In defence of economic liberalismRam Sharan Mahat’s recent book debates on mainstream economic meta-narratives, their applicability and practical implications.
The discourse of political economy in present day Nepal is heavily skewed to the left-of-the-centre. It is evident since the country's political atmosphere is overwhelmingly dominated by the faces and forces that are unmistakably communist in orientation. The intellectual defenders of the liberal order of political economy, that too through a systematic review in publication, are far rarer. In such a scenario, Ram Sharan Mahat, a Nepali Congress stalwart and six-time finance minister of Nepal since the restoration of multi-party democracy in 1990, is among a few of the rarest advocates of the liberal, free-market economy.
His recent book Trials, Tremors and Hope: The Political Economy of Contemporary Nepal unequivocally highlights the importance of an amalgamation of liberal political and economic orders for faster growth and prosperity. He calls the new book a sequel to his one-and-a-half-decades old publication, In Defence of Democracy: Dynamics and Fault Lines of Nepal's Political Economy (2005). The 12-chapter book released last month debates on mainstream economic meta-narratives, their applicability and practical implications viewed through the lens of an experienced practitioner and a staunch reformer. The book also excavates into current economic concerns and discusses the probable future course of, largely, corrective actions and strategies required to keep the Nepali economy viable in the long-run.
The author draws his point home in favour of a mixed but uncompromisingly liberal economy through four major perspectives: one, comparative analysis of key theoretical expositions that now shape the global as well as national debate on economic and development policies; two, as a sworn democrat and a disciplined member of the historic Nepali Congress party; three, as a technocrat who knows the ins and outs of managing the state treasury and; four, a ruthless reformer ready to risk the political opposition given the fact that benefit of any extensive policy and institutional reforms often invited instant resistance and criticism, even as the desirable results could only be felt in the long term.
In the first chapter, Mahat has painstakingly chronicled the evolution of the ideology of socialism, its several forms and their relevance in the contemporary world. His effort to marry the role of the state (in the event of a market failure and also as a responsible custodian of the social contract to ensure economic justice and equality) with market freedom (with unrestricted space for private sector-led investment and productivity) goes a bit overboard—but represents the current framework of Nepal's mixed economy. His interpretation of feasible socialism as a “market that works for people” is not, in essence, socialism of any form. But he seems compelled, as a Congress leader, to defend socialism at least in some contextualised form. This is because Nepali Congress has not been able to shed the term 'socialism' as an overarching socioeconomic goal from its formal literature, and the current constitution also aims to 'orient' Nepal towards socialism—albeit, without defining what exactly the term 'socialism' means.
The reference in the book about his discussion with the late BP Koirala, the founder of Nepali Congress, on what exactly socialism meant for Nepal provides a wider latitude of interpretation, which effectively makes the very tag irrelevant. BP did not, reportedly, claim his interpretation of socialism to be the final truth. He apparently thought the idea would be vetted and scrutinised for its viability and utility. Mahat also makes the interesting revelation that Koirala, as a visionary thinker, had foreseen the consequences of what the present-day global debate of climate change would focus on. “The essence of BP's views was being against the pursuit of unrestrained growth driven by excessive greed, joblessness and disproportionate use of the Earth's finite resources leading to unsustainable and irreversible consequences," Mahat mentions in his book.
Above and beyond anything, the mainstay of the book, rightfully, is the agenda of economic reform—both accomplished and pending. Mahat, who served as the vice-chair of the National Planning Commission under the first elected government after the political change of 1990, is the undisputed architect of Nepal's economic reform. Working under that Nepali Congress-led government, he laid the blueprint to liberalise the Nepali economy. The policy reforms that covered a wide range of areas including fiscal discipline, taxation, the financial sector, trade openness, divestment and privatisation, and extensive opportunities given for the private investment marked a paradigm shift. As a result, the role of the private sector has expanded; compared to that of the state, private entities have a far larger investment in key areas of the economy like banking and finance, aviation, health and education services, surface transport, agriculture, tourism etc. These policy reforms initiated by Mahat and his team then were subsequently implemented and consolidated during his multiple tenures as finance minister. This undoubtedly helped Nepal to maintain overall macroeconomic stability even during the decade-long Maoist insurgency, which he has termed in the book as a major political tremor.
The book with interwoven themes of political and economic developments that took place in Nepal—mainly over the past three decades have chapters on the pangs of writing a new federal constitution, Nepal's geo-political imperative as a 'yam' between two boulders, the boons and perils of a remittance-dependent economy and a detailed account of the current state of the country's economy. His successful role, as finance minister, in garnering substantial international support for post-earthquake recovery and reconstruction, after the 2015 natural disaster, is covered in a dedicated chapter. The final chapter, ‘Challenges and Tasks Ahead’, provides an informed prescription for Nepal's current and future policy-makers, regardless of whichever political ideology the government subscribes to. He sees the need for creating institutions at the sub-national levels to make the new polity of federalism functional and the country prosperous. He advises for a rational approach with an emphasis on austerity, efficiency and growth in productivity. Uncharacteristically though, for a seasoned politician himself, Mahat's way-out from the current mess is that: ‘The excessive preoccupation with politics and factional interests must give way to social mobility, quality governance, meritocracy and social justice.’
On the flip side, the book somehow misses on igniting much-needed, extensive debate on potential long-run strategies to control the alarming instances and magnitude of corruption that engulfs the highest political class. The future of federalism now hangs in precarious balance due to the rapidly burgeoning informal economy, which is about to displace the formal one. Some things that should have been covered, but the book fails to address, are the short-run priorities of the economy like enhancing productivity growth mainly of the industrial sector which has now fallen below the five percent of the GDP, employment generation which effectively is zero in the formal sector, containing the trade deficit that already has become unsustainable and reversing the absolute lack of absorption capacity of the resources by the government(s). The missing 'hows' in the book, necessitate another ‘sequel’ from the author.
Trials, Tremors and Hope: The Political Economy of Contemporary Nepal
Author: Ram Sharan Mahat
Publisher: Adroit Publishers, New Delhi-Kathmandu
Price: Rs 1,130