Tag Archives: economic growth

Corporate Governance in Asia — Challenges and Prospects

Executive Editor’s note: I am delighted to inform our readers that internationally known professor  Gunter Dufey has accepted our invitation to join us as  as the Director-Editor for the region of Singapore and Southeast Asia among his other activities. We are looking forward to his wise and experienced inputs. Below is a brief CV of his and the first article for our publication.

Professor Gunter Dufey, PhD or “GD” as he is known among friends and colleagues is Professor Emeritus of The University of Michigan Ross School of Business, in Ann Arbor, MI USA and Consultant on the faculty of Banking and Finance, Nanyang Business School, Singapore where he taught since 2000 to date. Parts of his academic career were spent at Stanford (USA), University of Texas, Wirtschaftsuniversität Wien (Austria), St. Gallen (Switzerland) and Universität des Saarlandes (Germany) where he was appointed Honorary Professor. His research interests focus on risk management, intl. financial markets and corporate governance. He has published widely. Parallel to his academic career, he worked for extended periods with a number of multinational companies and government agencies, such as  the US Department of the Treasury,, the Ministry of Finance ? FAIR in Tokyo and the Pacific Rim Bankers Program, Seattle, USA. He continues to serve on the Boards of Guinness/Atkinson, USA and until recently on several subsidiaries of Ally Financial (GMAC), Detroit and Toronto. He participates in managing the portfolios of several foundations. From 09/2001 to 02/2003 he was employed with McKinsey and Co. in Singapore, supporting the firm’s Corp. Governance practice in Asia. GD has been a member of the Singapore Institute of Directors, an active participant in the programs of the Asian Corporate Governance Association and currently serves part-time as Executive Director of EDUCATION EXCHANGE LTD, Singapore. Throughout his career he has been actively engaged in Executive Education.

Corporate Governance (CG) has been an enduring issue in the Region (Southeast Asia), especially after the Asian Crisis where poor CG made the crisis considerably worse as investors, local and foreign, harbored serious doubts about their fate when business firms confronted adverse conditions. In spite of progress made over the years, surveys conducted by organizations such as McKinsey & Co and well as the Asian Corporate Governance Association (ACGA) show that – while there are wide differences among countries in the Region – overall there is much room for improvement when compared to the developed markets in North America and Western Europe – although knowledgeable observers will hasten to add that there is considerable room for improving CG in these countries too.

Today, there are two factors that provide special urgency for CG ‘upgrading’: For one, a number of Asian countries, in particular Japan, South Korea, Taiwan, and the city states of Hong Kong and Singapore, have reached a stage of economic development where ‘technological catching-up’ can not be relied upon for further growth. With population increase severely limited and in some cases negative, can provide a further source of economic growth. The second factor, distinct yet related, is the looming pension problem in all these societies, driven by shrinking labor forces and rapidly rising life expectancies. With the traditional Asian family based retirement system disappearing, and ‘pay as you go’ social security systems ailing – to the extent they ever existed in the Region, the only alternatives are so called ‘defined contribution’ (DC) arrangements, illustrated by Singapore’s CPF. However, as this example shows, DC pension systems require the availability of assets with good returns over the long term. In practice only equities (incl. real estate related equities) can yield returns that make contributions affordable. And equity markets with good returns require high quality CG, where firms are managed for the benefit of investors.

Continue reading Corporate Governance in Asia — Challenges and Prospects

Instead of soaking the rich, create some new riches: an update


Dr. John Psarouthakis, Executive Editor.www.BusinessThinker.com.
Founder and Managing Director, www.jpmcenter.com

We all know that if we confiscate the entire 2017 earnings of the highest earners and sent it to Washington, you would solve almost nothing in Washington. Most of us, I hope, understand furthermore that pulling the One Percent’s wealth away from the capitalist funnel that feeds our economy would be worse than solving nothing; it would be a serious problem. This plan would, on the other hand, goad the very top layer of American wealth to do everything in its power to grow the economic pie.

I first thought of the plan applying to any person or entity with taxable income of $1 million a year or more. That was partly because a million dollars is certainly a nice income—but also because it’s an easy figure with which to work in sorting out numerical concepts. A $1-million cutoff would apply to an army of CEOs and business owners, but also to several battalions of quarterbacks, pitchers, power forwards, rock guitar players, actors, and media performers or executives. Applying the plan to the entire One Percent would cover any household making roughly $506,000 and up. Maybe the plan could be modified and applied effectively to affluent but somewhat lower pay grades. I don’t know. Economists and tax experts and actuaries and mathematicians who are whizzes with algorithms—lots of people need to have a go at fine-tuning and improving what I will call here “Economic Growth Corporations.”

These Economic Growth Corporations (EGCs) would not be think tanks, or advisory panels, or bureaucracies whose public benefit can be measured only via the most imaginative statistics. EGCs would be chartered to grow the economy in fact, not in theory and not as mere demonstration projects. EGCs would jumpstart our economic engine in ways numerous schemes, from “enterprise zones” to your town’s tax-abated industrial park, have never done.

Continue reading Instead of soaking the rich, create some new riches: an update

This chart reveals the most dramatic change in incomes since the first Industrial Revolution

Written by
Branko Milanovic Visiting Presidential Professor, Graduate Center University of New York
Published WORLD ECONOMIC FORUM (http://bit.ly/29A5wGv)
Tuesday 5 July 2016

The effects of trade, or more broadly of globalization, on incomes and their distribution in the rich countries have been much studied, beginning with a number of works on wage distributions in the 1990s, to more recent papers on the effects of globalization on the labour share (Karabarbounis and Neiman 2013, Elsby et al. 2013), wage inequality (Ebenstein et al. 2015), and routine middle class jobs (Autor and Dorn 2010). 

In joint work with Christoph Lakner (Lakner and Milanovic 2015) and in a recently published book, Global Inequality: A New Approach for the Age of Globalization (Milanovic 2016), I take a different approach of looking at real incomes across the world population. This is made possible thanks to the data from almost 600 household surveys from approximately 120 countries in the world covering more than 90% of the world population and 95% of global GDP. Since household surveys are not available for all countries annually, the data are ‘centred’ on benchmark years, at five-year intervals, starting with 1988 and ending in 2008. I report the results for up to 2011 in Milanovic (2016), while Lakner has an unpublished update for 2013. The updates confirm, or reinforce, the key findings for 1988-2008 that I discuss here.

The advantage of a global approach resides in its comprehensiveness and the ability to observe and analyse the effects of globalization in many parts of the world and on many parts of the global income distribution. While the true or putative effects of globalization on working class incomes in the rich world have become the object of fierce political battles – especially in the wake of the Brexit vote and the rise of Donald Trump to political prominence in the US – the overall effects of globalization on the rest of the world have received less attention, and when they have, were studied separately, as if independent, from the effects observed in the rich word.

Figure 1 – dubbed by some ‘the elephant graph’ because of its shape – shows real income gains realized at different percentiles of the global income distribution between 1988 and 2008. Income is measured in 2005 international dollars and individuals are ranked by their real household per capita income. The results show large real income gains made by the people around the global median (point A) and by those who are part of the global top 1% (point C). It also shows an absence of real income growth for the people around the 80-85th percentile of the global distribution (point B).


Figure 1. Cumulative real income growth between 1988 and 2008 at various percentiles of the global income distribution

Mean growth of different percentiles of global income distribution Image: VoxEU

Who are the people at these three key points? Nine out of ten people around the global median are from Asian countries, mostly from China and India. Their gains are not surprising, given that Chinese and Indian GDP per capita has increased by 5.6 and 2.3 times, respectively, over the period. Thus, for example, the person at the median of the Chinese urban distribution in 1988 was then also at the global median, but rose to the 63rd global percentile in 2008 and was above the 70th percentile in 2011. She thus leapfrogged, in terms of income, some 1.5 billion individuals. Such dramatic changes in relative income positions, over a rather short time period, have not occurred since the Industrial Revolution two centuries ago

The people around the global median are, however, still relatively poor by Western standards. This emerging ‘global middle class’ is composed of individuals with household per capita incomes of between 5 and 15 international dollars per day. To put these numbers into perspective, one should recall that the national poverty lines in rich countries are often higher than 15 dollars per person per day.

The global top 1% is composed overwhelmingly of the people from the advanced economies – one half of the people in that group are Americans, or differently put, 12% of Americans are part of the global top 1%. China and India have many billionaires (in effect, according to the 2015 Forbes list, China and India have more than 300 billionaires versus more than 500 for the US), but compared to the ‘old rich’ world, Asian countries still do not have sufficient numbers of ‘comfortably rich’ or affluent households. In 2008, the threshold for being in the global top 1% was 45,000 international dollars per person per year which, translated into a traditional family structure of two partners and two children, implies an after-tax income of $180,000 (or, using the approximate tax rates of the rich countries, a before-tax income of more than $300,000).

The point that attracts most attention is B. Seven out of ten people at that point are from the ‘old rich’ OECD countries. They belong to the lower halves of their countries’ income distributions, for in effect the rich countries’ income distributions start only around the 70th percentile of the global income distribution. (For some especially rich and egalitarian advanced economies, that start-up point is even higher – Denmark’s distribution begins around the 80th global percentile.)

The contrast between the unambiguous success of people at point A and the relative failure of people at point B allows us to look at the effects of globalisation more broadly. Not only can we see them more clearly when thus juxtaposed, but it enables us to ask whether the two points are in some sense related: is the absence of growth among lower middle classes of the rich world the ‘cost’ paid for the high income gains of the national middle classes in Asia? It is unlikely that one can provide a definitive answer to that question, since establishing causality between such complex phenomena that are also affected by a host of other variables is very difficult and perhaps impossible. However, the temporal coincidence of the two developments and the plausible narratives linking them, whether made by economists or by politicians, make the correlation in many people’s mind appear real.

In addition to looking at the global reshuffle of income through the nation-state lenses (are the ‘losses’ of UK working class related to the gains of the Chinese?), we can look at it through a purely cosmopolitan lens where all individuals are treated equally, and the same-percentage income gains realised by the poorer people are valued more than those made by the rich. With such a perspective in mind, it would be hard to dismiss the period 1988-2008 (and as our results for up to 2013 confirm, the period all the way to the present) as being one of failure. One could, despite the rising income share of the global top 1%, argue the opposite by pointing to the close to doubling of real incomes realised by some one-fifth of the world population that lies between the 45th and 65th global percentiles. It is their real income growth that has driven the first decline in global inequality since the Industrial Revolution (Milanovic 2016, Chapter 1).

The issue, however, is that such a cosmopolitan approach is a very abstract way to look at the matters of distribution. Most people are concerned with their incomes as compared to their national peers. Milanovic and Roemer (2016) show that what seems a very positive development (that is, lower global inequality) when individuals are assumed to be concerned solely with their absolute incomes becomes much less positive when we also include in their welfare functions a concern with relative positions in national income distributions. Then the dominant feeling across the world, reflecting increasing national income inequalities, becomes one of a relative loss.

The political implications of a global ‘elephant graph’ are being played out in national political spaces. In that space, rising national inequalities, despite being accompanied by lower global poverty and inequality, may turn out to be difficult to manage politically.


Autor, D. and D. Dorn (2010), “The growth of low-skill service jobs and the polarization of US labor market”, American Economic Review 103(5): 1553-97.

Ebenstein, A., A. Harrison, M. McMillan and S. Phillips (2014), “Estimating the Impact of Trade and Offshoring on American Workers Using the Current Population Surveys”, Review of Economics and Statistics 96(4): 581–595.

Elsby, M. W. L., B. Hobijn, and A. ?ahin (2013), “The Decline of US Labor Share” paper prepared for the Brookings Panel on Economic Activity, September 2013.

Karabarbounis, L. and B. Neiman (2013), “The Global Decline of the Labor Share”, Quarterly Journal of Economics 129(1): 61–103.

Lakner, C. and B. Milanovic (2015), “Global income distribution: from the fall of the Berlin Wall to the Great Recession”, World Bank Economic Review 30(2): 203-232.

Milanovic, B. (2016), Global Inequality: A New Approach for the Age of Globalization, Harvard University Press.

Milanovic, B. and J. Roemer (2016), “Interaction of global and national income inequalities”, Journal of Globalization and Development, forthcoming.


Continue reading This chart reveals the most dramatic change in incomes since the first Industrial Revolution