meanwhile, developing Asia has become the world's leading emitter of greenhouse gases, accounting for 35 percent of global carbon dioxide emissions, twice its share of global GDR Without sharp interventions, this share will rise to 44 percent by 2030. Asia has the world's worst urban air pollution, and environmental degradation is threatening its water, soil, biodiversity...