The last decade was characterised by excessive accumulation of wealth by soverign entities. Central Banks accumulated large surplus - that was parked in US treasuries and later in riskier asset classes (through SWFs). This is one of the primary drivers of the current crisis. VoxEu examines the reason for soverign wealth accumulation and suggests that this was primarily done to avoid exchange rate appreciation.
Economy as a Wealth managing engine
Any domestic economy serves as wealth creating and wealth distributing engine. We can imagine an economy as equivalent to two different motors linked in tandem (feeding into each other). Entreprenuership is common name given to the wealth creation motor. Governments add inefficieny into this motor by interfearing with it. What governments are really concerned about is the woking of the other motor - the wealth distribution motor.
In case of economies creating wealth using labour arbitrage, it is the wealth distribution motor that matters more. If this motor is working perfectly then the national income is able to percolate to the lowest rungs of the society. Unfortunately this is not so in developing Asia. The local governments role is of creating, improving and efficiently running this engine. But the measures taken by developing Asian governments had, intentionally or otherwise, no such effect. Indian government is talking of inclusive development - but its only lip-service. Only China built infrastructure but followed policy of enforced migration (to and from) and managed this to certain extent. These indicate a weakness of this critical motor in developing Asia.
The policy of accumulating further wealth while leaving the wealth distribution mechanism broken has lead to rise of very-high income population in developing Asia while low end remains poor. It is interesting that this is a good policy so long as reserve build-up is within a certain limit. Beyond this limit, a policy of allowing exchange rate appreciation may have achieved better wealth dispersion (at least globally) - than what we have achieved. This policy would have raised inflation, and consequently incomes across the income pyramid.
There is a need to put this VoxEu research under further scrutiny. There is definitely a lot of merit in the argument. We need to understand the wealth distribution/dispersion process in more detail. Obviously the theory I suggested above has holes and needs thorough examination.