Currently, Nepal’s economic policy is a jungle juice. There is no recipe for it and everyone has their own interpretation of it. Those who are rich enough to exploit it are getting richer day and night, those who can’t afford to exploit it are blacked out. But the economic system upcoming government going to adapt will have a very long lasting effect on Nepal’s economy and every single Nepali’s livelihood.
Observing what the political parties are saying, there are a clear two school of economic thought in Nepal advocating for two very different economic model Nepal is going to adapt in near future;
- Trickle Down Economy
- Capitalist Economy With Progressive Tax System
The first school of thought (Trickle down Economy) is the election agenda of Nepali Congress and his new ally and famous Nepali economist Dr Baburam Bhattarai and a new born Kathmandu based party Bibeksheel Sajha Party.
The second school of thought (Capitalist Economy with Progressive Tax System) is the election agenda of Leftist alliance (CPN UML and Maoist Centre)
What are Nepali Congress (NC) and Dr Baburam Bhattarai saying?
In simple words NC and Dr Bhattarai are saying that they would “create environment” for the wealthy foreigners to come to Nepal and invest into big projects such as hydro-electricity. The idea is simple The wealth will trickle-down from the rich to poor if the government “creates environment” for the wealthy;
The idea is simple and looks reasonable but it is an idea that is trailed and failed elsewhere in the world. This is an ultra-capitalist idea but potentially paralyzing the capitalism itself.
Nepali Congress and Rabindra Mishra’s fondness of trickle-down economy is understandable. NC initially fought for social justice in Nepal and threw out the Ranas who were the less than 1% of Nepal controlling almost every wealth generated in Nepal. But later instead of taking the wealth from the Ranas and Shahs, handful of NC leaders joined the 1% club to control the country’s wealth. Rabindra Mishra on other hand comes from the loyal royalist background whose fondness of Nepali and British monarchy is an open secret. Obliviously he would advocate the economy that would “create environment” for wealthy.
Riddle of Dr Bhattarai and billionaire Chaudhary
But Dr Bhattarai advocating for trickle-down economy is something I can’t understand. He had been advocating for progressive tax and “European” model of economy after peace-agreement. But since a couple of years he has been advocating the for trickle-down economy. Why?
Although a I don’t understand the motive of Dr Bhattarai, I am sure I know the motive of billionaire Mr Binod Chaudhary.
A lot of Nepali people are surprised and have no clue why Billionaire Mr Binod Chaudhary joined NC however, Mr Chaudhary himself has a plan! And its not a mere chair of MP he is after, but to make NC-Bhattarai alliance work to deliver the trickle down economy and absorb the wealth of middle class of Nepal until they are economically screwed. If the regulations are relaxed and the tax is lowered, people like Mr Chaudhary will be investing in real estates and other “wealth reservoir” in cities like Kathmandu and Narayangarh instead of opening a noodle factory somewhere else in the world. And such an investment mean already skyrocketed land/property prices in Kathmandu will be a dream far away for the middle class of Nepal. They can only think of renting one, will never will they be able to buy.
What does trickle-down economy do?
The good example of what trickle-down economy does is the USA and UK. Ronald Reagan’s economic policies in the USA and Margaret Thatcher in the UK adapted this economy and still now this is effectively the economic policy of both countries. Mrs Thatcher “created the environment” for the wealthiest foreigner to come to the UK and invest their money there by lowering the tax to the ultra-rich while the tax for the middle class and poor were the same or increased. The consequence: The trickle-down economy worked!! But to the opposite direction; the wealth trickled up to the wealthy from the poor. In fact the wealthy foreigner invested in the vital sectors such as London’s housing, skyrocketing the price of house or land then eventually forcing out the new generation of local from their house because they can’t afford to buy one. Then came the generation rent. Now almost half of the UK rents their houses. The rich are getting even richer and ultra-rich from Russia, Middle-east, China are flocking to the UK while half of the population can’t afford to live on their wages. Surprisingly the GDP is still strong! The wealthy new investors create the mask for the economy making GDP higher, but inside it’s at the brink of collapse and the new generation is left screwed. BBC programme Panorama suggests that, to buy a new apartment in central London, a Londoner with average wage will have to work more than 200 years!!
What they say? What happens in reality?
If the NC – Dr Bhattarai alliance wins, they will “create environment” for the wealthy foreign or local born investors which means they will reduce the tax for ultra-rich like ex-King Gyanendra and Binod Chaudhary. Dr Bhattarai is even advocating to “give chance” to the people who have reservoirs of black money to make it legal “for once”. This is craziest and even ultra-capitalist view than of Mrs Thatcher or Mr Regan.
If NC –Mr Bhattarai win and deliver what they promise; in Kathmandu the local born ultra-rich or rich Chinese or Indian would invest in the real estate and no Nepali would be able to buy a house there. This will mainly bite the middle-class first. The new generation of Kathmandu middle-class will vanish, if Mishra or NC – Bhattarai alliance deliver what they say. This is one example, every sector will have similar consequences. Since Nepal’s in-born wealthy are very few it will be the foreign investors that will mainly benefit. This will eventually bite our middle class and eventually another struggle will become inevitable.
What are Left alliance saying?
Left alliance has clearly signaled that they will be strict to the ultra-rich, especially to the foreign investors. They say they will adopt “European” style capitalism with altruistic philanthropic government where ultra-rich are heavily taxed then the state generously gives back to everyone including ultra-rich.
The sign of left alliance’s economic policy is good and much healthier for future than the trickle-down approach of NC- Dr Bhattarai alliance and Mr Mishra.
In one small but very successful trail, Maoist has promoted the local capital through “Ujayalo Nepal Abhiyan”. Started by then energy minister and Maoist leader Janardan Sharma, this focuses on collecting capital from Nepalese working abroad and investing into hydro power, then consuming energy in the country. (Surprisingly, the policy is brain-child if Dr Bhattarai who is now strongly advocating for trickle-down economy.) This approach has worked and if the left alliance deliveres what it promised accumulating and promoting local wealth while carefully welcoming foreign investment, this is really a good approach, especially the middle-class will hugely benefit.
Having said all this, it is hard to believe either NC- Mr Bhattarai alliance or Leftist alliance will ever deliver what they say. The choice is yours!!