In association with
Logo Logo Logo

First things first


Nepali politicians and planners have had a sanguine—even romantic—view of taking the country from poverty to prosperity. Referring to the optimism of economists and statesmen about the development paradigm popular in the 1950s and 1960s, Harvard economist David S. Landes writes:
“Once the burden of colonialism [read feudalism for Nepal] is lifted, the government sets growth as the objective, the plans are drawn up, and the requisite resources are mobilized, growth and development should follow as the night [follows] the day [but only that] it has not.”

It is, indeed, a mystery why economic development is so frustrating for so many countries. Nepal too has had disappointing development outcomes over a long period, which we may call a development disaster. Following the ritual of charting the development path—as laid out by Landes—Nepal, for over half a century, set over-ambitious growth targets, drew up a dozen development plans, and mobilized an immense amount of money and materials. Unfortunately, neither growth nor development has occurred, and prosperity remains illusive.

There is no evidence that the Nepali economy has changed in any measurable way, looking at its structure and the well-being of average citizens. There are some spots of light—improved links between regions and expanded international contacts—but living conditions have remained unchanged for most of the population, measured in income levels and amenities.

One might ask, using a succinct expression of curiosity by William Easterly, a former World Bank economist: “Where did all the development money go?”
The seeming disconnect between development efforts, including the volume of money spent pursuing them, and what actually got accomplished is a historic deception of first order—by planners as well as by donors who provided political and financial backing for the effort.

However, looking deeper into reasons for Nepal’s frustrated growth experience, we can rule out, for the most part, the role of economics and finance. This means Nepal’s growth has been hobbled and poverty perpetuated by noneconomic factors and lack of money has played almost no role in the development fiasco.

Among noneconomic factors, politics has played an outsized role in reducing the effectiveness of development efforts. Skills and resources that were targeted to achieve good growth have yielded low returns. Looking specifically at the last quarter century of democratic and Maoist transitions, there is no evidence of serious commitments by political leadership to help the economy grow, beyond declarations of intent and establishment of overly ambitious targets without taking stock of the past failures.

Besides politics, social, cultural, and governance aspects of development form another set of noneconomic barrier to growth and poverty alleviation. Some societies and communities are not ready to commit themselves to development as they are unprepared or unwilling to adapt to standards and values that underlie successful economic modernization.

It is true that cultures and traditions are difficult to change to fit the demands of a well-functioning modern economy. But doing so is unavoidable and there is no alternative. If Japanese, Koreans, and Chinese societies can embrace such changes, why can’t Nepali society as well? Robert Lucas, University of Chicago economist and Nobel laureate, asked this question about India a quarter century ago:

“Is there some action a government of India could take that would lead the Indian economy to grow like Indonesia’s or Egypt’s? If so, what exactly? If not, what is it about the ‘nature’ of India that makes it so? The consequences for human welfare involved in questions like these are simply staggering. Once you start to think about them, it is hard to think about anything else.”

Lessons from experience as well as research on the role of institutions in a country’s economic success minimize the importance of physical and financial resources for development. Without an enabling environment and good incentives, capital and resources cannot by themselves nudge the economy to growth, whereas the reverse can be true: Given the right institutions and a well-designed incentive structure, economic growth and poverty alleviation occurs almost surely as day follows night.

Since politics and institutions have hobbled Nepal’s growth, what can we expect over the next decades and generations? Contrary to popular belief, it is not the case that Nepalis are destined to be poor. However, a change of fortune would require a different approach to development than what has been tried until now, not to mention a genuine commitment by political leadership to produce results.

Development strategies need not focus on growth and poverty alleviation per se, or on resources. Rather, progress should be measured in terms of improvements in underlying conditions known to shape people’s attitudes toward working, saving, investing, and taking risks.

There are excellent reference points for judging the strength of a government’s commitment to economic success. Corruption rankings published annually by Transparency International and global business environment rankings prepared by World Bank are good places to start.

Much more than the size of development spending and comprehensiveness of policy, setting-up targets that seek improvements in the countries’ global rankings—what we may term institutional determinants of development—can underpin development efforts much more convincingly than a mere matching of growth objectives and amount of money needed.

Given the key role of institutional backing in development goals, it is unlikely that economic turnaround—here in Nepal or elsewhere—can be accomplished just by manipulation of budget data and making changes in plan strategy. More generally, it is not a question of coming up with right numbers—a well-designed input-output framework and requisite financing needs. To the contrary, development efforts can be made more focused if we minimize the use of numbers as a guide to policy.

The emphasis should instead be improving the quality of environment that determines the incentive structure of society, which, in turn, motivates economic agents—workers, investors, entrepreneurs—to adopt right behaviors and take responsibility for their outcomes. Because these agents need institutional support on a day-to-day basis, political parties, bureaucracy, and public safety and law enforcement agencies are relied on for efficient delivery of key services—crucial components of what we call social infrastructure.

Thus economics or finance should not guide development policy, much less determine what gets accomplished over a period of time. Economic development is basically a political art which, however, needs to be backed up by efficient institutions to realize the desired outcomes. The East Asian miracle was realized with firm commitments by governments to change institutions and incentive structures in a way that supported economic transformation.

These countries chose to wait for other diversions—cultural protection; political innovations; economic justice; assertion of distinct identity; to mention just a few of their ‘pride pursuits’—only after double-digit economic growth had been made sustainable. A development design conceived in this manner was fundamental to their growth miracle.

[email protected]

For Indian tourists travelling by land:- 72 hours (-ve) C-19 report, CCMC form and Antigen Test at entry point

For Indian tourists travelling by land:- 72 hours (-ve) C-19 report, CCMC form and Antigen Test at entry point

Comment here !
Related News

BIRGUNJ:- Retailers in Birgunj, Parsa have shut down all goods transportation services after the rise in prices of petroleum products.

KATHMANDU:- Minister for Energy, Water Resources and Irrigation Pampha Bhusal has announced to bring new policy to increase power consumption

KATHMANDU:- National Assembly (NA) members have drawn the attention of the House and the government to the country’s contemporary issues.

KATHMANDU:- The Community School Management Committee Federation of Nepal (SMC Federation) has urged the government to revoke its decision to

Information for Indian tourists travelling by land:- 72 hours (-) C-19 report, CCMC form and Antigen Test at entry point
Information for Indian tourists travelling by land:- 72 hours (-) C-19 report, CCMC form and Antigen Test at entry point
Information for Indian tourists travelling by land:- 72 hours (-) C-19 report, CCMC form and Antigen Test at entry point