Better Economics

By: Bikal Dhungel

There is an international movement to ban Economics. It was accused to be against the egalitarian principle as the main intention of economics is to serve the rich, which is not true. Economics is a way of thinking. It is a science that has a certain purpose to guide policy making, be it in health, finance, agriculture or international development. Some of the arguments that opponents of economics make are true for example when they say ' If economists knew better, how come we have frequent crisis ? How come they are unable to address inequality or poverty or sustainable development ?'. These are legitimate questions but financial crisis are not quite related to economics itself. It is the policy that is bad. When financial sector is so deregulated, which sometimes goes against the principle of economics, crisis will follow. This was what happened in the US. Similarly, when nation states solely finance their expenses with debt without a robust economical base, sooner or later, crisis will follow, a Greek story. Crisis elsewhere has some origin, it can be in public finance system, wealth concentration, undisciplined financial sector and so on. How to deal with such problems has been the main concentration nowadays.

There is also a wide outcry that the world is not fair because we have more inequality than ever, because the payment system is not ethical as the CEOs get paid over proportionally, student debt issue is serious, poverty is rampant worldwide, trade deals are not necessarily pro labours, lack of healthcare for everybody etc. Again these are genuine claims. Hence, the group of intellectuals have published a report called „ Rewriting the rules of American Economy: An agenda for growth and shared prosperity „. The proposed reforms can be generalised in many other advanced economies. The aim of this article is to summarize these proposals and they are:

• Regulate shadow banking
• Make the financial sector more transparent
  
• Improve competition for credit and debit card providors
  
• Impose stricter rules for corporations and companies that break the rules
  
• Improve governance in central banking
  
• Increase transparency in CEO payment
  
• Bring financial transaction tax for short term trading and incentivize long term investment
  
• Restore balanced intellectual property rights in order to encourage innovation and entrepreneurship
  
• Increase transparency in global trade agreements.
  
• Include environmental and labour protection in trade agreements
  
• Provide healthcare cost controlling mechanisms
  
• Raise top marginal rate of tax
  
• Increase tax on capital and dividend gains
  
• Reform monetary policy and target full employment
  
• More public investment for long term growth
  
• More investment in innovation
  
• Investment in public transportation to promote access to jobs and opportunity
  
• Stricter law enforcement for violators of labour standards
  
• Raise nationwide minimum wage
  
• Reform sick leave
  
• Subsidize child care benefits
  
• Promote pay equities
  
• Protect women's access to reproductive health services
  
• Increase access to higher education by relaxing financial burdens
  
• Introduce a universal healthcare for all
  
• Expand banking services
  
• Expand social security system
  

Policies to develop Nepal: A very brief summary

By: Bikal Dhungel

First there should be a political will to develop. Policy makers must want a prosperous nation. Then create a political foundation, which means ensuring political and macroeconomic stability and creating inclusive institutions that safeguard rule of the game. Why industrial revolution took place in England and not in Russia or South Africa or elsewhere is because of the Glorious Revolution of 1688 that installed inclusive institutions, created a political foundation which in turn gave incentives to people, as a result of which great minds like James Watt could launch their innovation that had enormous spill-over effects in the economy. Reform the education sector, import ideas and best practices from abroad but check for its feasibility in local culture before integrating it to the curriculum. The East Asian economic success could be attributed to its world class education system in the initial stage of growth. Social security is vital. Recognize who are real poor and guarantee the basic education and healthcare for them and their children. Don’t say you cannot afford, you can. Germany was much poorer than Nepal in terms of purchasing power parity when it introduced social security system. If you fall short of money, then save in security expenses and unnecessary benefits for the politicians. Liberalize the economy but not text book liberalisation but be strategic. Protect the industries and help them grow where you think there is a future. However, as soon as you recognize that they are not progressing, pull out the fund. For hi-tech sector, liberalize, guarantee tax free imports of technological goods. Liberalize financial sector and expand credit availability especially for the poor and small scale entrepreneurs however, create a separate institution to monitor financial institution because undisciplined financial institution can ruin the nation. See financial crisis of 2007/2008. You don’t need roads to every corner of the nation. Focus on cost-effectiveness. Incentivize rural dwellers to immigrate to urban areas and be prepared for that, which means design an intelligent city, green and sustainable. Otherwise, there will be slums everywhere. Reform the “sarbajanik kharid yin”, the current system is crap, it is impeding growth. Reform the “Tender” system. Don’t give the project to lowest bid. Advanced nations don’t give to the lowest bid. You should not be transparent in this matter. Ensure a high class public service. When a citizen should spend 5 days to get a job done in any public authority, you have a serious problem. Guarantee property rights, provide physical security and end all forms of discrimination on ethnic, sexual or religious ground. Once you think on these issues, growth will follow but remember that there are dozens of steps and they do not take place overnight. State should be in a position to enforce law. Justice system and central banking should remain without political influence and teach your citizen not to be blind followers of their history and culture. Culture that do not suit with modern scientific way of life based on humanity and international solidarity, your education system needs correction that teaches it. Finally, respect work, be selfless, praise creativity and hard work, and most importantly end nepotism. Imagine that the son of a good football player always gets a place in national team based on his father's performance and not the person who plays better. This is the same when capable people are barred from a particular job but incapable ones rule.