Saturday, June 28, 2008

Is it the geography, stupid?

Hari Bansha Dulal & Samyam Wagle

While the debate about the probability of miraculous economic success in Nepal under Maoists leadership is going on, they have not still come up with such strong convincing economic policies that would bring such dramatic turn allowing the three fold increase in GNP in a decade's time.

No doubt that if it is possible, it is possible only through capitalism. The much needed prosperity cannot be achieved by doing what ideologues of left-populist political trajectories in Latin America do-fault neo-liberal economic policies for slow growth, no improvement in poverty rates, and sparse investment in human capital through health and education. The failure of China under Mao and success under Deng is something that is out there for the Maoists in Nepal to ponder. Repeating failed polices of Mao in some form or the other to appear politically correct would be a blunder of Himalayan proportion. The famine that resulted from Mao's short-sighted policies is far greater than African famine or the number of people killed by hunger during the entire post-independence in India.

Approximately 25 to 30 million perished in China then. Hence, replicating Mao's "super-collectivism" of 1958 to 1960, the so-called Great Leap Forward, in some form or the other would be a blunder of Himalayan proportion. If history is of any use, it is quite clear from the past that only capitalist culture can ensure both the freedom and prosperity. Never ever in the history of mankind a famine occurred in any capitalist nation.

How the Maoists will transform an impoverished landlocked nation into a promised economic powerhouse without sound economic plans is in itself a big question. It will be interesting to see how they overcome the geographic constrains. The noted economist Jeffrey D. Sachs researched the effect of geography on economy and found that nearly all landlocked countries in the world are poor, except for a handful in Western and Central Europe like Austria, the Czech Republic, Hungary, Slovakia, and Switzerland which are deeply integrated into the regional European market, and connected by low - cost trade. Besides them all other land locked countries are poor because of geography that leads to high cost trade.

His famous research found that development surely seems to be favored among the temperate-zone economies, especially the subset that: (1) is in the Northern Hemisphere; (2) has avoided socialism; and (3) has avoided being ravaged by war. Tropical regions are hindered in development relative to temperate regions, probably because of higher disease burdens and limitations on agricultural productivity.

He further adds that coastal regions and regions linked to coasts by ocean-navigable waterways are strongly favored in development relative to the hinterlands. Landlocked economies may be particularly disadvantaged by their lack of access to the sea, even when they are no farther than the interior parts of coastal economies, for at least three reasons: (1) cross-border migration of labor is more difficult than internal migration; (2) infrastructure development across national borders is much more difficult to arrange that similar investments within a country; and (3) coastal economies may have military or economic incentives to impose costs on interior landlocked economies.

Leading thinkers have pointed out the four major areas in which geography will play a fundamental direct role in economic productivity. They are transport costs, human health, agricultural productivity and ownership of natural resources (including water, minerals, hydrocarbon deposits, etc).

Economists say it is the high transportation cost that inhibits the ability of landlocked countries to engage with the outside world to trade goods, exchange capital, and borrow ideas. Jeffrey Sachs also points out the burden of diseases on economic development. Tropical regions are more prone to diseases which have vital effect on economic growths. He even claims fertility decisions are affected by geography. Country like ours is still dependent on unscientific agricultural activities which again depend on monsoon rain.

Besides the fate of nations are shared by gift with valuable resources as Kuwait, Saudi Arab, Qatar, Arab are simply rich not because of their well governance but by natural gifs oil! Botswana is also the land-locked country but has diamond mines below them which make them better! Second is about the neighbors. Some might blame god for not keeping us next to Finland, Canada or Liechtenstein! Though our neighbors are the rising superpowers, our immediate neighbors are, Bihar in south and Tibet in north, both of which are the least developed states.

Even though geography plays significant role in the economic performance of a nation, it is not the only factor that determines the level of well being. Geography alone is not much of a help when it comes to evaluating the success of South Korea and backwardness of the North. If geography was the only factor determining economic prosperity, former east-Germans would not be risking their lives crossing the wall that separated starving proletariats of the east Germany from the highly prosperous Germans couple of yards west from the wall. Needless to say, the authority and policy play a major role in determining the fate of a nation. It does not take very long for a nation to go downhill and vice versa. Burma and Singapore are two nations that serve as classic examples.

While Burma, a nation with abundant resources and access to sea and once a better-off country, continues to lags behind under military Junta, continuous pursuit of Lee Kuan Yew's policies has helped Singapore surpass its east Asian neighbors. Does Puspa Kamal Dahal also have the spirit and determination to lead the impoverished Nepal and be the helmsman of 27 million Nepalese or he simply got lucky in cashing in the past failures of the major political parties and disgruntlement of the populace is yet to be seen.

The future Maoists' government should work around the geographical constraints by making shipping less relevant through lightweight manufactured and processed agricultural exports and can convert our perceived geographical liability into tourism and water wealth and other service-based industries. Maoist should create a sound atmosphere for foreign investments. Without foreign investments it would be virtually impossible to utilize the potential of the existing labor force put the existing natural resources into wealth generation. Without providing employment to the youth, it would be impossible to break the cycle of perpetual revolution and enhance the process wealth creation and multiplication. And, in the case of Nepal, both are equally important.

Apparent populism will not be of any help in achieving the required economic growth and slogans alone will not feed the proletariats. It is good to be optimistic but there should not be disconnect between what is being proposed and what can actually be achieved. Such disconnect, if any will cause an outburst of pent-up frustration. It would be wise to come up with deliverables that are really achievable. The current proposal put forward by the Maoists seems unrealistic with regards to geographic and resource constraints. Plus, with the existing stock of human and socal capital, it is virtually impossible to triple GNP in a decade's time. It is high time that the Maoists get off the populist bandwagon and pursue real achievable economic goals. No more gimmicks, please!


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