A Brief History of Economic Development

By: Bikal Dhungel

The world is changing rapidly. In the last sixty years it has seen miraculous developments. Coming out of the ashes of World War II, Western Europe has established itself as the most stable region of the world. Totally destroyed Japan, having been the victim of the only atomic bomb in human history, which killed hundreds of thousands, has established itself as the strongest economy of Asia, and second only to the United States worldwide. We have seen the rise of South Korea, which had the equal per capita income as Mozambique in late fifties. Today South Korea stands as a developed country. We have seen the growth of China when Mao Zedong went. From Deng Xiaoping to Xiang Jemin to Hu Jintao, it kept its economy open and recently overtook Germany as the third largest economy of the world. China is on the way to become the second largest economy. India, from the early ninetees, took similar policy. India grew when the world economy was in downturn. The rise of BRIC (Brazil, Russia, India and China) countries has re-shaped the world order. Mexico proudly declares itself as a North American country today and no more intends to turn back to its old identity as a Central American country. The North American Free Trade Agreement (NAFTA) has been good for Mexican economy as they can sell their products in the United States and Canada now. Indonesia shares similar story. Even though it was runned by one of the terrible dictators of the world, Suharto, he brought liberal policies in the country encouraging Privatisation, Free Trade and more Market Liberalization. After the Asian financial crisis of 1997, people lost faith in him and finally toppled him. Growth was felt in other parts of the world as well. Moreover, the emergence of computarized technologies, World Wide Web, digital technologies etc have reshaped the world.

Nepal, however, did not change much. Even though it enjoyed the modern developments from other parts of the world, it could not establish itself as a country capable to adopt such changes. There are many things to blame. Ill adviced policies of the past, weak justice system, ineffective education policies, nepotism etc are just handful of things.

In Nepal due to misguided economic systems and policies of the past, the investments are frequently being discouraged. The original sin did not start with the change of government, nor will it ends after a new system will be installed. No lessons were taken from the countries of Latin America and Emerging Markets like Hong Kong, Taiwan, Singapore and South Korea.

Since the late sixties, South Korea has been growing with almost six percent per year and in the end of the Millenium, established itself as an Asian dragon. Latin American countries also reduced trade barriers and motivated free trade. They invested heavily in education and concentrated in future based successes.

However, it is not a reason to be sad. Nepal has a huge advantage as well. Nepal lies between India and China. China is heading forward with double digit growth since three decades and it continues to grow. China also overtook Germany as world‟s third largest economy and the largest exporter. Its cheap labour cost is the motor to growth, but also opening up the economy, free market and trade. The landscape of China is also changing because of millions of people from rural china migrating to the coastal cities. China will also overtake Japan soon and once more become the major Asian power.

Abroad, China is also accelerating. Chinese investment in Africa is so vast that it‟s very hard for any other country to take its role. China has money and Africa has resources, so they trade. Barter trade is often a good solution for the Chinese, African Oil vs. Chinese infrastructure developments. From highways in Angola to ministerial buildings in Ruanda, China has become Africa‟s best friend in it infrastructural buildings. The south-south cooperation between Asia, Africa and South America is increasing day by day and these once „developing countries‟ have become major partners in global issues today. The Chinese government mentions that about 500 million people have been brought out of poverty since opening up the Chinese economy, which represents the same size as the total population of the US, Germany, Great Britain and Italy combined. A huge number of people are turning from poor to the middle class. More and more people are being able to afford European goods, making vacation abroad and live a high quality life.

India grew as well, with an extraordinary rate. After opening up its economy in the early nineties, it flourished. India has the resources. It has cheap labors and other comparative advantages. India is also one of the largest foreign direct investor in Europe and North America. As China, India is looking to Africa for resources, and their trade too, is increasing. Once the bread basket of the British Empire, India appears to be a great empire today. A vast majority of Indians educated in western countries are returning, they are bringing the skills with them and using it in their country of origin. India has developed itself as space technologist, sent recently a shuttle to the space. India is a nuclear power and its military is largest among the world.

China has around 60,000 students currently enrolled in the US universities and 20,000 enter the programs every year. India sends thousands every month. When this generation returns home, even more growth will take place.

This development of India and China is good news for Nepal. Nepal will definitely be affected by this growth. There will be spill-over effects. There are resources in Nepal but due to the lack of proper transportation facilities, they are not in a condition to be transported. As giant economies, China and India will certainly help Nepal to build infrastructures and make use of its resources. Nepalese people will find China and India an attractive place for employment. A huge flow of immigrants is possible. Currently, millions Nepalese are employed in India. India does not require visas for Nepalese citizens. China does. Chinese policy till date is to employ rural Chinese first and they have a restrictive immigration policy.

It is also in Nepal‟s interest that China and India both are democratic nations. A democratic country cannot try to impose autocratic policies in the weak neighboring country. China presently has a one party political system. It liberalized its economy when Mao died but the government remains the same. This government stays hard lined in many issues, like Tibet policies and is reluctant to change a lot. Nepal would obviously profit from a democratic and economically powerful China.

It is also up to Nepal to make the most of the economic developments of China and India. It should learn from China and India, which were both developing countries but within few decades, presented themselves as huge powers. Nepal should seek advice from India and China and work towards being a prosperous nation. The stability in the region is profitable for all.

Nepalese people should not leave it to the politicians to bring all change that is necessary. Change should never be a top down policy. It is the task of politicians to create a room for economic development and provide the public with necessary tools to deal with it but it should be the hand of private sector to undertake the greater share of development. Lessons should be learnt from all over the world to build Nepal and to create economic growth. Economic growth can only help to resolve the problem of our society, namely, poverty, under-nutrition, access to sanitation and clean drinking water, better health care and education. These things are the key to growth and development. Nomatter it is China or India or Brazil or Turkey or Russia, their very first steps towards development were these factors, which, in turn contributed to accelerate their growth. The role of the normal citizens should be, “Ask not what your country can do for you, ask what you can do for your country”; John F Kennedy.