Towards prosperity for allOnly sustained inclusive growth will deliver what the country has been waiting decades for
The other day, my attention was caught by the headline in the Indian Express that said: ‘India among least inclusive in G20 economies’. The story was based on ‘The Inclusive Development Index 2018’ brought out in time for the ongoing World Economic Forum (WEF) meeting in Davos. The said article rued that India’s position at 62 was outperformed by arch-rival Pakistan, at rank 47, out of the total 74 emerging countries in that section of the index. India was behind Sri Lanka at 40, but also Bangladesh at 34, and, the big surprise of Nepal, at 22.
In fact, Nepal stood 3rd in the category of ‘Most inclusive emerging and developing Asian economies’. Compared to the previous year, when Nepal ranked 27, among the South Asian states that were part of the Inclusive Development Index (IDI), it was only Pakistan that had demonstrated equal progress, from its place at 52 in 2017. Bangladesh had moved up incrementally from the earlier 36, but Sri Lanka and India had both regressed, down slightly from 39 and 60, respectively.
Nepal’s high position in the Index is even more remarkable given that it ranks at nearly the bottom of the group of 74 countries in terms of per capita GDP. The WEF report, thus, certainly provides some cause for cheer, coming as it did at a time when things were looking somewhat bleak in the political sphere, particularly with the unseemly, and oftentimes violent, spats over the issue of provincial capitals, and uncertainty still hanging over the question of provincial chief ministers. Difficult as it may be to believe, it proved that compared to many countries in the world, Nepal is not doing so badly after all. It is either that, or the situation is even more dire in most of the other countries.
From adjustment programmes to inclusive growth
It has been just two years since the IDI started being published. The IDI is derived from 12 ‘National Key Performance Indicators’, of which per capita GDP is but one. The others include labour productivity, life expectancy, employment rate, income distribution, wealth distribution, poverty rate, and also the amount of carbon generated in proportion to GDP, among others. The subject not being my area of expertise, and also since serious critiques of this approach have yet to come out, for now one has to assume that the IDI is part of a concerted attempt to push for inclusive growth as the development philosophy for the future. The 2017 report had stated: ‘[A] worldwide consensus has emerged on the need for a more inclusive growth and development model that would retain the key learnings of the past regarding the allocative efficiency of markets, importance of macroeconomic stability, and positive-sum game benefits of international specialization and exchange, yet would deliver far greater social participation in the process and benefits of growth.’
The idea of inclusive growth itself is rather new, and came mainly as a reaction to the dominant development paradigm of the past half a century or so, most famously articulated in American economist Walt Whitman Rostow’s The Stages of Economic Growth (1960). According to Rostow, all societies have to go through various phases, starting from the traditional to the ultimate goal of high mass consumption. Since this model was derived from the American and European historical experiences, it does not necessarily follow that the trajectories of all countries would be the same. In fact, untrammelled growth could actually lead to higher inequalities and greater societal upheavals. Hence, the call for economic growth to be coupled with equity at the societal level.
Nepal is at the crossroads where policies put in place today will define our future for years to come. At the helm of affairs is most likely going to be the CPN-UML, a party that has finally been given the chance to make a clean break with the past. When the UML came to power in 1994, the country was in the throes of the structural adjustment programme (SAP) that the Panchayat system had adopted in its dying days, and the pro-market policies introduced by the ‘socialist’ Nepali Congress that succeeded it. The UML did not, or could not, temper the country’s economic direction per se but it did introduce some popular policies such as the nominal allowances to the elderly, widows, and people with disabilities. There is enough anecdotal evidence to suggest that part of the reason for its strong appeal this time around is what the UML sowed those many years ago in the form of those social security allowances. Granted that inclusive growth goes far beyond such cash transfers but if the UML’s ideological heart is still in the right place, it has been given a golden opportunity to ensure social justice on a much larger scale while rethinking the wholly market-driven approach to generating national wealth. Back in power with a far greater mandate than it could muster a quarter century ago, the UML would do well to heed the entire sub-section devoted to ‘social justice and inclusion’ outlined among the policies of the state in the 2015 Constitution, a document it has backed so vigorously.
In their famous 1997 article, ‘Africa’s Growth Tragedy: Policies and Ethnic Divisions’, the conclusion by William Easterly and Ross Levine has some lessons for Nepal: ‘Africa’s poor growth—and resulting low income—is associated with low schooling, political instability, underdeveloped financial systems, distorted foreign exchange markets, high government deficits, and insufficient infrastructure. High ethnic diversity is closely associated with low schooling, underdeveloped financial systems, distorted foreign exchange markets, and insufficient infrastructure. While motivated by Africa, these results are not particular to Africa.’
Easterly and Levine were writing at a time when the old way of delivering development was the norm, and inclusive growth as a concept had not yet materialised. But it would do well to keep in mind their warning. Nepal’s famed diversity is certainly one that has been and should be celebrated in all its varied aspects. Yet, it was problems in the redistribution of wealth and power that could be discerned along the lines of geography, ethnicity, religion and language that provided the motive force in the push for federalism. The exercise in federalism will begin in earnest soon, and only sustained inclusive growth will deliver what the country has been waiting for decades now. If with all the unstable politics of this long transition we could rise to the top of the South Asian table in managing the most inclusive development, imagine the cusp of possibilities the country is standing at now. All power, and wisdom, to our leaders.