This past week, Kathmandu’s streets echoed with chants not heard in decades. Teenagers wielding smartphones demanded an end to corruption, repression and hopelessness. The resignation of Nepal’s prime minister, which resulted from a wave of “Gen Z” protests, left the country in what some call a condition of statelessness. The state’s moral legitimacy—its capacity to claim the loyalty of its citizens—collapsed.

This is not the first time Nepal has faced such a reckoning. The country has seen revolutions in 1951, 1990 and 2006. Each was meant to inaugurate a new era of justice and opportunity. Each time, elites reshaped institutions to serve themselves, leaving citizens disillusioned. What makes the current moment different is its generational character: A rising generation that has no memory of monarchy or Maoist insurgency, only the lived reality of broken promises.

The task before Nepal is immense. It must transform this upheaval into an opportunity for durable inclusivity and prosperity. To chart a path forward, we must turn to the lessons of history and political economy. The most illuminating guide comes from Daron Acemoglu and James A Robinson’s seminal book Why Nations Fail, which argues that nations thrive when they create inclusive institutions that empower broad segments of society, and decline when extractive elites monopolise power and wealth.

Nepal today is at such a critical juncture. Will it double down on extraction, or seize this opportunity to build inclusive institutions? The question remains.

Iron law of exclusion

For over a century (1846–1951), Nepal was ruled by the Rana oligarchy, which concentrated power in a handful of families. Education was a privilege, political participation was nonexistent, and economic policy was designed to serve the ruling elite. Acemoglu and Robinson describe how extractive institutions deny broad participation and stifle innovation. Nepal, under the Ranas, exemplified this. When the revolution of 1951 ousted them, citizens hoped for transformation. Instead, old elites retained dominance in the military and bureaucracy.

King Mahendra’s dissolution of parliament in 1960 replaced one form of exclusion with another. The Panchayat system banned political parties and centralised authority under the crown. Students and intellectuals resisted, but for 30 years, dissent was criminalised. This mirrors the pattern Acemoglu and Robinson note worldwide: Extractive elites dismantle pluralism to preserve control.

The restoration of multiparty democracy in 1990 raised expectations. Yet, over the next decade, governments collapsed rapidly—more than a dozen administrations fell between 1990 and 2005. Corruption, patronage and elite infighting hollowed out the democratic promise. Political scientist Mahendra Lawoti called this “exclusive democracy,” where institutions existed but representation remained skewed.

The Maoist insurgency (1996–2006) was fueled by deep socio-economic exclusion. Rural communities, Dalits, Janajatis and Madheshis felt abandoned by Kathmandu’s political class. The 2006 people’s movement and subsequent abolition of monarchy promised a new dawn. Yet, transitional justice faltered, patronage politics reasserted itself, and once again, inclusive promises yielded extractive outcomes.

Nepal’s 2015 constitution declared the country a federal democratic republic. But it also enshrined controversial citizenship provisions that discriminated against women, limiting their ability to transmit nationality to their children. Madheshi and Janajati groups protested, claiming exclusion from power-sharing. Once again, a supposed settlement reproduced new forms of exclusion.

“Statelessness” in two senses

Nepal’s 2025 unrest has created a sense of statelessness in both literal and metaphorical ways. Tens of thousands of Nepalis, particularly children of Nepali mothers and foreign fathers, remain without citizenship. Others, especially Madheshis, face bureaucratic hurdles in obtaining IDs. Statelessness denies access to schools, jobs, health care and dignity.

The resignation of the prime minister, bans on social media and police crackdowns on protesters created a perception that the state no longer belongs to its people. Gen-Z activists describe themselves as orphans of democracy.

In Why Nations Fail, the authors explain that extractive institutions eventually generate instability because excluded groups refuse to comply indefinitely. Nepal’s unrest is precisely such a backlash. The question is whether this crisis will be channelled towards inclusivity or suppressed once more.

Architecture of marginalisation

To understand how inclusion should be structured, we must map exclusion.

Dalits face systemic caste-based discrimination in housing, employment and social life. Their representation in government remains minimal. Madheshis were historically underrepresented in state institutions, subjected to discriminatory citizenship rules and geographically marginalised. Janajatis are denied cultural recognition and are underrepresented in politics.

Citizenship laws historically denied children nationality through their mothers, producing statelessness. Women are severely underrepresented in leadership.

Muslims and other religious minorities experience social discrimination and political invisibility. Persons with disabilities and LGBTQI+ groups face institutional neglect and a lack of legal protection. Rural poor and migrant workers are economically marginalised, dependent on remittances, with limited access to services.

The picture is clear: Exclusion is multidimensional based on caste, ethnicity, gender, geography, religion and class.

We need to correct historical injustices against Dalits, Madheshis, Janajatis through targeted affirmative action. This action must be combined with socio-economic targeting to assist all poor households, regardless of identity and guarantee of gender equality in citizenship and representation. We need to apply geographic weighting so that remote districts are not left behind. This model reduces zero-sum identity politics and builds broad coalitions for inclusive policies.

The action plan

With technocrats and civil society leaders, the caretaker unity government must initiate an emergency citizenship drive to recognise maternal lineage immediately through mobile ID registration. It also needs to serve the fundamental agenda of anti-corruption by immediately freezing suspicious contracts and operating a public asset disclosure portal.

Constitutional reform is a must in the short term. The interim government needs to establish constructive no-confidence, equal citizenship rights and an independent judiciary. This should be done in tandem with electoral reform which includes proportional representation with reserved seats for marginalised groups and blind recruitment in civil service. The anti-corruption agenda must be formalised through an independent and budget-protected commission with prosecutorial power.

Why this will work

Institutional safeguards prevent elite capture (constructive no-confidence, judicial independence). Broad coalitions reduce zero-sum politics by combining group-based and socio-economic targeting. Economic complementarity ensures citizens see benefits and defend inclusive institutions. International partnerships provide technical and financial support without undermining sovereignty.

Critical juncture to inclusive future

Nepal today is stateless not because its government has vanished, but because its people no longer recognise its legitimacy. Gen-Z protesters have forced a reckoning that could, if mishandled, spiral into chaos—or, if seized, inaugurate a new era of inclusion.

History warns us that revolutions in Nepal often end with elites reinventing exclusion in new forms. But history also offers hope: Societies that embrace inclusivity at critical junctures—by broadening citizenship, creating accountable institutions and building economies that benefit all—can achieve durable prosperity.

Acemoglu and Robinson remind us: Nations fail when they choose extraction over inclusion. Nepal’s choice today is stark but clear. If it embraces inclusive citizenship, institutional reform and economic justice, it can transform its “statelessness” into a rebirth of sovereignty. The alternative is another cycle of false dawns.

The youth of Nepal, chanting in Kathmandu’s streets, have made their choice. The question is whether the nation’s leaders will follow.