Nepal's Economy Stagnates

By Kamala Sarup

Why is Nepal so poor compared to India and China? In a 2001 comparison of 174 countries, Nepal ranked 150th in per capita income, a universal indicator of material wealth and living standards. So Nepalese are questioning, why is Nepal so poor?

To answer this question, it is necessary to review the direct cause of higher incomes and then review the subsidiary causes, that is, the economies and politics under which the people live. In that way, some generalizations can be drawn.

Poverty in Nepal is the result of violence, violent politics and its leadership. Nepal's economic reformers are not able to rally for bigger social transformations or bring about social reforms. We must remember, the direct causes of economic development are the tools, machines, materials, energy sources, medicines, physicians and manufacturing and commercial practices that are transformed into consumable goods and services that comprise basic development standards, which are then summarized into income statistics.

There are other ways to increase per capita income, of course, but they are limited. Leaders can put more people to work and compel them to work harder. But how far can you push people? Maybe an additional 10%, and then what? They can extract more raw materials (ores, lumber, etc.), assuming they are available to exploit, but there are limits to how much can be obtained and used. They can put more land under cultivation, but that too is limited by people's appetites.

This acquisition of a better economy requires large amounts of money, which cannot be accumulated domestically, because that requires technology. Thus, an initial loan or grant of "seed money" is required. Such loans do not necessarily lead Nepal to develop. There is an complex interplay of economy and polity, leadership and violent politics that produce unknown, uneven effects, thus preventing guaranteed economic success.

However, when Nepalese see richer countries enjoying goods and services that they cannot afford, the resulting envy may lead to revolution or emigration, or both. Economic development depends not only on education, but also on the economy and polity of the nation.

From the above, it is clear that a country with violent politics is severely handicapped to generate sufficient money to increase the wealth and living standards of its people. It is true, economic and associated incomes are devoted to preventing people from killing and stealing from each other.

Nepal's violent politics is not able to change its economy and polity and enjoy greater relative wealth.

Nepal, with its unchanging combination of violent politics and its corrupt leadership will continue to depend on others to stimulate economic growth.