8 Challenges of Nepalese Economic Development

By: Bikal Dhungel  

1) How to end the massive problem of under-nutrition: This is an evidence that better nutrition = better health = better human development = economic development. Poor nutrition = poor health = poverty trap = poverty. 47% of children in Nepal are stunted, mal-nutrition is alarmingly high. Nutritional deficiency is not only the problem of today, it has a long term impact. Deficiency is connected to reduced cognitive abilities which will cause in poor results in school and this finally cause fewer opportunities in the future regarding income. The very first step of economic policy should be to end this trap. The question is now how to end this trap. To end this trap, you should find information about who are struggling with nutrition. Substantial amount of time should be spent on distribution policy. Learning from other countries are vital. Countries with similar level of development have distributed Food Ration Card for the basic nutrition. Then there are policies to reduce food waste. There are agricultural policies which are targeted to food production in the form of small entrepreneurship. In some cases, there are also free distribution of energy biscuits financed by aid money. Economically saying, even if the country provides subsidized foods, it will be less costly because if not, this person cannot contribute to the welfare of a nation given his/her cognitive deficiency. It might also be that the country need to pay for his/her treatment in the future. So, prevention should be focused instead of treatment. 

2) How to create an affordable healthcare system for all: 80% of Hospital are located in urban areas whereas the majority of people live in rural area. The unavailability of healthcare system due to any reason has caused poor health condition of rural inhabitants. In urban area, hospitals are over-crowded and unhygienic especially the government ones and it will not be wrong to say that hospitals are not only the place to treat the disease but also a place to catch infection. The Health insurance market is not available for the large majority. But if it were there, people would be willing to pay a portion of their income because if you are unlucky and something happen, it might cost you a huge fortune in most of the cases. People are forced to sell their properties to pay that cost. So, health based poverty traps are visible everywhere. The economic impact of this can be huge. For this reason, most of the development countries have compulsory health insurance scheme for their citizens and those in the lower level of income group will be subsidized. This is however easily said than done. So, the division of task should be there. Governmental policy should be focused on prevention through public health campaigns, educational programs, environmental standards , public policy etc and the private sector can concentrate on health insurance scheme and to bear the costs of treatment, there should be a good deal between the actors about who should take how much of the share. Where government fails, private sector emerges and they might not always act on the interest of the public but governmental regulation should offset this. Still, this is not something one can design in one of two days or even years, but it is possible in the long term.

3) How to fill up the education gap to reach 0% illiteracy: The 65% literacy rate Nepal has today is not a satisfying number. 35% illiteracy is enough for all sorts of problems regarding health, culture and political instability. Illiterate people have higher tendency to believe in superstitions that can be harmful. In rural areas, people for example trust the traditional healers instead of doctors. Illiterate people are less likely to send their children to school even if the schools are available. Illiterate people are more likely to discriminate based on gender or caste. Illiterate people can easily be manipulated to achieve political interests for example the use to violence that the Maoists have done in the past. Illiteracy is one of the reason of poor health etc. Providing educational infra-structures including the qualified teachers and school materials are challenges that are especially high in rural areas. In urban areas, this is not a problem but still, the quality of education should attract the focus of experts. In government schools, the rate of failure in SLC exams are extremely high, close to 90%. This is a pure weakness of management and the quality of teachers. First of all, providing at least a secondary education to everybody is a key to further development. Education is related to better health, entrepreneurship and a peaceful society where any form of discrimination, or superstitious beliefs rarely exist. So, the challenge to fill up this gap should be thought thoroughly.

4) How to solve the Infra-structural Dilemma: Have a look at a Google map of Nepal, you will discover that almost half of the country, the northern side are only mountains where people cannot live. So, Nepal is actually much smaller than the total area of 147,181 sq km. About two thirds of the remaining area is of high hills where the population density is sparse. Only about 20% area, the southern plains, houses most of the people. The hills and rivers possess a real challenge to build infrastructures like roads and bridges there. Even if there is an access of road, due to the lower density of population, most of them cannot be fully utilized. So, the recommendation here is that, costly infrastructures should not be built blindly. There should be calculations, how many people live in the area and how much would it cost to install basic infrastructure there like paved roads, schools, hospitals etc and if that cost of higher than to bring these people to other areas where settlements could be built, it should choose the latter. It will be equally unjust for other tax payers to spend huge amount to build roads that can be helpful for few people. Economic calculations must be there. Development alone is not enough, it should be just, it should be sustainable and it should be in a position to be used.

5) How to achieve self-sustaining agricultural system: In a globalized world, no country is fully self sustaining and only few can achieve prosperity by itself. But if it could self-sustain in terms of foods, it is better because it is in lower risk of starvation in case of war. The Common Agricultural Policy ( CAP ) of the European Union is based in this principle. Even though it will cost them cheaper to import foods, they are subsidizing their farmers so that in case of emergency, they don't have any kind of food shortages. For Nepal, being a small country, it is highly dependent on neighbouring countries for almost all kind of foods. This has created some serious problems sometimes. The landslide for example blocks the road and food supply will be stopped causing the food prices in the cities to skyrocket. If there are environmental problems in importing countries for example heat waves, it will cause a massive rise in prices. Moreover, the importing country can also use the food as a political instrument to put pressure. All these are not good for Nepal. So, self-sustaining food system is necessary. It is again possible by small scale farming in the first place, that will also reduce food price and makes less dependent on foreign countries. But this alone cannot sustain us. Food production should slowly grow, it should be industrialized. Small scale farming cannot feed the nation, only if the absolute majority of the people are farmers. This is not true in today's scenario. The service sector is rising and most of the educated people choose other sectors than farming. The process was similar in rich countries. When they transform from poor to middle income to rich countries, the size of agricultural sector decreases. It is same everywhere. Only 70 years ago, Agricultural sector comprised about 20% of German economy, today it is less than 1%. The productivity growth of these countries can also be attributed to the switch from agricultural to industrial sector. Roughly saying, about 0.5% people can feed the whole nation today due to their agricultural productivity supported by machines and industrialization. So, for development and food security, it is necessary to be self sustaining. But a good news is that, Nepal is moving towards the right path. If it continues remain in this path, someday, it can sustain itself.

6) How to ensure urban sustainability and rural development: Urban sustainability here means how to create livable cities. Kathmandu is not a livable city. The air pollution there cause deaths of thousands of people yearly due to respiratory diseases. The water system has failed. Most part of the city should buy water for daily consumption. There is no good sanitation system. Waste management is another example of failure. Every types of wastes are lying everywhere giving a safe heaven for diseases to spread. All these have caused increasing cases of diarrhea, typhoid and other health problems that then possess burdens on hospitals that were built when the population of the city was half a million which house today more than three million. Decentralization would stop this process from increasing further. Better housing plans, better town planning, road planning, water and sanitation system, environmental standards for vehicles, waste management system etc will solve the problems mentioned above. These are also easy things to do. It does not require a superior technology. It only require minimal capital, rules and the power to enforce these rules.

7) How to create an entrepreneurial society: All above mentioned policies will not sustain in the lack of entrepreneurial society. To keep life going, entrepreneurship is vital. Humans are actually entrepreneurial animal by nature because we should survive. Most of the people living in the whole world do not have their own lands where they can grow foods for themselves. They have to sell their skills in order to earn a living. So, after achieving basic requirement, humans should involve in creation, create something with value and exchange this value. This will move their life further. No country in the world has achieved prosperity without entrepreneurship. This is however, the result of learning, ideas, information and a good environment. The job the government is to create an environment and the rest is the task of individual itself.

8) How to eradicate all forms of discrimination: Discrimination is bad for growth and bad for sustainable peace. Achieving high standards of living does not necessarily mean that there will be no discrimination. There is discrimination in rich America, there is discrimination in Europe and in Japan, Australia, Singapore and actually everywhere. Women in the western world earn 20% less in average than men who do the same job. People are still discriminated in some places due to their beliefs, skin colour, sexual orientation or something else. Some places have dropped these sorts of discrimination to minimal level by working on awareness programs, education etc but the way to that point was everything else than easy. Nepal is a country of over 100 languages, many castes, many religion, rich, poor, middle, lower middle, upper middle, people with different political views, radical, liberal. Nepal is fire. People are fighting for every little things, from which colour the flag should be to which street should be named what. Powerful few can do anything they wish whereas the poor are struggling for basic rights. There are all forms of discrimination everywhere. Policy makers have no clue where to start. It is like trying to keep a milk in a pot with 1000 holes. It is important to solve these issues but going through the sequence of above policies will make the work done with few resources. Education is vital here but not enough. The main thing is that, it should not give rise to violent conflict. Once you light a fire based on these issues, it will leave a deadly scar that will remain for a long long time.   

Global Inequality and Thomas Piketty

By: Bikal Dhungel 

Inequality is a matter of concern. It rose in the previous decades. The top 1% of richest people possess the amount of wealth like never before. This is not only the phenomenon in rich countries, but also in transition states where the process of development is taking its pace. Inequality per se is not a problem but it can create problems. Thomas Piketty, an Economist of University of Paris I, Pantheon-Sorbonne wrote a book called ' Capital in the twenty first Century ' that presents some good statistics about inequality in the western world. He intelligently uses the statistics from the previous century to present some fine data that, with an optimistic view, will shape the discussion of inequality from now on.

Piketty mentions, the Gini-Coefficient, that says the difference between the rich and poor, actually decreased from the time after World War II until 1965. But then it increased again and stands today at the highest level ever recorded since the data is available. Within this group, the share of the income of top 1% people rose from about 8% in the 80s to over 20% in 2010. Anglo-Saxon countries reflect quite similar picture. In US, UK, Australia and Canada, the level of inequality is continuously rising since the 1980s. The US is moving with the highest rate, followed by UK, Canada and Australia. The situation however, is different in continental Europe and Japan. In France, Germany, Sweden and Japan, the inequality level decreased from 1910 and during mid 80s it reached the lowest level. Since that time, it has remained constant, with some yearly variations.

The total global income consist of labour income and capital income. Labour income consist of about 75% of total income whereas capital income consist of about 25%. Since the 1970s, the share of capital income is rising. Looking at the figure of France, even though inequality in general decreased, the labour inequality has remained the same. This simply means, those people whose income is based on wages, they are not better off. This group consist of people who are for example the poorest 60%. So, economic growth might have occurred, but the ones with higher income, means the rich, are profiting over proportionally from this.

In Anglo-Saxon countries, the share of people earning from capital has increased with higher rates than the share of people who earn wages. These explanations based on few figures of Piketty's book means, expressing simply, in early 20^th century in continental Europe, the capital income inequality has been reduced but there was no change concerning labour income inequality. But in late 20^th century, there was no significant changes in both capital or labour income inequality. For Anglo-Saxon countries ( US, UK, Australia, Canada ), in early 20^th century until World War II, there was a large reduction in capital income inequality when, also labour income inequality decreased, but in late 20^th century, labour income inequality increased drastically whereas capital income inequality increased only slightly.

When we go more deeper, in Europe from 1870, the private capital as a percentage of national income decreased from about 700% to 250% in 1950s but then had an increasing tendency up to today which lies around 500%. The share of public capital has remained the same today, as the year 1870. This implies, there has been theoretically no public capital gains. The data is similar for the US. Again, the private capital fell in Europe and the US but the extent of this was higher in Europe. It may be attributed to War in 1939 when most of the private capital was destroyed. It might also be because of high taxation. But, the private capital is again increasing since several decades.

One can conclude from Piketty's findings that, ( as Piketty also says ), if the rates of return in capital income is higher than the return on wage income, inequality grows. So, one policy recommendation from these statistics might be, that capital income should be taxed higher, ( or at least taxed because in many countries, they are not taxed ). Warning: this can also have negative consequences in the economy depending on the situation how the economy is running. However, we can think of why capital share is increasing. First reason is, rich are in the position to save more. Money left after consumption could be saved and as this amount accumulates over time and mostly over generations, it will increase so fast that it will be way more than any intelligent mind can guess of, thanks to compound interests. Lets see this with an example. Imagine your great great great great great grandfather put 100 unit of a currency, lets say $ in a saving account with 3% interest for you in the year 1600. Only 3% per year. Which means, this year it is 100$, next year it will be 103$. What do you think how much you will get in 400 years ? You can guess the number first, but leave it, our intelligence cannot even make a guess in compound interests. I will tell you the answer. 100$ deposited with 3% interest per year in 1600, in the year 2000 you will get an amount of 13,642,371.82. Yes, from 100$ deposit in the year 1600 with an interest rate of 3% per year, you will get thirteen million six hundred and forty two thousand, two hundred and seventy one point eighty two $.

Well, coming back to our discussion of inequality, if you tax capital income efficiently, it might help to decrease the inequality but this is rarely possible in today's world. We have a globalized world where the movement of capital can rarely be restricted. There are tax heavens, also called safe heavens where you can take your money and keep it un-taxed. Singapore, Switzerland, Bahamas, Cayman Islands, Monaco to name the few where billions of amount are in the banks which we don't know who has put how much. In this case, it is not possible to tax. A national government can only tax the companies that are operating in their countries and few countries like the US have enacted laws that forces its citizen to pay the tax no matter where they earn their income. The issues with safe heavens will equally involve the high level discussion like inequality because the vast wealth concentration in the hand of extremely rich will do less good to the ones with little as everywhere, financial constraints are emerging as massive problem. The US government recently made the Swiss to give details about their citizen's deposits in Swiss banks and warned economical consequences in the form of trade bans for Swiss goods coming to the US if they do not. The Swiss eventually did it. Similarly, the European Union is talking with Switzerland. With Luxembourg, the EU has achieved a huge success in this matter. Other safe heavens might follow this. Still, this alone will not solve the problem of inequality. We should not forget the fact that, the ones with huge wealth are also in a position to manage the wealth better. They can hire an Asset Management/ Wealth Management specialist who can intelligently spend their money in order to maximize the return. In some cases, we can also say that, the wealthy have lots of internal information for example the policy of finance ministry or central bank which will help them to forecast and react accordingly in their own favor. It is equally true that, the rich have more political influence. They might get successful in getting the politicians enact policies in their favor by for example financing their campaigns. One can see this in the US President Election. Corporations donate millions, openly or secretly and once the person gets elected, he is morally obliged to bring policies in the favor of big corporations. This can be in the form of tax break, or subsidies or any other trade preferences. In some of the European countries, like Germany, elections are financed by tax revenues but still, companies are allowed to make donations for political parties.

This has caused huge outcry from left wing spectrum about the increasing role of corporations in policy level as, when these corporations continually grow and take control over the large majority, it might not be in the favor of the majority because the top 1% for example might have higher voice than the bottom 99%. Today, when we see the richest 100 economic entities, only 49 of them are countries, 51 of them are big multi-national corporations. Corporations like Walmart and General Motors are richer than states like Saudi Arabia or Denmark. In which direction it goes will be another topic but what is also true is that the concentration of wealth is increasing. Without intelligent tax policies based on fairness, we will have to face protests like ' Occupy Movement ' in the future.

Thomas Piketty has triggered the important discussion about inequality which cause the investment of handsome amount of time by the intellectual community in the coming years and decades.  

( The source of the data in this article is Thomas Piketty's book ' Capital in the twenty-first century ' 

The Great Migration

By: Bikal Dhungel 

Humans are by nature a nomadic folk. The early humans, the hunters and gatherers survived by moving. They moved from places to places in search of foods. Once agriculture was discovered, humans remained in one places as they did not need to hunt for foods. Agriculture gave birth to human societies and humans settled in fertile lands, which slowly expanded. Agricultural societies existed from Mesopotamia to Egypt to India to China and many other parts. This is also when civilization started. It was the beginning of ' belonging ' and ' possession'. When hunters and gatherers moved from one place to other, they didn't need to possess anything except their tools like bows and arrows, used to hunt animals. But since they had installed societies that used lands to practice agriculture, when their population rise, they needed more fertile lands to feed themselves. Then they started to steal lands by raising wars against other groups of humans. But still, the agricultural society didn't stay in one place. Sometimes there was natural catastrophes, sometimes there was human-made violence that made them move. The origin of humans is believed to be in East Africa but humans are found everywhere. How did the aboriginals trapped in Australia ? How did the native Americans reached the north american continent ? Because they migrated from other places.

Many accept Globalization as a modern phenomenon but it always existed. The world was globalized every time as the other. People migrated for trade, looking for prosperity to the other parts. Sometimes they were forced to moved due to natural calamities and sometimes it was due to human reasons like political repressions, a phenomenon that is quite new. In the year 1914, exactly 100 years ago, the world was equally globalized as today. That time the Colonialists from today's European countries lived in former colonies and today it is mostly other way around. Today, things also turn bit radical. Immigration is differently understood than it used to be. Immigrants brought prosperity to the new countries namely America, Canada and Australia. The same people then started imposing restrictions for other potential immigrants. There are clear evidences that the pros of immigration clearly outweighs the cons if there are rules and regulations and if there are at least chances for everybody to thrive and prosper. Take the Jews in America for instance. Most of the Jews that live in America came from Germany and other European states when Adolf Hitler came to power and politically repressed them. During and after World War II, they were joined by millions of others, many of whom were Holocaust survivors. There are more Jews living in America than the Jewish state of Israel. Interesting fact about the Jews is that, they are just 0.3% of world population whereas almost 35% of Nobel Prizes have been awarded to the Jews, in the field of Economics, its 50%. In private industries, they have done equally well. Facebook's Mark Zuckerberg and Sheryl Sandberg, Google's Sergei Brin to name the few. Regarding other inventions, Thomas Salk, who discovered Polio Vaccine, Albert Einstein who discovered the theory of relativity, Sigmund Freud who is the father of Psychology, Niels Bohr who is discovered Quantum Theory, and even Karl Marx, who is the father of Communism were Jewish and most of them or their parents and grandparents emigrated from Europe to North America only recently. The Jews are the most nomadic folks than any other groups. Since the time of Jesus Christ, they have spread throughout the world and until 1948, did not have their own country. In places they have lived, they brought many inventions which helped the whole humanity. Few of the Jewish inventions are for example Television Remote Control, Traffic Lights, Genetic Engineering, Radiation, Chemotherapy, FAX, Optical Fiber, Video Recorder, Walkies Talkies, Stainless Steel etc. In entertainment industry, Bob Dylan, Steven Spielberg and Chelsea's boss Roman Abrahamotivtz ( who directly most of Vladimir Putin's decision ) are Jewish.

Like the Jewish, other immigrant groups have brought prosperity in the form of goods, foods and technologies. Still, the views about immigration is still negative. It is due to the view that immigrants only want the slice of the cake. It can be justified by some statistics which shows that immigrants are for example more likely to be unemployed than the natives and have lower level of education than the locals. This cause negative resentments in the minds of natives who then lobby their political representatives to enact policies to restrict immigration.

However, we should see why the immigrants from Europe who went to new lands were prosperous and why the people from today's developing countries who come to Europe and America are lagging behind the natives. The Europeans who immigrated to America did not face any restrictions. They could theoretically go to America, start any business they think will bring profit and live the life they preferred. Slowly they became rich and started giving jobs to the locals. Today's immigrants face lots of restrictions like , they are not allowed to work, they have limitations if they want to start their business, they don't have equal access to education system, sometimes due to language barriers etc. This limits their chances.

But the issue here is immigration in general. Immigration can be positive as well as negative, all depends on the circumstances. In today's world, there can be no open borders, especially between rich and poor countries. Four fifths of the world are poor and live in developing countries. In the case of open borders, a large majority of them would emigrate to rich countries posing a tremendous burdens in the social system which probably will break down. But this is also not the issue here, the issue is only how the immigration policy is evolving. It is a human tendency to move to wealthier parts whatsoever. People are not hesitating to take perilous journey to reach prosperous countries. Only last year, about 25,000 people died while crossing the Mediterranean sea to reach Europe and about 80,000 made it. Hundreds of thousands are waiting for their try in Mexico to cross the border to reach United States. Australia and New Zealand equally face the inflow of people from other parts. Most of these people come as refugees. How to handle these people remain a topic that has been intensely discussed but it has divided the western societies into two big parts, one that is pro immigration and one that is against. Both groups are raising a warfare with arguments, statistics and facts to justify their arguments. Even within one union, the European Union, the issue of Immigration has divided the member states. Countries like Germany and Sweden are taking a liberal policy by accepting most of the immigrants and refugees whereas other countries are silent about it. The war in Syria, the violence in Iraq and Afghanistan, the poverty in Africa has caused hundreds of thousands to move north to Europe. So, Germany and Sweden face a huge burden to take a bigger share whereas other countries tend to be reluctant to take any refugees. It has also given rise of right wing parties that are openly campaigning against refugees, in some of the cases, their arguments are also true, for example: people who can pay tens of thousands of dollars to human traffickers to reach Europe are really refugees or just the ones who want to make more money. What about the real vulnerable groups in any civil war, that means women, children, elderly, handicapped etc. Why are the majority of these refugees are young men between 16 to 40 ? If they think their life is not secure in the countries where they came from, what about the people who are still living there ? Arguments goes on and on but it is also true that, groups such as Islamic State or Taliban are massacring innocents.

But immigration is not only about from poor to rich countries. It is also from rich to rich countries. The Euro crisis has caused high immigration from eastern and southern Europe to western Europe. The high wages has caused high immigration from western Europe to Switzerland. The Swiss then went to the referendum last year which voted to restrict immigration from the European Union. Again at the end of this month, there is another referendum about the quota of immigration restriction to Switzerland. Either this is good for Switzerland or not is a different issue, but blaming foreigners for Swiss problem is totally wrong. Most immigrants to Switzerland are highly educated individuals who have secured job. They had brought more good to Switzerland than they cost. Swiss Elites and intellectuals have understood this fact. We can clearly see the tendency of voters in last election. The most prosperous cities, like Geneva, Zürich , Basel and almost all french speaking Switzerland voted against the restriction for foreigners while most rural parts and Italian speaking south voted for restriction. Areas where the number of foreigners are few voted against. Most rural Swiss who voted for restriction are convinced that it is their goats, cows, pigs and hens that brought prosperity to Switzerland but in fact it is the financial industry which relies on highly educated foreigners and the money from abroad that helped Switzerland to be one of the most prosperous countries in the world. So, the consequences of immigration restriction might be worse than they thought.

It is also true that, Western Europe must allow immigrants. Their population is ageing, they will have lots of older people in 30 years whose pensions should be paid by young people who are not there yet. Their birth rate is less than what is needed to balance the population. The population of countries like Russia has decreased in the past. At the same time, people are living longer and longer. That means, they need somebody to care them as well, and the ones who pays their pension. Without allowing immigration, this is not possible. The center for economic research in Germany has calculated that, Germany should allow almost half million net immigration per year for the next 15 years in order to maintain the prosperity they are enjoying today. The issue is also about trained professionals. There are high scarcity of doctors, engineers, IT specialists, teachers, care takers, and industrial specialists. The only option that is available in immigration. The same story is true for Japan as well, Japan has one of the highest life expectancy, there are so many old people like never before and so few younger people. In the present scenario, Japan cannot sustain its prosperity. The pension system will collapse as there will be only fewer people to pay in it. If Japan continues to remain tough in immigration issues like today, in order to finance its pension system, it needs to raise tax. The fewer younger people will then feel over-burdened and have incentive to move abroad. This will cause the brain-drain, which is bad for efficiency of Japanese industries. This might lead to the downfall of an industrial nation. The prosperity Japan achieved after the Meiji Restoration, will come to an end. Sooner or later, it should allow immigrants in, and invest in them to use for its competitive economy.

However, it should be taken into consideration that only allowing immigrants inside will not solve their problems. There should be a proper system. If immigrants are not given equal chances, if they face high barriers to universities and job markets, in some decades, there will be few million people without skill who would need social support to survive, creating burdens to already over-burdened society. So, the job of the authorities today should be to ensure that at least everybody has an equal chance to chase their dreams by studying, by being an entrepreneur and by being a responsible citizen. Immigration can help the rich countries to maintain their high standards, so this issue should be handled intelligently and at the same time, the issues of poor countries should also be taken into account especially when richer countries enacting liberal immigration might cause the emigration of people like doctors and other health professionals who are vitally needed in poor countries today. A welcoming culture is equally necessary as, if you are not welcoming, there are other countries where immigrants will choose to go.

What is true is, immigration was always there and it will always be there. Only when we handle this issue in an appropriate way, in a human way, it will cause good for the whole world. If we continue making immigrants scapegoats and blaming them for our problems, we will only divide the society which will surely cause destruction in a massive scale.  

Open The Border For Trade

By: Bikal Dhungel 

Two group of people who oppose opening up their national borders are right and left wing extremists preaching things like national sovereignty and fear of loosing national identity. What is a national identity and if it is important for our daily survival is a separate topic of discussion but opening up the border in this case means nothing other than free trade, not essentially free movement of people but of free trade.

Why free trade is important is, there is strong evidence that nations with most free trade are also the ones with highest income and high level of welfare and oppositely, countries with more protectionist trade policies are the ones with low level of income. Why free trade is a good thing is, when you have a business, your market will be large. When you have a large market, you have an incentive to be an entrepreneur. Being entrepreneur helps you to increase your income and probably you will also create jobs for others. When employment level rises, the tax collection of a country rises and it can invest in education or infrastructures which will increase the literacy rate and this again creates more educative people who might then come up with a bright idea to become an entrepreneur and this again helps the country as a whole. This will go on and on.

So the question goes why are countries reluctant to open up their borders for free trade ? This issue is much deeper than we can imagine. Normally, in developing countries, the few elites who own the local businesses are the ones who have much political influence. They know very well that, if you open the border and let foreign businesses who can produce goods efficiently come to compete with them, they will be out of business. So, they will do anything to exercise their power to stop competitors to enter the market. Who looses here are the consumers. Consumers are paying higher prices for inefficient goods. Why should they buy goods with higher prices from somebody who seems to be from their own country instead of buying cheaply from a foreigner ? With protectionism, few elites of a country profits whereas the large majority will suffer. These elites or lets say business owners talk about national sovereignty, or bring issues like cross border crimes or the disappearance of local businesses and the average citizen believes them. In most cases, these businessmen also own media companies which gives them even more power to control public opinion.

Imagine, for a small country with a population of 30 million which has a neighbouring country with1 billion people. When a single product, just a single product from this small country become successful and it can sell this to a tiny fraction of people , lets say 1% of the big country's population, which means 10 million in our calculation, the small country can create job for 1 million people if one person is is able to cover ten customers. 1 million new jobs creation is not a joke. It can transform the country overnight. So, free trade is good for two reasons: 1) it gives more incentive for potential entrepreneurs, 2) it will be cheap for home customers.

Then there are limitations. Of course you have to let the local businesses grow, but there should be a limit of time. If you subsidize inefficient local business for a long time which fails to achieve economies of scale, it is only the waste of tax payers money. On the other hand, as most of left wing extremists points, big multi-nationals with eat up small businesses. This is only partly true. Multi-nationals also create jobs locally. Evidence shows that multi-national companies have better working conditions and payments than local businesses provide because these days they have a huge pressure from international society and informed consumers will punish them by not buying their products if they fail to stick on work ethics. Moreover, this is also the opportunity for technology transfer. When a multi-national company invests in your country, it will have a spill-over effect regarding technology. The know-how can be then used later. A big business also creates another spill-over of jobs for example if a big tea producer opens a branch in a country, it needs resources, in this case tea leaves, which will then be supplied from another firm located there. So, this lead to the creation of another firm. It is true that, free trade should have conditions. In terms of negative externalities like in environmental pollution, an agreement should be done prior to free trade agreement. Other issues like consumers rights, transparency etc should also be considered.

Currently the European Union is discussing a Free Trade agreement with the US called TTIP which remains highly controversial because of its lack of transparency and because of the fear of loosing consumers rights. Environmental issues are also neglected. This has caused a huge uproar in many countries within the European Union but also in the US.

Free Trade in other parts on the other hand has worked very well. For example NAFTA ( North American Free Trade Agreement ) between the US, Canada and Mexico. It has created millions of jobs and raised Mexico to be an upper-middle income country today. The European Union itself is the largest free trade zone in the world. Before the EU was created, when goods crossed the national border, it used to be taxed coupled with other transaction costs and until it comes to the hands of consumers, the price became higher. After the EU enacted free movement of goods, capital and humans, trade has increased, goods have become cheaper and there is no hassle in the border, there are no borders anymore. Moreover, every country specialized in goods which it can produce efficiently or in economical language, where it has comparative advantage and imported goods which other country is efficient. By this way, both parties were better off. And, as a result of this, a huge market was created. Germany, the largest exporter in Europe exports 60% of its goods to other European countries today.

On the other hand, trade is also Peace. When countries trade with each other, they are less likely to fight with each other. When Germany exports high amount of goods to France, a stable, economically powerful and peaceful France is also in the interest of Germany. So, in case if France is in financial difficulty, Germany has incentive to help it. Potential of any conflict in Europe is roughly null but in developing countries, it is unfortunately high. So, trade might help them in many aspects. Concluding everything, trade is good for prosperity, good for peace and good for the well being of the whole world if everybody plays with the rule.

Cost of Fourth Grade Journalism

By: Bikal Dhungel 

This article focuses on Nepalese Journalism. 10 years ago, only a very tiny fraction of people knew how to use computers. Most of them could not afford to buy it. Today, the portion of people using computer has increased drastically. 10 years ago, one could count the printed version of newspapers and magazines. So, the majority of them published useful things mostly. Today, as the number of people using computer and internet increased, the number of news websites also increased. It is difficult to name all the news websites. Most of them are biased and based on personal opinions instead of facts based on evidences. This possess a danger of mass brain-washing. An average reader considers that whatever gets published in internet is true. Misusing this, any political party or organisation or any other individual is in a position to use it for their own profit without regarding societal consequences. Even the intellectual group spends a large amount of time reading news that is infact of no relevance.

Economically saying, this kind of activities is very bad for productivity and growth because people spend a share of their time reading these stuffs which can help them in no way. They could use this time in some productive activity. Lets take an example: You spend 3 hours a day going through such websites reading and commenting about it. It means that in a year, you spend 1095 hours. This means, 45.6 days in a year, you spend on reading such news. How did it help you ? Do you really need it ? Could you try to remember any four news from last year ? So, wasn't it a waste of time then ? I do not mean that you should not read any news. It is of course important as you should get up-to-date with what is going on in the world. But once you understand how the world functions, being updated makes less sense. If something really important happens, like the Ebola Outbreak, or Financial Crisis or a terrorist attack in New York, you will hear it from multiple people. So, you wont miss anything important. However, if you spend time on any topic for some time for example reading a book about Linear Algebra or Behavioral Psychology or Political Economy, you will hardly forget it. You can read regularly about what you are specializing in but you should question yourself, ' Is it really relevant to me what I am reading ? ' Exactly this is what I meant by Nepalese websites. I rarely find any website that is publishing news being neutral. All of them is full with negative publications which is very toxic to our mind. In the long term, this will install hate in our minds and at the end, we are much worse off.

Freedom of Press is important and press is an important organ of a functioning society. This is why Press Freedom is mostly secured by basic constitution in all democratic countries but this does not mean that everybody can publish and spread anything they wish to. For countries with diverse ethnic groups, it can cause a threat of violence which is already visible in Nepal. Some ethnic groups are bashing others for the ill policies of the past and there is really an online war going on between these groups. A normal person who follows such threads regularly will wake up one day with mind full of hate towards others and by this way, the perpetual peace might never come into existence. Understandings once broken can rarely be re-installed again.

Noone can limit the freedom of others but it should be in the mind of the individual how he/she wants to grow up, a mind full of hate and prejudice or taking the side of love.  

Stop Blaming Rich Countries

By: Bikal Dhungel 

It is not uncommon to hear poor countries blaming the rich countries of Europe and North America for their evils. Former colonies blame the colonialists for stealing their resources and dividing their nations without regarding the ethnic boundaries which is one of the main reasons of ethnic tensions today. However, we should also take note that, what was taken from colonies was only a tiny fraction of their economies. This is true that it was still not a good thing to do. But when we flip the coin and see things from other sides, we have to agree that without rich countries, the poor countries would be in a miserable situation today.

Take medicine/aspirin as an example. Aspirin was discovered by Felix Hoffmann in Germany. If rich countries had said that ' it was discovered at our place, so it will also remain at our place ', people in poor countries would continue to die at early age as they did in history. For most part of human history, humans lived between 20-30 years. Imagine the world without a Polio Vaccine, without Measles vaccine, without Antibiotics, without Anesthesia, without any treatment methods which were all discovered in western world and were transferred to the whole world. Jonas Salk, the guy who discovered Polio Vaccine decided not to patent it so that the most needy people especially in developing countries can afford it. By this way he saved millions of lives.

Take things like food production technology. Without this, people would starve to death. This level of population growth is not sustainable. Without Norman Borlaug's Green Revolution, much more people would die today due to hunger. Take education, without the education systems and materials like copies, pencils, large parts of developing world would have remained uneducated. Take Roads, without building technologies, one could never build a highway from Cairo to Cape Town. Take governance, without the good governing schemes that originated in the west, we would have more countries with conflicts. Without economical systems that took off after the book written by Adam Smith, ' Wealth of Nations' we would not have seen economic growth and prosperity.

And now think about iphones that make your life impossible without it these days. Be it of printing press, be it television, Radio, Washing Machine, Computer, Chemical Processing, Electricity, Smart Grid, Heating and Cooling Technology, Artificial Engineering, Information Technology, Nano Technology and 1000 others to name. They were all invented or discovered in "Western Countries". Being so dependent on their technologies and blaming them at the same time is self-contradictory. It however does not mean that developing countries have not contributed anything. But less. Still, when we talk about one side of the coin, it will be biased to end the story there. We should look the second part. A country or region cannot be fully good or fully bad, there are both good and bad people in the both side. 

Lets make it short, most of the discoveries that we have seen today was discovered in western countries in Europe, North America and East Asia. These discoveries have made our life easier and helped us in other forms. The western countries continue to be the innovators which is helping the whole world. So, the blame by developing countries that they are poor because the other is rich is baseless and false. Prosperity is not a zero-sum game which means one grows rich only by making other person poor. This is not true. You can become rich without making others poor. This view was only held by the communists. In communism, as everybody are kept equal, one can only grow rich by making other person poor. In other forms of governance it is not true. Everybody can become rich. Why some countries are rich and why some are poor is dealt in Development Economics but the aim of this article is to say that rich countries became rich due to their own hard work and ideas in the last few hundred years and their creativity has helped the whole world hence, poor countries should stop blaming rich countries for their misfortunes.  

Resources: Good or Bad for Poor Countries ?

By: Bikal Dhungel 

Having a huge reserve of resources implies the wealth of a country. The availability of Oil in the middle east and other parts of the world is the matter of envy for countries that don't have it. Middle Eastern nations like Saudi Arabia, Kuwait, Qatar etc have turned themselves from a desert to places with highest sky scrapers and enormous amount of wealth. Few other countries with rich natural resources have developed themselves to highest level. However, the question goes, is it good if a poor and undemocratic country is rich in resources ? Studies have shown otherwise. Countries in Africa and generally developing world, that are rich in natural resources are not the one where there is a stable economy and high human development level.

Actually it is the opposite. Countries that have resources are the ones that are unstable, violent and autocratic states. The Democratic Republic of Congo, which is rich in resources for example Coltan, a material that is used to make Laptop Computers is one of the most unstable countries in Africa. The struggle to get access to resources has left the country with deep ethnic conflict. This was first started by the French and Belgian colonialists in early twentieth century. When DRC gained independence, the colonialist type rule by president Mobutu Sese Seko was continued for 30 years. He did nothing at all to develop the country except enriching himself with the vast resources DRC had by selling it to western multinationals. To remain in power, Mr President did everything he can to suppress the people by preventing the Congolese to educate themselves and he did everything to impede economic growth. When a president of a neighboring country asked Mobutu for help when there was an uprising, he replied ' I told you not to build any roads, I have never built any roads in 30 years. If you build roads, then people to reach you to topple you down'.

Similarly, Somalia used to be a rich part with plenty of exotic fishes near its shores until the days when big western ships came and started to take their fishes. That drove small Somali fishermen out of business who eventually started being pirates. The business of being a pirate was so lucrative that if you are successful in hijacking a big ship, you can demand millions of dollars from western countries. In a poverty ridden place like Somalia where an average citizen struggles to survive, dreams of millions of dollars gave rise to gangs and thugs who involved in piracy. Well, this is a huge topic of discussion but one can take resources as the reason which gave rise to this mess.

What is happening in Niger Delta, Nigeria is nothing new for most of us. Nigeria has vast oil reserves and most of the western oil companies are operating there. Nigeria has second largest number of millionaires in Africa and is on the way to become largest. This can attributed to oil. The Nigerians on the other hand, like Somalis are struggling in their daily lives and the oil companies have also caused vast environmental disaster that has negative impacts on the lives of people living around Niger Delta. Oil has not done good in Nigeria. The list goes on and on when we take more examples.

However, we should also not forget that few countries have done better, for example Botswana. It has done better because it had a functioning democratic government that is capable to enforce law and order. Even if any country is democratic but not in a position to maintain law and order, and discovery of resources will give rise to groups, clans or gangs who will seek to take control over these resources which can cause violence or large scale conflicts. Countries like Norway, where Oil was discovered in mid twentieth century did extra-ordinarily well. Norwegian wealth is not only socially just i.e. Whole population get their share in the form of economic development or health care, they have also created a huge reserve from that income for a rainy day. When oil is finished, this reserve can continue helping them in the future.

Going back to the times of Colonization, also countries with more resources were colonized like India, Brazil or the United States. Unfortunately, most of the countries, even though they became independent from the colonialists, got even worse politicians from their own nations who continue to exploit them.

Conversely, everything else constant, countries with no natural resources are among the richest countries, like Germany, Switzerland, Denmark, Luxembourg, Singapore, South Korea and few other countries. Of course there are other factors that play an important role but these countries never had resources. Neither did they colonize other countries with an exception of Germany which had few colonies before World War I but had to give it to France or UK after Germany was defeated in World War I.

The aim of this article is to say that, when there is any discovery of resources in a poor or unstable country, it can be negative. It can give rise to more instability and harm the economic development. So, creating a functioning democracy with a capable justice system which is able to enforce law an order is a pre-requisite for a peaceful future.  

25 years of Unity

By: Bikal Dhungel 

Germany celebrates 25^th birthday of its unification. 25 years ago, the Berlin Wall was tore down and East and West Germany became one great nation.World War II left the country devastated, with ruins all over, broken families and immeasurable work waiting ahead. Those who remained, especially the women, who were later called 'Trümmerfrauen' rebuilt the broken country. Thanks to the Marshall Plan led by then American Secretary of State George Marshall who came up to the idea of re-building Europe, Germany also got a substantial amount of money which it used to reinstall the infra-structures it had before the war and few years after the war ended started to take-off its economy which grew at phenomenal rates. From early 1950s to late 1960s, the German economy grew at an average of 8% per year, which eventually made it the largest economy of Europe as it was in 1900. The economic policy of finance minister Ludwig Erhard, who later became the Chancellor will remain as one of the most successful stories of economic growth in human history. Today Germany has a solid situation with its economic foundation being a Social Market Economy which is growth promoting and at the same time socially just.

However, this country never had an easy time. When German Empire lost World War I, it lost all its colonies in Africa, a large part of its territories and had to pay reparation payments to the victors of World War I namely England and France. Then slowly, the newly formed Weimar Republic re-gained its power and became economically successful until the crisis next time. The crisis gave birth to radical leader called Adolf Hitler. Hitler became the Chancellor of Germany in 1933 and slowely installed a dictatorship and attacked Poland. It was the beginning for World War II. 80 million people lost their lives, the economic and social cost impossible to measure, Germany was again defeated. The Allied Powers, United States, Soviet Union, United Kingdom and France divided Germany into four parts where they would eventually control. The Soviet Union took eastern part of Germany whereas North, West and South was taken by others. The Americans wanted to install their own economic form of government, neo-liberal system whereas the Russians wanted Communism. In the 1950s, when people from the east immigrated to the East, the Soviets declared to build a Wall. Fearing Communism, immigration escalated and many businesses moved from east to west, two of the famous ones being Siemens and Audi who went to the state of Bavaria. The Wall was built in 1961. Families were separated, a nation was divided and the possibility of war has always been the issue which left people in both sides with a bad day sleep. People who tried to run away to the west by hot air ballon, with a ship or even digging underground holes in East Berlin were either arrested or killed. Many could make it to West Germany, many died on their way. Many who were against the state were detained and kept in prison. East Germany turned to become a totalitarian states as every other Communist state.

West Germany boomed, became one of the wealthiest countries in the world while East Germany remained deprived. The west was liberal democratic with highest degree of freedom whereas the east was a totalitarian country which limited the freedom of expression. At the same time when there was massive demonstrations in other parts of the Soviet Union, East Germany also saw a rise of uprisings starting from Leipzig to East Berlin, from Magdeburg to Rostock and from Dresden to Cottbus. And finally, the Berlin Wall was tore down. A nation had a flow of tears when people chanted ' We are one nation '. Finally, freedom and democracy won against dictatorship in the name of social justice. However, this 30 years left the country deeply divided. Today, after 25 years of unification, there is still substantial differences between East and West Germany. In the mid 90s, a solidarity tax called ' Solidaritätszuschlag ' was introduced which was aimed to finance rebuilding the east. Workers in both East and West had to pay extra 5.5% of their income as solidarity tax. It was thought that by the year 2020, the earnings and economical situation will equalize. However, 5 years before the deadline, there is still a huge difference between East and West Germany. People on eastern part earn 20% less in average than the west. This is still not the issue. One day, both parts of the same nation might be equal but the issue here is different. Freedom and Democracy will prevail. One cannot deny people the freedom of movement, freedom of expression and freedom to pursue their dreams. The youngsters of today could never feel how it is to live in a divided country by a wall, but a 15km long 'ballon stands' made in a form of wall was put in Berlin so that one sees how it was then. The ballons were set free this evening and once again, no wall, only freedom.

The German-German unification should send a signal in the whole world that division will indeed fail and unification will prevail. Also freedom will prevail and not wall, we should build bridges if we want to live in peace together.  

Books burning is killing

By: Bikal Dhungel 

" Wenn man Bücher verbrennt, man wird, am Ende, auch Menschen verbrennen " translated to english, When ones burns books, one will, in the end, burn people was once told by Heinrich Heine, a literary figure who was born in 1797 in Düsseldorf, Germany. 

Adolf Hitler, during his Nazi rule in Germany burned books that were un-German. The first book burning culture began in Berlin and soon after moved to other cities where mostly Jewish literature were burnt. The Nazis eventually killed 6 million Jews and a total of around 80 million civilians or military personnel died as a result of World War II. 

A book is a symbol of knowledge, education and enlightenment. If one does not hesitate to burn it, it might well be that the person also care less about human values. Book burning campaigns did not only took place in Nazi Germany but also in many other places from the hands of dictators who tend to see everybody who disagrees with them as a threat. Hence, burning books to install autocratic rule was a common culture. 

Nazis burned books and libraries in other countries as well. 

Chilean dictator Augusto Pinochet let books burn, Brazilian dictator Justino Alves let books burn that were subversive and the list goes on. Incidents of books burning for pure political reason happens often, for example the burning of Bible by Islamic fundamentalists or Quran by right wing extremists but burning in a mass scale as it was done in Nazi time and others, there is a strong correlation between books burning and mass murder.