Wednesday, May 24, 2006

Dev Raj Dahal

Going beyond the Constitutional vision of welfare state, the post- 1991 governments, however, deviated from the welfare state and sought to create a subsidiary state where poorer people and region subside the rich and powerful. As a result, the state since 1992 began to lose its legitimate monopoly on force, taxation and loyalty of the people. Neo-liberal policies, the development paradigm of the 1990s, had exposed differences within the left political spectrum, built consensus of left with right-wing parties, weakened the autonomy of the state to stand above class power and prevent growing structural, manifest and latent conflicts in society. The growing conflicts in the country have their roots in the centralization of urban class power and resources and distancing people from the benefits of state resources. In this context, the motives of privatization involved the creation of an enabling environment for market institutions, private sector and civil society, shifting of public-private balance and increasing share of public policy making power by the private sector, civil society and donors. Reform programs could achieve pockets of improvements in service, banking and financial sectors. But these improvements were made at the cost of weak investment and growth in agriculture, agro-based industries and cooperatives. Job market declined markedly. There was not much transformation from agriculture to non-farm-based rural economy despite almost two decades of urban policy reforms. The governments even failed to learn the lessons of United States, Japan and India on how they are protecting their economic, commercial and industrial interests despite liberalization and global integration. Even the utility of the state to generate national capital, infrastructure development and upliftment of marginalized workers, peasants and region suffered. National and international obstacles remained unchanged for the industrial class and the state and, as a consequence, they could not properly articulate. Relative deficiency of the government to govern caused to lose its active position as generator of the rational order springing from people's mandate.

Two-class system of education--public and private--firmly entrenched in Nepal brings its educational policies closer to Canada, the UK and the USA rather than Germany, the Netherlands and Sweden where people send their children to public schools attended by every one. Education, the locus of knowledge society, suffered and the political power registered considerable failure in either retaining the younger generation in the country or making their skills useful in the management of pluralism. The vehicles of privatization reduced the economic size of the state, but not its ministers, police, bureaucracy and chiefs of public sector corporations. This means the costs of regular expenditure did not reduce much so that social and economic surpluses can be diverted to productive sectors. As a result, the state’s ability to serve rural constituencies and do development works has completely atrophied. The deregulation of the border, domination of external actors in policy making and the privatization of public property allowed free movement of external capitalism and open geopolitical contests.

For the sake of flexibility of labor, Federation of Nepalese Chambers of Commerce and Industry (FNCCI) is seeking the authority of hire and fire of the workers and defining the wages and work conditions. The weakening utility of social projects, exclusiveness of class, caste, ethnic, regional and religious forces and their contestation with national identity, primacy of efficiency over economic security of citizens and the adjustment of the society to global capital market demonstrate the erosion of the power of politicians to use politics to empower the public. In this sense, it reduced the capacity of the state to manage security and regulations, devolve power to lower authorities, maintain effective check on its abuse, deliver public good and serve as an instrument of people's power beyond national frontiers. The result is obvious to see. To correct all these anomalies, Nepal needs to bring "politics in command" (instead of experts who are not publicly accountable) so that politics is not devoid of public policy making and the leaders are made accountable for policy failures.

Decline of Public Sphere

The primacy of globalization limited state action, undercut political choices and the purpose of modern governance—support the well-being of its citizens. Both its history of underdevelopment and delayed transformation of internal societies have contradicted the hypothesis that the global interdependence of Nepalese society would lead to rapid development. But, this does not mean that Nepal should opt for either autarky, or resort to de-linking from the international system. The basic idea is how to prevent growing erosion of native values, rules and interests that prevents the formation of national community able to compete in the community of nations. The state class largely relied on the centrality of capital in the process of social transformation. Those who supplied the capital dictated the terms of policy. The growing policy shift from manufacturing to service sectors, rural to urban areas and public to private caused the decline of public life. In Nepal, the policy of de-industrialization is the consequence of fiscal strain on the state, declining productivity and economic growth, bloated bureaucracy and international capital mobility. Political economy of Nepal is characterized by the existence of an intermediate regime as majority of Nepalese people stand between the capital and the labor.

This means policy regime must capture the middle space and strategies should be directed to putting progressive tax on upper class to subsidize the underclass. But, the oscillation of politicians to mass during elections and class after elections has caused instability at the level of politics and development policy. Intermediate regime is the most conflict prone regime. Its tendency to augment growing violence may oscillate the regime to either greater democracy or greater authoritarianism often devoid of political will required pursuing correct economic policy. This assumes that development policy of Nepal must be able to address the centrality of this middle ground of political economy in order to make "development contract" socially just and sustainable.

The decline of mediating class has been facilitated by a) decline of the state revenue partly due to growing political conflict and partly due to the state's dependence on a few native and foreign comprador class, b) dependence on the selection of development project and mobilization of foreign aid on the basis of "whose turn for commission is now" mentality, c) doubling the cost of development projects due to corruption, and d) reckless spending of public money by the government to stay in power. One cannot confine the question of development to economy alone. Good policy reforms require good governance structures--a governance that acts according to the rules and regulations of the nation-state rather than partisan rationality of expanding electoral constituency for next election and recruiting one's own clients and relatives in the government, para-statals, and public interest departments. An intermediate regime with "soft-state" character cannot fix the goals, set priorities, and design effective and easily implementable policies. This is why one can see in Nepal a myriad of committees, commissions, task forces and advisory bodies to rationalize mostly the wrong policies of the incumbent government. All these activities, however, are hardly related to a system of collective accountability for public welfare.

Policy Incoherence

“Policies, actual and proposed,” argues Joseph Schumpeter, are “based on ideology” (2004:x). If this is the case then one can safely assume that only a rational course of action grounded on the sociology of knowledge is compatible with diverse interests of people caught in unequal division of labor, hierarchy and patriarchy. The sociology of knowledge seeks to “throw light on the question of how the interests and purposes of certain social groups come to find expression in certain theories, doctrines and intellectual movements” (Wirth, 1936:xxviii). Nepal did not have historically open moments when the Nepalese citizens and leaders achieved some real chance of making political and development decisions that could realistically have altered the course of events towards national progress (Bleie, 2003:1-34). The longer historical trajectory of Nepal's development consistently points that Nepalese societies, polity and economy have succumbed to non-evolutionary instability mainly induced by exogenous forces. If this is the case, then, can public policies gear the preferred course? Are politicians in command of public policies? If not, how can they persuade the people to lay claim on those policies not made by them? Do the needs and demands of citizens shape policy agendas? One grim fact of Nepalese policy making is that policy makers seem more interested in importing the "development models" manufactured elsewhere in an entirely different context than in addressing the genuine needs of native people. Despite the implementation of nine periodic plans, Nepal's economic problems remain unchanged.

The central question associated with this is the growing gap between political response of social science disciplines and the life-world of majority of people. The other is the hegemony of a comprador class and urban bias in the formulation and implementation of public policies. The key policy and decision-makers of Nepal, whether under democracy or aristocracy, come from the urban upper strata of the society not thoroughly socialized with the interests, needs and concerns of majority of rural people. This is why the allocation of development projects strongly reflects the weight of political interests of those in governmental power.

Resistance to genuine rural and agricultural development comes from a) those classes of society who are in a privileged position but do not contribute to the production; b) the private sector which thrives in tax evasion; and c) contractors, professional class and consultants who are assimilated into domestic and international power structure and are, therefore, unable to perceive local reality. These classes, thriving on foreign aid and appropriation of rural surpluses, give little thought to the collective welfare of the nation and people. One can also see the weak implementation of economic and public policies. This is not only because of the weak institutional capacity of civil servants but also because of the polarization and politicization of the bureaucracy along partisan lines, unintended effect of patronage politics and a lack of public "ownership" in policy content, policy formulation and implementation. They are, however, not accountable to policy failure.

It is immature to blame donors alone because they have even assumed the financial cost for the implementation of local development policies. Owing to weak implementation capacity of Nepalese bureaucracy, the number of foreign advisors and the quantity of foreign aid grew in size and complexity. Decline in productive activities in both agricultural and industrial sectors, growth in finance companies and shadow business, and excessive import of consumer items and construction activities clearly exhibit as to whom foreign aid has served. So long as Nepal's industries increasingly rely on foreign capital, technology, raw materials and skills, they cannot compete with the product of other countries. Foreign aid, in some cases, instead of complementing local development substituted it and made the Nepalese think that "development amounts to pumping more and more foreign aid rather than achieving self-reliance." Foreign aid has thus helped Nepal in the expansion of health, education, transportation, communication and electricity but not in the expansion of the structure of production and fight against the problems of poverty created by social and economic power structure and protect common heritage of the nation, such as forest and land inherited from the ancestors as a trust for future generations. If one were to gauge the contribution of foreign aid to the structure of production, the maintenance of monetary stability and the promotion of social justice to bridge the gender, rural-urban, regional, caste and class divide, the outcome would be disheartening.

Wherein lies the future of Nepal? Should it focus on the specialization of agro-products and remain as usual exporter of primary products? Even it does, one should not forget that it has even lost its comparative and competitive advantages in this sector. Economic growth in 2003 hovers around 0.63 percent. About 90 percent of workforce is engaged in the informal sector of the nation's economy. More than 300 thousand people enter into the labor market every year. Due to high population growth (2.27 percent), Nepal's labor market is dominated by the younger generation. Official record indicates only 2 percent of the people as unemployed. But, underemployment rate is widely believed to be as high as 48 percent. Only about 20 percent of land is irrigated and only 20 percent of people have access on electricity. The debt per capita for each Nepali is about Rs. 13,000. Nepal's economic lifeline, to a great extent, depends on the import of tourists and export of unskilled workers. Its manpower is not adequately trained to revolutionize the production process due to lack of know-how and official neglect of this sector, notwithstanding the tautology of implementing Agriculture Perspective Plan, Poverty Reduction Strategy Paper and Millennium Development Goals.

Does land reform hold the promises for rational progress? The past governments legislated land reforms several times but the state provided several loopholes in the law so that landlord could hide their lands under different names. Merely redistributing land and fragmenting rural power while consolidating and centralizing urban power can further concentrate wealth and power in urban areas. One of the issues of underdevelopment of rural Nepal is that majority of the people are suffering from semi-unemployed condition. Stimulating the engagements of the majority in gainful activities is a major policy challenge. A small percentage of population occupies a large chunk of productive lands, and there are limited opportunities in non-agriculture sector. Elimination of countless labor-intensive small-scale industries due to the official policy of market deregulation, denationalization and open border added hardships in agrarian life. The unequal distribution of the factors of production and misuse of public resources additionally compounded this problem. Capital flight and non-investment of surplus capital in agricultural point at a trend showing constant stagnation of agriculture sector. Almost similar policy mistakes occur in the implementation of decentralization. If this is the case, why is the implementation aspect not consolidated then? Obviously, decentralization does not serve the interest of state class's tendency to monopolize power and resources and democratization of political power erodes the base of informal political system maintained historically by patron-client relationship and the web of power. In such a context, the role of political ideologues lies in articulating the interests of people and providing them a broad cultural interpretation that explain to activists how deprivations have come about and how to overcome them (Kitchalt, 2003:3).

Conclusion

Nepal is not a homogenous economic space, nor are its potential regional growth hubs well connected to the center, Kathmandu. The major towns of the Tarai have better exchange relationship with the Indian towns across the border than with Kathmandu. The incongruity of its economic space with the political heartland, the hills and valleys, has weakened the political effect of economic action. It is, therefore, difficult for Nepal to cohere the components of security, culture and political economy. Without capturing the economy of scale through internal market integration as well as creation of a single labor market by means of proper political policy, Nepal's democratic future will remain uncertain. Is it possible to create an autonomous national economic space without risking the alienation external capital? If development is about improving the quality of life, we need the modernization of productive forces and an alteration in property and power relations.

Development, in this sense, becomes permanent politics--politics that is democratic, just and participatory. The exercise of a visionary political leadership is necessary to the creation of a stable political order. A democratic leadership often prioritizes the interests of the poor and disadvantaged because they are in need of development and balances the aspiration of Nepalese for identity with the Spirit of the Age. But, the political society must mediate the contradictions of society, between the general and particular interests, and the mounting pressure from below for self-governance and above for global integration so that development polices are implemented without much resistance. The moral responsibility springing from the vast poverty in rural areas and the wealth concentration in urban areas has to be mediated by the state. The country's backwardness can be corrected by removing the structural factors that cause poverty and inequality. Without comprehensive economic reforms, it would become difficult to democratize the polity and ensure sustainable development. Promoting development in Nepal is something more than palliative approach to poverty alleviation.