The government is now busy preparing the budget for the next year. This is the time of the year when finance ministry officials including the minister are busy holding meetings with different stakeholders, working on the estimated revenue and expenses of the government and coming out with the usual promises of encouraging private investment and catering to the needs of the poor and downtrodden. The line ministries will be working overtime to justify their demands for increased allocation for the next year even though a significant pool of resources for the current year remains unspent. It is an annual ritual where the line ministries demand resources that they know they cannot spend and the finance ministry regularly reduces the allocation on the ground that the government does not have the money. No one however asks why the money allocated for the last year was not spent. Similarly, in projects where money has been spent the focus is primarily on outlay and not outcome. Blacktopped roads are full of potholes just a few weeks after completion. This is because the government starts working in all earnestness to spend the money just a few weeks before the onset of monsoon. The thrust is on spending the allocated budget by any means rather than creating new assets that last. The political establishment, the bureaucracy and the privileged members of the business community with good access to the government are beneficiaries of this mis-utilization of public funds carried out in the name of development. This is an annual ritual that continues with a commitment to the welfare of the people knowing full well that it enriches the few at the cost of the many. It is a problem that has remained unattended to so far. [break]
False promises
During the last few years we have seen revolutionaries of all shades at the helm of the government promising a transformation of the polity and economy that would set an example for the rest of the world. Sadly our rhetoric is far ahead of our achievement. After the signing of the 2006 peace agreement, Nepal’s economic growth has gone down while trade deficit continues to rise at a near exponential rate. The share of manufacturing that contributes to productive job creation has shown a downward trend. Agricultural growth remains sluggish and Nepal, an agricultural country, is becoming an importer of food grain. In the meantime political parties are primarily interested in leading the government rather than promulgating the constitution, with the result that we now have the rare distinction of a country that is holding election for the second constituent assembly because the major political stakeholders failed to arrive at a consensus even after four years.
Corrupt capitalism
Even now the political rhetoric is full of references to the success of the political parties in dismantling the old feudal structure. Normally, in a feudal socio-political set up the position of each person is defined by the social hierarchy he belongs to. Those who are in the “upper” social hierarchy are the rulers who place great emphasis on honor, caste or rank to claim power, prestige and resources. Those in the lower hierarchy are usually the serfs, farmers and laborers who work the land and share the burden of supporting the lavish lifestyle of the upper hierarchy with a monopoly over military and other organs of the state. It is an exploitative relationship where new technology, education, innovation and the notion of people’s sovereignty are frowned upon to maintain the status quo. In this process a feudal society internalizes a set of societal values and norms that perpetuates this unequal and exploitative relationship in the name tradition, honor or religion.
Taking a feudal society to a new stage where merit, competition, rule of law, human rights and capital accumulation by private sector are encouraged as a part of the capitalist process of development is a tall task. When this process goes wrong, the country ends up not with capitalistic development but with corrupt capitalism where the few at the top monopolize the gains of new initiatives of social and economic development with the tacit government support. This has been the experience of many Latin American and African countries where modernization has led to an ‘island syndrome’—the emergence of a prosperous class in the middle of an impoverished population. In Asia, the Philippines emerged as a prime example of this derailment of development under the Marcos regime in the 1960’s and 70’s. The political rhetoric was committed to uplifting the poor and downtrodden but the political norms and values sustained a structure of exploitation that favored a few. The present day Nepal comes close to this description.
The country claims to have destroyed the feudal set up but the reality is that feudalism is gradually giving way to a form of capitalism that is corrupt and geared towards serving the political and economic interests of a small elite belonging, ironically, to political parties that claim to be revolutionaries and the harbingers of a new value system that serves the masses. Feudal values are perpetuated in different forms and an alliance among the new political class, bureaucracy and the favored business interests continues to maximize rent seeking from development projects. Thus government capital spending remains lethargic during the winter season when the weather condition is good for construction activities. Spending picks up just before the rainy season with full knowledge that the quality of the work will suffer. Spending rather than outcome becomes the focus, but this is no one’s concern because in government books the money has been spent and the work has been successfully completed. The beneficiaries are the members of the new alliance that claims to be committed to development.
Corrupt capitalism based on feudal values where the high and the mighty are practically above the law is the new model of development in Nepal. The defining features of corrupt capitalism, a form of neo-feudalism, are growth of private monopolies with the help of the political establishment running the government, finance catering to a small elite, rule of political connections instead or rule of law and the consolidation of a political oligarchy that uses the theme of development to increase rent collection, at the cost of economic efficiency and general welfare. The so-called revolutionary politicians who never tire of pleading for the poor have so far followed this path and Nepal’s ranking in the development scale is slipping every year.
Increasing resentment
Is democracy a remedy for corrupt capitalism? The answer is not at all clear even though over the long run a democratic system probably has a better chance of correcting the problems of corrupt capitalism than one-party systems. In India the so-called License Raj under a democratic government stifled the entrepreneurial spirit of Indian people. But it continued for over 30 years and one reason for its longevity was that it served the interest of the bureaucracy, the political class and the privileged business community who enriched themselves in the name of socialism. A severe financial crisis in the early 1990’s and the imperatives of globalization forced a reexamination of the development paradigm, leading to a redefinition of the role of the state and the private sector in the development process. In Nepal, because of steady income from remittances, the political class has had the luxury of ignoring economic issues while promoting corrupt capitalism to enrich itself. So long as this model of development continues, does it really make any sense to talk of sustainable and inclusive growth? A sense of betrayal pervades the political atmosphere. It is high time for politicians to take note of this reality before the resentment grows out of control.
The author is a senior leader of the Rastriya Prajatantra Party
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