Viewers Till 11.11.11 are 1101 :)

Freedom for Innovation

The collection of quotes from micro blogging for condolences on the death of Steve Jobs as published in the article of Wall Street Journal “China Frets: Innovators Stymied Here” depicts why democracy and freedom are important for innovation. Some of the quotes are below: .................................. # In a society with an authoritarian political system, monopolistic business environment, backward-looking culture and prevalent technology theft, talking about a master of innovation? Not a chance! Don't even think about it.
# China may be the manufacturer of the world, but many are frustrated that Chinese companies are better at knocking off others' original work than coming up with innovative ideas. “If Apple is a fruit on a tree, its branches are the freedom to think and create, and its root is constitutional democracy. An authoritarian nation may be able to build huge projects collectively but will never be able to produce science and technology giants."
# "And its trunk is a society whose legal system acknowledges the value of intellectual property."

Power of Economic Growth Rate

Yesterday attended a consultation program on Nepal Economic Growth Agenda (NEGA) 2012 organized by http://www.samriddhi.org/. It highly appreciable work and I found it a visionary step to advice government about growth agendas. I would like to add why growth agenda matters.

A simple approach to explain the importance of growth is the power of growth rate. Small difference in economic growth rates between countries can result in very different standards of living for their people in the long run. Thus, it necessary to think about economic growth issues of Nepal.

A growth rate of 3 percent per annum leads to a doubling of GDP within 24 years, whilst a growth rate of 8% per annum (say, China and India between 2000 and 2010) leads to a doubling of GDP within 10 years. This depicts the fact that how does a number matters. It also illustrates that how quality of life of people of Nepal is lagging behind people of India and China.

This is explained in the table of Power of Economic Growth Rate. Here is a hypothetical GDP of 1000 unit in 2010. It is calculated that how many years it require to double the GDP. The growth rate, 4 %, is the average economic growth rate of Nepal since 2001 to 2010.

Is Government Planning to Make Poor to Less Poor and Richer to Poor?

Nepal adopted liberal economic policies since mid eighties. A policy has worked a lot in Nepal. Despite this fact some anti-liberal politicians and economists blame that liberal policy under-developed a country.

However, after the liberal policy, it is observed that poor are becoming rich and rich are becoming more rich. Living standard of people has changed dramatically. Many industries have grown up rapidly and it has increased the access to internet, mobile phones, even in the education, televisions channels, newspapers, FM radios, shopping malls, residential appartments, cheap clothes, durables like T.V., refrigerators, kitchen wares and so on. If one do not belives then s/he can check the statistics of all these thing of mid-eighties and present. All these things are available to people because we (knowingly or unknowingly) liberalized the economy. People have access to all these goods and services because of not the government but market has provided to people.

Actually, the reason for underdevelopmet of Nepal is that private sector could not work well due to the long political turmoil. Still, there is dismal chances for free market to work because of workers-entreprenuers relation is not favourable for investment and present government has been failed to develop the confidence of domistic investors.

In free market system, we have freedom to earn. Some politicians are jelous to the business persons' and entrepreneurs earning. They blame that few people have controlled all the business in Nepal. This might be one of many facts of undervelopment. As politicians are not a entreprenuers, they are myophic to observe that there are thousands of other businesses, which are yet to be explored.

Some people who like strong government control in the economy even do not like the government services of government owned institutions like Nepal Oil Corporation (NOC), Nepal Airlines Corporation (NAC) etc. I had seen many of them staying in the long line for petrols. The petroleum market is controled by government. As we find they are choosing private airlines services like Buddha/Yeti instead NAC.

Even in free market government has tax and expenditure instruments to save poor. Here, In Nepal most of us think only about distribution. But, distribution without growth is meaning less. First, let us grow and then distribute a part of it. " if any people want to invest and earn money by employing people voluntarily then it is not wise to intreven in their business. Let them to serve people through their business and allow them for business under law and with strong quality control and consumer rights. This can rise living standard of people and develop Nepal. However, the current government has been unable to use the thrust of private sectors and making people of Nepal "Poor to less poor and Richer to Poor". Let us think on it.
[ In nutshell, {(100+5)+(1000-500)}, the government is adding 5 decreasing 500. How much it contributs to growth?]

Changing Relative Prices in Nepal

The figure shows that how do relative prices of commodities are changing over the period in Nepal. The relative prices are taken as the ratio of price index of respective commodity to overall consumer price index (CPI) of Nepal. It shows relative price of cloth is decreased and energy is highly increased.

Liberalization is Most

Word matters most. Future of Nepal's economic policy depend on its constitution. Why lawmakers do not want the word "liberalization" in constitution? It discouraged the investors. "The Federation of Nepalese Chamber of Commerce and Industry (FNCCI) is angry because the Act does not mention liberalization in the preamble." This is because of fact that various lawmakers have various interpretation of regulation. A group of lawmakers think regulation means active participation of the government, other group interprets regulation is only for increasing the efficiency of the market through curbing its negative externalities. Policy confusion is harmful to investment and economy as a whole. It is good if regulation is defined to the extent to promote competition and cure monopolies and inefficiencies of the market. However, if it goes beyond the extent then it is harmful to Nepal. Therefore, it is necessary to understand history and governments role in economy.

Government is not a creator of wealth, but, only inefficient distributor of wealth. It receives income from one who work and provides it to those who are lazy and inefficient like lawmakers. Even though government tries to create wealth, it is remains inefficient in it. We can take examples of Nepal Electricity Authority, Nepal Oil Co., Nepal Airlines, Nepal Food Co. etc. We compare these with private organizations, which are more efficient in creating employment, consumption and services to Nepali people. Government has provided only 3 percent employment and remaining 97 percent are either unemployed, self employed, or work at private organizations. If private companies are able to increase employment and consumption, why we need government in commercial activities.

Many anti-liberal economist blame liberalization for the current economic crisis. However, they have forget sixty years' benefit of liberalization. Otherwise there might be no innovations and benefits like internet, air services, communications, T.V., computers, news agencies, ATMs and ABBS of banks, etc. etc.

If we observe from production, consumption and welfare side, liberalization has done a lot. In spite of these benefits, why people expect very much from government? Why our lawmakers are against liberalization? Development is an outcome of freedom in thinking, freedom to work, freedom to earn, freedom to express, freedom to innovate. All these are in liberalization.

In Nepal, knowingly, unknowingly or either due to circumstances of BoP crisis Dr. Lohani has done a good job during mid 1980s i.e., liberalization.

Therefore, dear government you are not capable in your work i.e., maintaining law and order. You specialized yourself in your field. Don´t come in the business and economy. People want democracy and freedom. We work, we consume, we save, we pay you tax for maintaining national security, law and order. But, do not want to pay for your inefficiencies.

Tax Payers' Question ?

Despite various inefficiencies, government still want to be active in commercial and business activities in Nepal. However, quesition arises why to contribute our everyday meal for inefficient business?

There is an article which rightly advocates in favor of taxpayers right. Why should the tax payers’ money of a poor nation like Nepal be spent to pay the huge losses of Janakpur Cigarette Factory, that of all the commodities produces cigarettes, can’t compete with its private sector rivals?

Whatever few PEs are making, profits are because they enjoy virtual or actual monopoly markets and not because they are efficient. For instance, despite its poor services Nepal Telecom Ltd (NTL) earns a huge profit, simply because its competitors are too small and too new to challenge its domination in the lucrative market. Other monopolists like Nepal Electricity Authority and Nepal Oil Corporation that enjoy huge captive markets are not as lucky as NTL; with chronic ills like oversized structure, swollen staff, wasted resources, high leakage in operation and corruption their financial health is very poor. The condition of other PEs too, is not very different.