Market Economy Whither in Nepal?

  14 min 7 sec to read
Market Economy Whither in Nepal?

Though the market economy is in peril, as witnessed in the election results the world over and in Nepal also, the system is not being abandoned but taking a corrective course on its own.


The market orientation of an enterprise can be self-examined by the following check-list.
a. Are we easy to do business with?
b. Do we keep our promises?
c. Do we meet the set standards?
d. Are we responsive?
e. Do we work together?

Market orientation has been the primary theme in public discussion from 1980 onwards as a panacea for all the ills from social to political. Most countries, including those with left leanings, have chosen to shift to a market economy in their economic development strategies. We say that the countries which adopted a market orientation as their development strategy believed in the contents of the above list. China is a glaring example which not only believed in them but practiced them in their public life to reap the benefits. Other countries like India, Nepal, Brazil, Russia, though they believed in them, could pass the reality-check partially only because of various reasons attributable to the social, and political delivery mechanisms in place there. Hence their economic development is at different stages of progress compared to China.

Irrespective of developmental progress the recent years have witnessed a turmoil in societies which finds its origins in liberalism, competition and openness. The three prime characteristics of a market economy. It is very ironical in that the western world, which advocates these tenets vociferously, suddenly finds that they are pitted against them to their disadvantage. Their response is to turn against them silently without saying so. The market economy seems to be at peril. In the past the dissatisfactions have been shown through violent demonstrations in the streets but the market orientation of the countries have at least changed the form of protests in the shape of peaceful transformation through elections.

The epoch-making contribution of market orientation has been to change the mindset of the people to more democratic norms of working together and be responsive to their plight in a peaceful and patient manner.

The Maoist movement was a direct outcome of the market economy’s failure in the rural sector. The market gave voice, openness gave initiative. Rural youths saw an opportunity and went abroad, and those who were left behind gave voice to their dissatisfaction. A Maoist type of upheaval may not take place now but any discontent that’s brewing among more aware people will be graver. Society may get fragmented in new dimensions. Political parties do not encourage voices of discontent. They want blind adulation which is totally against the market spirit.

It is said that “when a system breaks history always throws the breakage in the streets”. But though the market economy is in peril, as witnessed in the election results the world over and in Nepal also, the system is not being abandoned but taking a corrective course on its own and also with the help of the new political dispensation which heralds a permanent future for the liberal concept of development. 

This is a time of delight as well as tribulations for liberalism, competition and transparency inherent in the market economy. The perils that it is encountering today are of its own making, the offshoots of working in different political environments and at different stages of development. It is not a sign of weakness but a transit to maturity. The principles of liberalism, competition and transparency are the biggest virtues an individual aspires to and when they are threatened, as today, they have to assert and strike. We cannot afford to give it up. Our constitution which enshrines the roadmap for a holistic development of a citizen as an individual is the staunchest custodian of liberal values which can prosper and flourish under market orientation only.

The transforming threat to the market economy has come from an untouchability of a new kind. Power has concentrated in a few hands which democratic changes had sought to replace by the people. A new social restructuring is shaping up in which a few sophisticated elites have all the power of wealth whereas the majority of have nots are still poor, though they have the voice and power of votes. Society is polarising in terms of race, religion, class, and creed. 

This is equally true for Nepal also. The federal system has brought these issues to surface and may pose more problems of unity in developmental concepts in future. Development in Nepal is more in the statistics. The new government has projected everything to be in shambles whether it’s the economy, law and order, judicial system, integrity in public places, the very institutions on which the market economy stands on and thrives. The future trends are ominous, messaging the new government to shift to a more controlled regime. It will also be a test of the people’s mind set whether it has imbibed the above virtues of market orientation or are still mired in old conservative traditional habits of being directed from above.

It cannot be denied that during the last decade Nepal has frittered away its resources on too many focal areas. It has resulted in too much waste of scarce resources and not a single sector has reached a critical mass level so as to start giving economic benefit to the people. But this approach is totally inimical to optimal allocation of scarce resources on a comparative advantage basis. These wastages have occurred because of sweeping populism to which the political parties have resorted in Nepal and in other countries also. The trend seems to be the same. The majority of voters who are still poor and disillusioned with those in government want change. The political parties not in power also are fishing in the volatile troubled waters to their advantage. However, this in no way should dilute the strength and desirability of market orientation in our economic strategies. In fact the democracy we are experimenting with now is the gift of this orientation only. Therefore, we need to take corrective measures so that the effectiveness of neither democracy nor market liberalism is in doubt in the public mind.

Populist leaders struggle to govern. They have ego but no philosophy and want to rule by dominance, posture and awe. They forget what they promised and once they are in the saddle they cannot deliver. They are opportunists and desire only short lived acclaim. A new wave of such populism has started in political campaigns all over the world but once in office their aggressiveness tapers off. Statements made as an individual, a party worker, a party official, member of parliament and as a minister and the party manifesto all made by the same person are contradictory to what he actually does. This contradiction is because he has to survive. All this militates against the principles of market orientation which is system based, competitive and responsive. These leaders represent the interest of both rich and poor at the same time. How they can do justice to both is becoming very challenging to them. This dilemma is injurious to both democracy and market liberalism which needs correction.

It is not that the market economy does not have its faults. Under it the development is more quantified and statistical. It is more wasteful and ostentatious. Show offing has gone up. Values are eroded. Quality in every field has been ignored in favour of mass inclusiveness. Corruption is on the rise. Distribution of income is tending to be lopsided. The trickle-down effect has slowed down. It has not been able to tackle the enormous issues at the bottom. These are the side effects of the market oriented economic structure and need to be addressed in parallel. 

These aberrations do not make a valid case for giving it up, rather they are the indicators calling for corrective action and also that many of the watch-dog activities which go along with the operation of a market economy have either not been instituted or are not effective. It may also be that the bottom layer of society has been so protected that it is not prepared to awaken and take the initiative to benefit from the trickling down prosperity. They have become more rent seeking in terms of governmental social allowances and welfare activities. They perhaps tend to take their down-trodden status as a comparative advantage. Hence they are passive in taking any steps towards self-amelioration.

Bureaucracy is also to be blamed. They are incompetent and unconvinced in the desirability of the liberal approach. Collusions at different levels have enabled misuse of public power. The saying, “democracy is becoming an enemy in itself” needs scrutiny and discussion at every level of society. Power is concentrating in big cities in a few hands. Villagers, therefore, are migrating to the metro-towns. The entire economic structure is becoming urban-centric. Agriculture is disintegrating and instead of manufacturing, the whole concept of economic development is becoming more service oriented.

To all the above maladies market orientation is a solution and not a cause. The basic principles of market orientation are decentralisation, competition and inclusion. These days, people do not trust authority. They themselves want to be a part of the building process and manage and monitor what they are building for themselves. Instead of concentrating in a few hands, ownership needs to be shared. 

An article by David Brooks concludes with a very strong statement saying, “the forces tearing down society are powerful and the people bringing it together are, too”, which sums up the essence of market strength. Market forces bring people together to counter nefarious movements which are tearing down the social fabric into haves and have nots. Media, civil society, voters and the judiciary are pillars which can keep liberalism and democracy afloat. Decentralisation has its own challenges in terms of diversity of voices and chaos of purpose. Henry Timms and Jeremy Heimans in their new book New Power have advocated that these contradictory challenges of decentralisation can be addressed by a blend of old and new power structures.

It is very crucial that media becomes the vehicle of change. Journalists have to not only spread the success stories but also to identify and expose the pits of dissatisfaction looming in society. Investigative journalism and analytical approaches create a positive environment for people to take initiative as well as guard against abuse of power. They are the real custodians of the prosperity dreamed of in our constitution on behalf of the masses. The survival of a liberal economy depends on the quality of democratic institutions. But these institutions also derive their strength from democratic political dispensation. There are many forces in society which thrive and advocate authoritarian rule because the implementation of programmes is easier in it and there is more freedom to do what is right. Authority feeds off the illiterate masses who can be swayed by rhetoric. If the quality of masses i.e. voters can be improved with better education and exposure, their selection of quality representatives to govern them will go a long way towards creating the environment for a thriving market economy and to address the grievances of the people at the bottom of society.

There is a ray of hope in that the judicial system, which had started to be dominated by the executive wing of the government, has of late woken up to its independent role and shown courage to stand up to the negative dictates of the powerful heads of state. This augers well. An independent, competent judiciary with integrity not only upholds the high values in public life but will also ensure that the legislative functions and executive decisions are qualitative and of high ethical value. Their contribution can lay the foundation for a liberal cultural milieu in public life. Equity and equality for all people in society at all levels will definitely create a congenial atmosphere where the market economy can prosper.

Civil society is very crucial to prevent the abuse of power and to educate the masses. They are from the people and acceptable and trusted by them. They mould the opinion in society and also ensure that the benefits of developmental efforts percolate to them. However, there is also a vulnerability, in that this group becomes complacent and divisive. It is very important that civil society remains homogenous and vigilant through a unity of purpose.

The private sector of Nepal has of late become sceptical about its primary role as an engine of growth. Nepal’s constitution also does not give it the autonomous role it deserves. Government’s engagement in economic activities is again on the rise. This is because the image of the private sector so far has not become credible enough to warrant mass appeal. Their social sector engagement is poor and inadequate. If the private sector believes in market orientation and wants it to survive and thrive, they will have to embark upon an intensive and extensive relook at their image and take steps to improve it. The temptation to jump at syndicates, cartels and protectionism at the slightest opportunity needs to be resisted.

All over the world there is a rise in nationalism which is anti to the principles of globalisation. A movement to return to tradition is on the rise. Control of borders, currency and mobility is in demand. The western world is leading this anti modernism silently. Our constitution has made ample provision for the upliftment of individuals. It does not dream of the welfare of a class or creed. Individuality is the basis of any market orientation, because it is an individual who has the inherent initiative urge to prosper and acquire skills.

There is an urgent need to discourage the tendency to accumulate absolute power by enshrining in the constitution some provision which serves to check and balance the power of the ruling government if it crosses a certain threshold. If democracy is to survive it has to agree to change some of the rules which may prevent any political party to become absolute. How can good people come into governance and undesired elements be prevented from entering it? How can the manifesto of any political party be made legally binding? How can parliament be prevented from abusing their power? How can legislation be more qualitative, meritorious and of international standard? How can an opposition or whistle blower of a certain stature mandatorily be instituted? These are some of the challenges that democracy faces today.

There is a war between nationalism and globalisation, sweeping the world over and the wind seems to be blowing in favour of nationalism. It is likely that the market economy may also be swept off its feet especially in emerging democracies where its roots are not deep yet. It is upon all of us to safeguard it.

Inequality of conditions is a modern concept in Nepal which the market economy has introduced among the people only recently. Therefore, inequality upsets people less here since they are more believers of fate. But slowly the concepts are changing. People have started believing in their own initiative, role of the government and the liberal environment which only can push them to prosperity. Inequality has suddenly become a burning issue.

Dreams are aplenty but directionless. To give them direction and to make them complement each other requires the skill and experience of leaders who are born and brought up in a liberal environment. They and they only can avert the dangers of conservatism and bring about the necessary dynamism of an open economy to push growth forward and address occasional crises.

Agrawal is the president of the Nimbus Group.

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