This time its for real: The Yes No of Environmental and Human Disaster

By: Bikal Dhungel 

Everything that scientists predict about the future of earth or environment, it is never 100% sure. No one can say for sure what will happen because a longer time frame is necessary. The life of this earth is between 4-6 billion years, but the humans are there only since 200,000 years. The latest remains of early humans were found in Australia and it is believed that they were from some 40,000 years ago. Only since 8000 years, there is a recorded history. The scientific judgement was only possible since 200 years. 200 years out of 6 billion is too little to predict something. Due to our short lifespan, there is a huge gap of information regarding the environmental science.

The environmental pollution that we see now is however real, because we see it. We see it in the form of acidification, in the form of cleared forests and the consequences of this can also be seen in the short term. But we do not know how this will impact in the long or very long term.

In the year 1798, Thomas Malthus came with an idea of human disaster which he wrote in his ' Essay on the principles of population ' that we are heading for a big disaster because of rapid population growth. Population was increasing geometrically but the food production was only growing arithmetically. Consequence of this will be a big human disaster, hunger, famine, poverty and many more. It sound logical that time because he based his essay on the current scenario of that time and predicted the future. Then on 19^th century, John Stuart Mill had a great news for the people, he claimed that humans were saved and the Malthusian disaster will not happen because of technological advance. Technology saved and Malthus was proved wrong, at least for a moment. Then again, Rudolf Clausius came with a new idea of the law of thermodynamics and entropy.

To understand this in an easiest way possible, lets see what this means. Thermo means heat and dynamic means power ( Oxford Dictionary ) hence we can say, thermodynamics means power of heat. The first law of thermodynamics tell that energy can neither be created nor be destroyed. Energy can only change forms. For example, you can burn woods, so you have changed solid into gas but the total amount of energy or matter remained in the universe, it doesnt go away as the universe is regarded as a closed system. The second law of thermodynamics , which is also called the law of entropy says, the amount or quantity of energy or matter remains same in the universe but the quality changes. In an example of wood, woods are regarded as good but when you burn it, it will be turned into gas, and the gas is not good, because it is bad for your health and cause problem in the atmosphere. So, the quality of the matter became worse. This is where entropy comes which means in a rough sense, the increase of unusable energy. As the wood was turned into gas, the gas is unusable or is lost somewhere in the universe. As it goes to ozone layer, there will be chaos and randomeness. This will create chaos on earth. Clausius says, when industries burn fossil fuels, it will go to the ozone layer and cause environmental consequences and the humans are doomed. He was supported by Rachel Carson, who wrote a book called 'Silent Spring', a super hit, that predicted very bad ecological consequences which might put the humans in trouble. In 1972, an economist , Dennis Meadows wrote another book ' Limits to Growth ' which again warned our way of life. He also said, if we dont radically change the way of our resource intense life, this will impede the economy due to scarce resources. Then came the famous 'Brundtland Report' on the name of Norwegian prime minister and special UN envoy Gro Harlem Brundtland. She came with the idea of Sustainable Development. SD gave hope to mankind. If we go further in a sustainable way, we can save the planet and ensure economic well being at the same time. But when Denis Meadow's update of 'Limits to Growth' came after 30 years, he wrote, 'we are still in trouble'. This was supplemented by Stern Review in 2006, which focused on Green House Gas Emission. Among others, Stern Review also mentioned that developing countries are increasing their share of GHG emission when they grow. Developing countries growth was mainly led by China and India. The major consequences of climate change will be faced by developing countries. So the Stern Review implied that, developing countries should also play their part to reduce GHG emission for better environment. Western Europe is committed to reduce GHG emission, there were many climate negotiations where many countries signed to reduce GHG emission. Additionally, through the technological advances and the growing investment in renewable energy, rich countries will reduce their GHG emission. Developing countries are less willing to sign any climate deals because they need growth to eradicate poverty. So, without efforts from developing countries, environment will surely deteriorate. We are saved if everybody work together, agree on climate measures but we are doomed if negotiations fail.

From the events mentioned above, we can say that somebody comes up with good news, and again bad news follow and again there are good news and again bad and good and bad and it continues like this. When I see the current status of the world, I think this is the bad time. The acidification process, desertification of millions of hecters of land, the population growth, toxification of rivers etc, I come to conclusion that humans are doomed, but I am also a firm believer in the power of technology to solve most of the crisis humans are facing. Though, technology has helped us to solve many problems, not all problems were solved. People die with various forms of cancer, there are diseases which have no treatment. So, it is also not sure that technology will save us.

The Brundtland Report advises the cooperation between many actors, the industrial sector, national and regional governments, aid organisations and international organisations. When everybody play their part, if there is investments in clean energies, if there are tough rules and regulations for dirty forms of energies, if countries cooperate and agree to solve the global problem together, we can at least be happy that, this time, again, we are saved. But if countries failed to do this, we are doomed. Once we are doomed, it might never be possible to reverse this and would perhaps bring an end of humans or end of life on this planet which we called home for a very long time. 

Impact of Economic Growth on Environment

By: Bikal Dhungel

This article is in some way similar to Environment-Poverty Nexus assuming that economic growth as a most important tool to eradicate poverty. But it will focus only on economic growth.

Let me repeat quickly about Environmental Kuznets Curve. EKC is an inverted U shaped curve that says, as countries grow, their level of environmental pollution will also grow. When it reaches a certain level, it comes down again, which means, environment will be better through better protection. For the latter, that growth is good is easy to agree despite evidences showing mixed results.

The basic idea behind this is that, growth results in technological advances and technology will solve all the problems. So, growth in the first stage will solve human problems of poverty and is also good for the environment. Hence, it is assumed that, pollution will be reduced automatically as people or countries grow rich. More money or wealth allows country to employ better technologies to protect environment and the affordability will be higher as well.

What is the condition of poor countries regarding environment today ? Poor countries simply dump the waste in the river or throw it on street. Plastics lie everywhere, there is no real water and sanitation facilities. Used water will be drained on the backyard or on the river directly. Proper waste management system simply lack and environment as well as human health suffer from negative externalities. This is because either the government cannot afford waste management systems, or they lack technology or they have other priorities. The origin of this problem is again poverty. Moreover, poor countries also use poor quality fuels inefficiently. Rich countries have a moral obligation to help through increased aid supply assuming aid will also be used for this purposes but when we look at the aid table, most aid goes to countries that are strategically important for rich countries or to countries where there are useful resources needed for the industries of rich countries. So, most aids are being used to build infrastructures to extract these resources. Least developed countries also get lower amount of aid. If aid is available, such problems mentioned above might be reduced.

So, what is growth ? Growth is the increase in income, increase in consumption of foods or calory intake, increase in physical and human capital, demand for more services etc. When we increase food consumption or calory intake, more production is required. When billions of people demand more food, production facilities should be expanded. Food production is energy consuming. Food itself also require other resources, like water. Upon demand of more Beef for example, large quantity of water is necessary, so, water sources need to be extracted. At last, there will be more CO2 emission and there will be competition for use of natural resources like water. If demand continue to grow and for some reason, production cannot increase, it will raise the prices. To keep the price stable, production should rise with demand. On the other hand, growing population and growing wealth will also lead to the demand of material goods, like Computers, Television, Tables, Beds, Chairs, Carpets, Boxes, Cloths etc which need other resources to be a finished goods. So, the growth will again lead to additional environmental goods demand. For the supply of human capital, people demand more schools, colleges, training centers, buildings etc. They , like other goods also require resources to come into existence. Buildings need bricks, cement, wood, iron and many more. In the same way, we can argue that, as wealth grows, welfare increases but at the cost of more resource use and environmental damage. But is it then good ? Should we forget about growth and protect the environment or we should first ignore the environment and concentrate on growth and take so called ' grow and clean up later ' approach ? Which one is morally good ?

Well, there are both advantages as well as disadvantages of both. When we let the current situation to remain like this, first of all, poor countries will continue dumping wastes in the river and someday the waste will be so huge that it will damage the environment which will affect the whole world. This damage is going to be there very soon because in only next 50 years, we will have 3 billion people additionally in developing countries. Not only their waste will increase, but also their demand of firewood. Forests will be cleared off for building human settlements. Growing population but poor economic condition and environmental vulnerability will cause emigration from poor countries towards rich countries. The story can be extended further but I will stop here. The message is, we cannot let the situation be like this. But as the previous scenario explained, letting poor countries grow will cause negative impact on the environment. Yes, of course, but what evidence shows is, as there is economic growth, population growth will decrease in the future for many reasons. Additionally, though they pollute the environment or demand higher environmental goods, in the long term, this trend will reverse. There will be better environmental protection laws, people will move towards organic foods, reforestation will increase. Better waste management system will be there, use of plastic will decrease, people use other energy for cooking purposes and not firewood and there will be other improvements. Moreover, this will also avoid refugee influx to rich countries and rich countries will profit by expanding their markets to today's poor countries.

But this is only an ideal scenario. If we manage the process of growth better, there will be positive affects on environment but if we dont, environment will suffer. Growth should also reach to a certain level (the turning point of kuznets curve) to be friendly towards the environment. When growth sticks to a point where it doesnt grow further and also wont come down, people will continue polluting the environment without any perspective of reaching the cleaning phase. So, an ideal solution is of course, rich countries transferring technology already now and support more during the process of growth and post growth period. The post growth period should also de-materialize. There should be strict environmental regulations, use of harmful materials should be restricted and other policies should be brought into existence. As the porter hypothesis tells, strict environmental regulations will induce efficiency and encourage innovations. This is true in present cases in some European countries. Strict regulations caused companies to increase their research expenditures for fuel efficient cars or in renewable energy systems. Looking at the financial side, only when economy grows, government receive higher incomes in the form of taxes which they can invest in research and technology. Without growth, funding should come from outside, which might not be sustainable. It is also morally wrong to say that developing countries should not grow. They have a right to human life standards. They should also be able to enjoy universal education and healthcare services.

To conclude, economic growth will cause environmental damage in initial phase. Then there will be environmental protection. When a country becomes technologically advance, there will also be investment in climate friendly technologies which will help to create a better climate and at last, everybody will enjoy a higher life standard and will maintain a clean environment and this will be called sustainable development.  

Environment-Poverty Nexus

By: Bikal Dhungel 

The Earth is our home. It is actually more than a home because it not only gives us a place to stay but also provides us with everything we need to survive. It takes care of us. So, we should also take care of it. It has become a home of over 7 billion people and will accommodate 3 billion more in the next 50 years. For the most part of our existence, the human existence, population remained the same or it grew so slowly that there was no such burden placed on earth which put its own survival in danger. But when we developed in material well-being which we also call industrialization, population grew rapidly. This growth was mostly centered on industrialized countries. As the economy and population grew, enormous pressure on planet earth was exercised which led to environmental degradation. It is not sure if this growth could be achieved without such pressure on earth because earth provides us with resources like the forests that were vital for growth. But for sure, environmental pollution sky-rocketed, CO2 emission increased heavily and resources were depleted. In the course of 200 years, industrialized countries acquired so much wealth that they are today 40 times richer that the poorest countries. Both of them were roughly equal prior to industrialization. A second lot of countries started to grow after the 1950s. They too achieved economic growth so rapidly that income has increased by more than 10 times from 1950s to 2015. However, about 3 billion people on earth are still poor, in a sense that they earn less than $2 a day. 1 billion people earn less than $1 a day. They want to grow too. But now the mainstream media is filled with news like 'they cant have that', 'that is not sustainable', 'earth cannot accommodate so many people with that high living standards' etc. There are also many scholarly articles claiming that the poor cant grow the same way as today's rich countries did. And there are counter arguments claiming it not to be true.

Evidence shows that, economic growth was indeed good. For rich countries anyway but even if we look at poor countries, average per capita income grew from about $900 in 1975 to $1350 in the year 2000. Infant mortality rate decreased, literacy rate increased, healthcare access to the poorest increased, share of women in schools and educational institutions increased and there were other positive development. This success can be attributed to economic growth. But there is other side of the story too. Air pollution level is higher than ever, fresh water sources were depleted, massive soil degradation, deforestation, loss of bio-diversity among others. And of course, there are other economical challenges like inequality and poverty.

So, the question here is, should the poor 2 billion of today and other 3 billion who will be born in developing countries be allowed to grow ? Wouldnt they put more burden on environment ? Wouldnt there be more environmental degradation ? Well, it can be. But for that, is it morally good to let poverty remain like this ? Is it the poor who harm the environment or the rich ? Will poverty reduction make the environment better or worse ? The answer is, nobody knows. But there are evidences that poverty causes some environmental degradation, for example when the poor use firewood for cooking, they cut trees. On the other hand, economic growth generates demand of wooden furniture and more trees need to be cut as well. We have to analyze, which aspect of poverty cause environmental degradation. Scholars agree on population growth which is the catalyst of poverty-led degradation, either in terms of more demand of woods or farmlands that require clearing forests. Farmland is not available everywhere. So clearing forests sometimes is the only option available to ensure adequate food supply through agriculture.

Arguments can go on further but we have to see the evidences. There is no scarcity of journal articles that poverty reduction has caused environmental damage. China, the most successful story of poverty reduction where 700 million people were brought up from poverty in just 40 years, environmental damage was rampant. Tens of thousands of hecters of land have been turned to deserts, forests were cleared off for creative destruction and CO2 emission is immeasurable. There are also frequent floods, landslides and other natural disasters in China. On the other hand, no person should die of hunger, as they did under Mao's rule. Here, environment was damaged but human welfare improved. Recently, after the unbearable air pollution in major cities, China brought tough environmental measures. It was seen as the turning point of Environmental Kuznets Curve. Other countries share similar stories. On the cost of environment, human welfare and poverty reduction was achieved.

When we see in the amazon rain forests and some other areas on earth, the best protected forests are those where the indigenous people live, who are also among the poorest in the world. They are the protectors of the environment. Poor people are believed to be the best environmental managers because they rely directly in forests and nature for their survival. There are also enough scholarly journals which prove that, the Willingness to Pay for better environment is high among the poor. It is same in South America, South Asia and Sub Saharan Africa. However, even the Willingness to Pay for better environment is higher in rich countries, this has decreased in the last few decades. Probably because it has arrived in the mainstream media and lots of things have been done for the environment and people in rich countries might think that they are already doing enough for the environment.

To conclude, both environment and poverty are the challenges we face today. My personal opinion is that poverty should be eradicated first. Poverty is the challenge of today whereas environment is also today but mostly tomorrow. Only after the humans are well off, there is likelihood of technological advances that will help us to better protect the environment. Although, Kuznets Curve has not been proved correct everywhere, at least in some advanced countries we can see that the demand for better environment grew with economic growth and more technologies came into existence which has reduced the pollution rapidly. When developing countries focus on poverty reduction by taking any measure and developed countries help them with technology transfer to leap frog to sustainability, they can achieve both, economic growth and environmental protection. But as I already mentioned, if there is no technology transfer, it will not be a reality and at last all are worse off because though countries are different, the earth is same. Pollution caused by one country will affect the other. It is also necessary to make paths for technology transfer. Technology transfer doesnt work this way, that rich countries tell poor countries, ' here, I have this technology, take this and use this' . No, it is possible though, trade, foreign direct investment, educational transfers and of course mutual cooperation. If they fail to achieve this, nothing will happen. When they should keep in mind is that, either they do it, either they cooperate or dig two graves at the same time.  

Adaptation or Mitigation

By: Bikal Dhungel 

Climate Change is real, it is visible everywhere and we have no option but to take action either to adapt with Climate Change or mitigate it. Adaptation means learning to cope with it, learning to live with it and mitigating means reducing the impact of this. Both of them are not simple and easy. Both costs a lot of money and without a global cooperation, it is impossible to reduce the risk of climate change. However, it is everything but an easy task to agree on issues related to Climate Change. All the climate negotiations in the last years and decades have failed to agree on 'common but differentiated responsibility'. For most of the developed countries, especially Western Europe, there is a strong willingness to pay for climate change, however, the US is not so flexible. Developing countries on the other hand do not want to compromise their economic growth for climate. They argue that the current level of CO2 emission was caused by rich countries in the previous two centuries, not by them and that is why, they do not want to bear the cost and not at the cost of their growth. Growth is vitally necessary for poor countries to eradicate extreme poverty, to provide universal education and healthcare and to achieve a certain level life standard. However, poor countries are also the ones who will be affected over-proportionally by the climate change. So, they cannot simply walk away from the issue. Both developed and developing countries should play their part. It has also been largely debated either least developed countries should adopt the path of growth of rich countries or 'leap-frog' to sustainability. The latter is only possible if there is a technology transfer from indusrial countries because least developed countries do not have climate friendly technologies. How this can be achieved is being discussed but another issue within this issue is either to focus on adaptation or mitigation and which one is more cost-effective. Public intellectuals like Bjorn Lomborg of Copenhagen Consensus Center call for adapting to climate change putting the arguments forward like pouring billions of dollars every year for mitigation purposes in the next few decades would postpone the climate change for only few days and either this spending is meaningful or we should use the money in things that are more important today namely poverty, health or education. Opponents are not convinced by him. They point that mitigation should start sooner rather than later and the international community should not save in climate fund to solve the problem of poverty and malnutrition. They can save in security expenditures like in military, nuclear weapons and long range missiles. There is no problem of finance, there is only a problem of spending money in a right way. Both of them are right. Therefore, to meet an agreement, we should compare the pros and cons of both measures.

Before we embark to compare both, it is important to mention areas where adaptation and mitigation can be focused. In this article, for adaptation we will look the following areas: Water Agriculture, Infrastructure/settlement, Health, Energy, Transport and Tourism. For mitigation, it is important to look at following areas: Energy Supply, Transport, Industries, Buildings, Agriculture, Forests and Waste.

Adaptation:

• Water: Water is life. We not only need water for drinking purposes but also for irrigation and other purposes. There should be water and storation technologies so that even in times where there is no rainfall, we can use the stored water for irrigation. Rainwater harvesting is another option. National governments should bring policies to manage water resources better. Physical barriers should be dealt sustainably.
• Agriculture: It is necessary to adjust with planting dates. The data about the weather should be collected in regular basis and this would help to determine planting and harvesting crops. Moreover, crop relocation should be considered because some kind of crops might not be suitable for the new temperature. Technological and informational constraints might be a challenge.
• Infrastructures/settlement: More infrastructures are needed for more people. Small Island nations might go under water soon. The people from there needs to be relocated somewhere.More infrastructures are needed, more land should be acquired and for that, new land use policies should be brought. The challenge here is again the availability of land where people can be relocated. It is likely that the new land will be a part of a different country. It is being debated about the place where Climate Refugees can be relocated.
• Health: Higher temperature might bring diseases that do not exist today or the prevalence of existing diseases will increase. Changes in other areas like Water will have impact on health. So, in order to adapt with health issues, other areas should also be taken into consideration. Public Health has more role to play.
• Tourism: Areas where lower number of tourists used to go due to cold weather before, can be a new tourist attraction. This can be northern Scandinavian or Russia. Areas where people used to go to enjoy the beach and sun can no longer be there. Beaches will be automatically relocated. So, new infrastructures should be built. Challenges remain in financing.
• Transport: Transportation should be designed according to the conditions. When too much rain or icefall can stop bus services or airports, this will cause turbulences in daily life. However, technological barriers remain.
• Energy: Rainfalls can make the electricity polls to fall putting risks in human and animal lives. Putting electricity transmission underground can be a good adaptation techniques. Investments should be done in renewable technologies. Total energy consumption should be reduced. However, financial and technological constraints remain because renewable energy is costly and technology might not be there.

The following points should be focused while mitigating the impact of climate change.

Mitigation

• Energy: Renewable energy is the only option. Coal will continue polluting the climate. Hydropower, Solar, Wind, Geothermal and Bioenergy should be prioritized. There should also be some action in policy level for example there should be higher taxes for dirty energies and subsidies for clean energy.
• Transport: Energy intensive transportation should loose importance and fuel-efficient technologies should be supported. Cycling, use of public transportation etc should be used instead of private cars for everybody.
• Building: The most CO2 emission are caused by residential buildings. Reducing household energy consumption and providing efficient forms of energy can reduce the emission significantly.
• Industries: Like in household buildings, industries should also be encouraged and incentivized to use efficient technologies which will reduce energy use and cause lower emission.
• Agriculture: Crops need large amount of water but the water might not be available all the time due to the lack of rainfall or destroyed irrigation system. So, there should be research on how to grow crops using less water. Processing and Packaging is also energy intensive. So, again, energy efficiency is required here.

I will stop here because my aim is not to clearify which is better, rather just to give an introduction about where and how mitigation and adaptation should be placed to. Having written this, it is important to note that, both adaptation and mitigation makes less sense in some aspect because the CO2 is already there in the atmosphere and it will remain for decades long. It will continue changing the climate. So, adapting alone will not help as the patterns might be different every year. It might be unpredictable. So, both mitigation and adaptation should be there in tandem. Green House Gas emissions should be reduced and at the same time, adaptation techniques should gain importance. If we only focus on adaptation, countries and industries will be motivated to emit further by saying that nomatter how the climate might react, we wil adapt. We might face a situation where it will not be possible to adapt. There are limitation on adaptation. It can be limitation of technology, limitation on other things. Until we are able to reduce the warming up to natural level, we will face impacts and it might take a short time to destroy human existence. Nature is powerful. It has wiped off countries, civilizations and empires. We cannot underestimate the power of nature and the universe. Either we play with the rule or we are out of the game.

Knowledge as Aid

By: Bikal Dhungel

Development Aid is the most controversial among all forms of development cooperation. It has many drawbacks and dozens of scholars are providing evidences of its failure and problems it has caused. May be it is money that corrupt people. Argument goes, Development Aid is the money given by poor people of rich countries to the rich people of poor countries. Others claim that aid mostly goes to countries that are strategically important and only a tiny amount goes to countries that really need support. Controversies remain, and aid institutions are questioning their own policies if money alone can solve the problem of poverty. When James Wolfensohn became the president of the World Bank, he started to initiate the campaign of 'Knowledge as Aid' and attempted to make the World Bank itself as a Knowledge Bank.

It is knowledge that empower people. It is the source of all forms of progress. The World Development Report of 1998/1999 starts with the following sentence: ' Knowledge is like lights, weightless and intangible, it can travel the world, enlightening the lives of people everywhere'. Knowledge about how to treat any disease saves human lives, knowledge about how to do farming can provide food to the people, knowledge about technologies cause technological progress and at the end, knowledge will increase the welfare of the people. Knowledge about the worldly problems will help to solve them. The difference between rich and poor countries is not only the amount of capital they possesses but also the level of knowledge they have. The knowledge gap between rich and poor countries is huge. 300 years ago when industrialization began, the world was less connected than today. Developments in one part of the world did not spread. As a result, the technological know how did not spread much from Europe. It spread only to few geographical boundaries and across the ocean when Europeans emigrated to Australia or the Americas. Today, the world is bit different. We have information and communication technology that reduced the distances. What happened in Australia immediately arrives to Europe through communication mediums. Similarly, knowledge acquired in the US can easily reach India. So, there is a golden opportunity to develop, to narrow the North-South gap. This will contribute to economic growth and human well-being.

Almost all of knowledge production takes place in rich countries because they also invest heavily in research. Poor countries are free riders. If they have appropriate mechanisms, they can free ride and profit from the efforts of rich countries. But how can they do this best ? How can they make use of the knowledge created in rich countries for their good ? For this, first of all, some fundamental things should be done, that is, ensure that everybody in their countries are educated by introducing universal education. They should make sure that no one is discriminated in learning. They should build life long learning schemes. Only then they can make use of knowledge from abroad. For example, if a housewife in rural Nepal is able to read English and has a computer with internet facility, she can read about Child Nutrition for her children. She can read about the precautionary methods of diseases, she can also learn about the mushroom farming at home with low costs. Students can get online degrees from other countries, policy makers can read the publications to make better policies, entrepreneurs can learn about technologies abroad etc.

How can governments play their part ? Governments should first ensure that they are open enough to the rest of the world. They should do public investment in open learning. They should monitor the learning and make sure that they are welfare maximizing. If there are biased information, wrong information which are in circulation, they should also prohibit these information. Countries that achieved high economic growth had interventionist states. Sometimes there was too much intervention but this was for good. Basically, it was knowledge that drove their growth. In all these countries, there was scarcity of land. Land is important for economic growth but even without it, the progress in knowledge based economy was able to overcome this constraint.

Very important thing however is, the knowledge that was acquired in advanced countries cannot be copied one to one in poor countries. It might not suit well. Taking an example of Green Revolution, the technology discovered by Norman Borlaug has perhaps saved the mankind from Malthus's theory. He predicted terrible human disaster as population was growing geometrically and land was limited. Borlaug's technology which enabled higher yield ensured that people have enough to eat. The technology spread quickly to the rest of the world. However, it could not be used immediately in other parts. First the local condition had to be studied, the local climate had to be studied. If it will suit in that particular region had to be studied in detail before using Green Technology there. There were also places where Green Technology didnt work may be because of different climatic conditions or something else. So, the lesson from here is, take the knowledge acquired in other countries, check how you should refine it again to use in local context, and then only imply it. By this way, any kind of risk could be managed well.

To conclude, knowledge is important, probably the most important driving force of economic growth. When a country closes itself to the rest of the world, it will not enjoy the free flow of knowledge. If a country aims to develop, it should open up, it should get ready to learn. The duty of a government is to ensure that its citizen learn in a best way possible. It should provide the basic infrastructure required for that. International organisations should help governments who are unable to achieve this in their own. Donor countries should rethink their aid policies. Either they should pump money to developing countries that didnt show any significant outcome in the last few decades or they should stop giving money and give knowledge instead. Either they should focus on providing infrastructures like helping to build telecommunication lines or provide computers and send experts in every sector instead of giving money and letting them do things themselves. Of course there is no evidence that knowledge based aid will be effective as it has not been implemented yet but the recent development in the world shows that information technology can indeed change the world for better. The mobile phones have empowered women, it has educated the people in most rural parts, it continues to change things. Knowledge aid will at least not harm poor countries and at least donors will not loose their money. They have the knowledge anyway and if others in poor countries can make better use of it, it can only be a win-win situation.  

But How Did They Develop ?

By: Bikal Dhungel

These days, politicians and public intellectuals give examples of Singapore, Taiwan, Malaysia, South Korea, Botswana etc to tell that they have achieved solid economic development just in one generation. South Korea, as poor as Mozambique in 1950s is now a high income country and a large exporter of electronic goods. These few countries are ideals, a proof that market economy has won against other models. However, only few give hints about what they actually did to make this possible. There are several books and papers related to it but even they are criticized to be biased by other scholars. Opinions might differ but the aim of this article is only to highlight some of the very basic policies that were taken.

• They lowered controls on foreign trade
  
• Market entry barriers were reduced or removed for private firms
  
• Privatize state firms and ensure a fair competition.
  
• Remove all structural constraints for the firms and help them integrate with the global economy.
  
• As private firms do not have capacity to get all information, the state took the role to collect information. This was normally done by central bureau of statistics or other research institution.
  
• Many such institutions were created to help the economy.
  
• Governments gave their best to maintain macroeconomic stability.
  
• Saving rate was increased or high saving was encouraged. Sometimes even by sacrificing the consumption of today for the sake of tomorrow.
  
• Resource allocation was fully left to the market to regulate.
  
• Knowledge was acquired internationally, they were refined with the local context and used locally.
  
• They followed the rule of comparative advantage, which means, imported what the rest of the world knew better or could do better. However, some countries supported home firms in the first phase by import restriction or by using other tools so that they can learn and go to gain efficiency.
  
• Credible and capable government in all level was installed.
  
• Strategic Integration if not fully open to trade
  
• Send the people to study in well known universities with government scholarships but force them to return and do something for the home country.
  
• Bring experts of each sector to rule that sector but closely monitor them.
  
• Ensure the stability of financial sector and prohibit the capital outflow.
  
• Bring an intelligent technology policy, financial policy, competition policy and accounting standards.
  
• Build infrastructures especially transportation system and focus first on strategically important regions or regions where there are reserves of natural resources.
  
• Keep the agriculture sector but make it efficient.
  
• Promote small and middle scale enterprises.
  

These were some policies that all high-growth countries shared. An important thing is also that no country were a democracy, they were all some sort of dictatorships. It is time consuming in a democracy to to pass law and implement it. For least developed countries, freedom and democracy also get misused. Singapore's Lee Kuan Yew even jailed journalists, many people who opposed his styles and brought harsh rules for example a fine for spitting in the public, a ban on chewing gum, compulsory flush in public toilets etc. Malaysia's Mahathir Mohammad was blamed for too much nepotism i.e. Major sectors were controlled by people who were near to him.But his argument was, let people make profit, and even they are only concentrated on profits, at the end of the day, this will also help the society. Lee Kuan Yew ignored the ideas of Human Rights, though he was well aware of it, he was a Cambridge educated man. His arguments were again, to gain something, you have to sacrifice something or give up something. To gain economic growth, he had to give up personal freedom and sometimes had to intervene in people's private life. But it has been proved that he did it for the sake of Singapore, for the good of future generation, his children and grand children. When we see the example of China today, China is harsh too.When it wants to build a road, it builds and noone will block the process of building. In other countries where freedom and democracy predominates, this is difficult. Exactly due to this reason, the growth of India has been slower than that of China. A huge discussion sparks from here if democracy is good for least developed countries. No doubt that dictatorship is worse but how about moral dictatorship like that of Lee Kuan Yew ?

In addition to this, education policy, and health policy were reformed first. The chief of government also remained the chief of economy and health ministry. These two things are most important. If the health of nation is poor, it can never build a nation. So, health is important. Then when education comes in, it will give a huge boost to human development. A highly qualified productive workforce is the backbone of economic growth.

These were few things done by countries that achieved rapid development. We have to bear in mind that this might not be the best medicine for other countries. Policies cannot simply be copied and pasted. Even though it worked in some countries, there is no guarantee that it will work everywhere. Differences in culture, differences in environment and differences in many other factors will determine. Best practices should be adopted from the whole world but there should be a feasibility check every time before mistakes are done. A country is not a lab. One cannot do an experiment in it. But learning from others mistakes and others success is a key factor.  

Deposit Insurance and Financial Sector Regulation

By: Bikal Dhungel 

Deposit Insurance simply means, when you deposit a certain amount of money in your bank and the bank goes bankrupt, either an external institution or the government pays back your deposit to you. That means, you are insured and you should not worry even if the bank is having problems. In times of Crisis, it is important. Imagine, when you know that there is a crisis coming and tomorrow you run to the Bank and withdraw all your money and if many thousand people like you do the same, the bank will go bankrupt sooner than later. This will have serious impact in the economy and economic crisis even worsens. Banks should have liquidity. In other words, deposit insurance is a trust. Your trust on your bank that it will not go away.

Banks are integral part of an economy. When banks are having problems, it will shake the economy as a whole depending on how big the bank is. Today, many people do not have trust in their banks. So, they keep money at home, may be inside a pillow or hide it somewhere. This has many drawbacks. The money could either be stolen or loose value in the presence of inflation or the income with interest payment will simply be lost. In the absence of deposit insurance, bank run outs will become frequent. You can see the situation of the US during the Great Depression of 1929. At that time, there was no deposit insurance. So, when the people knew that banks are having problems, they immediately ran to their banks and took their money out. This made the Depression worse. Only after the US introduced deposit insurance in 1930, bank run outs decreased or it became very rare.

Recently, during the crisis of 2007/2008, the German chancellor guaranteed the deposits of people up to Euro 100,000 by the government, which, as a result avoided any problems in the banking sector. Many other countries brought similar policies. This also shows that, even banks might be private, a close supervision by the government is required in order to ensure financial stability. If banks act irresponsibly, for example by keeping the bonus in good times and letting itself rescued by the governments in hard times, can impact the bigger public. So, supervision would hinder the banks to involve in risky activities. However, how the insurance should be managed in another issue of discussion. If the rule first let the bank to bear the cost themselves for example by putting some money aside which was earned in good times to cover the insurance, it will be fair because then the tax payers should not bear the burden alone in difficult times. This will also give incentive to the banks to be careful about their lending, to increase their deposit lending ratio, and to manage the risk properly. As a whole, it will create financial discipline.

The rule of a market economy is, Crisis will definitely come sooner or later. Crisis is a part of market economy. There is no country that never had economic crisis. But if the government and financial sector are better prepared for any such crisis, they can mitigate the consequences together and both of them as well as the society are better off.  

Reforming Nepal's Education Sector

By: Bikal Dhungel

This article deals about the education sector of Nepal. The first part will give some information about the current status of education sector and the second part will give recommendation about how to reform to improve the educational outcome in general.

Nepal is one of the least developed countries in the world with quasi non-performing education sector. The government has failed to play its part to provide quality education for all. As a result, private sector has emerged and growing continually which can fully replace the public education sooner or later. The education system of Nepal is as follows. Private schools start with Nursery, where 3 or 4 years old join and spend in total of 3 years before going to the first grade. There is a state examination at grade 10 called the SLC and after that, three specialization schemes are available where the students choose between Science, Commerce or Arts. After two years of education, students can choose to go to the University for Bachelors Degree. In public or government schools, it is slightly different. Student directly join the first grade, and do until 10^th grade. After that, students can choose the three schemes like the pupils in private schools. In government school pupils can choose between Mathematics or other subjects in 8^th grade.

There are about 80% public schools and 20% private schools in Nepal. Almost all private schools are located in cities. Talking about quality, even though the government school teachers get training as an educator, their performance is too poor in terms of teaching than in private schools. Very few private school teachers were trained. Moreover, public school teachers enjoy other facilities like fixed job, sick allowances, pension scheme etc whereas private ones do not. Still, the absenteeism is very high in public schools, about 20% in a year. In private, this is significantly lower. Teachers fear their job, so avoiding unnecessary absenteeism, providing bad teaching is less likely. Making it short, despite all the facility packages for teachers, quality in public schools are too bad whereas in private, they are not. One reason of this bad quality can be explained by the organisation of teaching and school policy. Public schools have fewer classes, they have no homework, and exams are held at the end of the year. Private schools have lots of classes, if a teacher is absent, classes can be held on the weekends, students get home works and the secondary levels even projects and there are three exams per year so that the school is more up to date about the students performance. Weak student get support either by the school or the parents can afford a private tuition. As a result, the perform better. Public school students come from poor family who do not take tuition and as the family themselves are less education, they cannot get support from the family.

The outcome of the education system can be seen in SLC result. Less than half of the attendees pass the Iron Gate. For number of years, the actual percentage remained between 35 to 45%. Students should score 32 out of 100 to pass. An informal rule is, if student score up to 27, 5 marks could just be granted. This implies, more than half of the students cannot even score 27% of the grade. This figure is way too poor. This shows the failure of teaching. Only about 30% students from public schools pass SLC. Most of them with very low marks. Private schools have higher pass percentage but given the facilities provided, the result is still not convincing. So, what is the consequences of this outcome ? The consequences are very serious. First, if more than half of all children every year are wasted, if their talents are wasted, this is a huge loss for the country itself. Second, when the children from rich families do better in schools, have better opportunities in the future, and the children of the poor continue failing, they will have a gloomy future, they will never come out of poverty trap and the inequality between the rich and poor will continue to remain. Further consequence of this is poverty. This can even invite violent conflict because the poor will always see themselves discriminated and the state is not doing enough to address their problem. Nepal has a huge population growth. Most growth is happening in poor families. Without better schooling and better perspectives for the future, the are forced to go to other countries in search of employment without regarding their health and other worse effects.

Before we go to second section, let is talk briefly about another problem, which is, 11^th and 12^th grade. Almost everywhere in the developed world, school doesnt finish at 10^th grade. Developed countries teach upto 12 or 13^th grade and only after that, the University will start. In Nepal school ends at 10 and as it is called Iron Gate and is seen as an achievement for students passing this Gate, students have a feeling of freedom after that. They think, they have grown up and use their freedom to do things that they were not allowed to do before. Most of the students do not perform well in 11^th or 12^th grade like in the school upto 10^th grade. Second aspect of this is the growing business of private colleges. They charge a lot of money, unnecessary fees and other extra costs. This mostly does not represent the facility they provide. This again is differed between Arts, Commerce and Science. The business of colleges has grown so massively that, the admission fee in an average college is more than 5 times the admission fee in an average school.

So, what can be done to Nepalese schools and education system ?

There are many aspects that need improvements.

1. Financing Education : A report by the Ministry of Education wrote that, the average cost per student in a month is about 3000 rupees for the government in public schools. In private schools on the other hand, it was only about 1200 rupees. This is the cost for the school, not the school fees. School fees are higher because schools also generate profit from this. But from this figure we can say that, if the government abolish all the public schools, pay the tuition fees of the students in private schools, the government is better off, and the students will also be better off because they can get quality education and the education outcome will definitely improve. This is a radical but an appropriate suggestion: Abolish all government schools.
2. Make schools 12 years: School should not stop at 10^th grade. It should continue until 12^th so that the greedy private businesses of high education cannot rob the public. Secondly, as the education simply continue, 11^th and 12^th grade can be organized more flexibly by providing more choices of subject, technical or non-technical subjects.
3. Exit Scheme for those interested in vocational training: students who want to continue the education further in the university can top up to 11^th grade, those who are for vocational training should have an opportunity to quit and participate in training. This gives more flexibility and the economy will have needed technical experts.
4. Perform the exam in regional basis: The SLC exams should not be held nationally at least not in the first few years. The curriculum should also suit with the geographic or cultural factors of the given area. Moreover, as the quality of education is not same everywhere, the best way of judging the student is to hold regional exams. Even if government schools are to remain, SLC exams should be held separately between government and private schools.
5. Introducing a Teaching Licence: Apart from the specialty of teachers in their field, there should be a compulsory training as an educator for the teachers. This training should include Child Psychology, Arts of Persuasion, Creative Works etc.
6. Independent Thinking Scheme: Education is not merely a collection of facts. Students should not be forced to learn things by heart, which they forget at some point anyway. Students should be taught the fundamentals, then independent thinking should be promoted. Things like group discussion, debates should also include so that the students learn to think of their own instead of repeating the facts.
7. Regular Breaks in Schools: Our mind has limited capacity. It cannot absorb facts for unlimited time. It needs break. After every 2 classes, at least a 10-15 minutes break should be there. Schools in developed countries have this scheme which they call study sessions.
8. Make water available in all classes: This has been ignored mostly but one important thing we should not forget is, water is a scarce good in developing countries like Nepal. Schools in Kathmandu mostly dont have clean water taps. Either students bring water from home, or they dont drink the whole day. Students in secondary level dont bring water. But they forget that not drinking water for a long day reduces their concentration and can even have negative impact on their health. Make water compulsory in schools.
9. Reforming Curriculum: Nepalese Curriculum is biased. They include exaggerated history which is nowhere to be found except in these books. This should change. There should be strict control on who writes the book, and the contents should be checked thoroughly. Either there should be same contents in all school is another matter of discussion but the aim of schools should not be to make everybody same but to motivate them to be themselves, have their own ideas etc.
10. Establish Teacher-Guardian Contact : Every month, there should be an hour or two meeting between the guardians and class teachers where they discuss the ongoing issues. In Germany, there is this scheme. It is called 'Parents Hour' where parents of certain students meet with the teacher and talk about how to deal with the given issue if there is something that needs to be changed. This improves school performance drastically.
11. Grading System: Grading should not only be based on the exams. It should also include class participation, performed homework, discussions and also exams.
12. Updated way of Teaching: Especially in the university level, courses should be offered according to the demand of time. Subjects that do not represent the growing demand of the economy should be reformed. For example, large fraction of people who came from government schools study Sociology because it is mostly the only available subject in government colleges. Subject offerings should be diverse.
13. Best Practices from Elsewhere: Today's age is a scientific age. More and more research are being done in education sector. When there is a proven way of better performance, the education system should be in a condition to adapt to the system. It also means that Laws should not be made to strict that it is hard to change. Etc

These policies can change Nepalese education sector for better. Finally, they are just opinions. Not all are facts and opinions can also be biased.  

Not Misunderstanding Capital

By: Bikal Dhungel

These days, it is not uncommon to hear a lot about Capital, Capitalism etc. Many people call themselves anti-capitalists and even blame capitalism for the ills of the society. I am not sure if they have fully understood the meaning of Capital. I guess not. Neither the large majority of the general public. If the had understood, I think such a big generalised critic on Capital would not be there. The aim of this article is the explain what is capital in an informal way.

First, we need to be sure that Capital has few basic characteristics, it is productive, it is produced, it earns a return, its use is limited and it wears out, meaning that at some point, it cannot be used anymore. These characteristics I took from various sources. So, from this definition, we can derive that, Capital is for example the machines that we use in industries which produce something and whose use is limited. But also the building where the industry is located is a capital because it also contributes to generate income. Similarly, the tools that are available there, for example calculators, computers, and other devices can also be put under Capital. The more capital we have, the more production we can generate. For example, consider a farmer in a poor rural setting. He harvests the crops by himself, then bring it home, hits it against the stone so that the grains fall from the plant, then collects it, filters it, store it and finally he can consume it. In this case, he had no physical capital. Now consider a farmer in the US. He has a big tractor, a Capital, which harvests the crop , puts it in truck and the truck brings this in the store immediately and can be packed into sacks using other machines. He could perform all these tasks within few hours whereas the poor farmer in poor setting needs days or weeks to do so. From here, lets conclude that, better capital generates better productivity. This also explains why some countries are rich and why others are poor. Rich countries have higher rate of Capital per worker than poor countries. Only, one thing what we should remember is, this process of producing capital is also called investment.

Till now, we dealt about Physical Capital. But there is also Human Capital which is not material. The machine you used is a physical capital and your skill or knowledge about how to use that machine is human capital. The Human Capital of a doctor is his skills to perform an operation whereas the capital of a teacher is his skills to teach or his knowledge about a particular subject.

In today's world, the most important factors of production are labour and capital, which includes both physical and human capital. In the 18^th century for example, it was not labour and capital but labour and land because all people had was their land to sustain their life. But things are changing now. Because of the advanced technologies we have today, land is not as important as in the past. We have higher crop yields, we know better farming techniques and we can manipulate the crops with the help of bio-technology to use or consume according to our convenience. Also less than 1% of the workforce can work in agriculture to feed the whole country, at least in developed countries. Others are involved in service sector or industries. As fewer people work in agriculture and a large number can involve in other activities, innovation has increased because people do research in other areas. As a result, in the last 200 years, there were so many innovative inventions like never before.

So, Capital is good for everybody. The general belief among the economists is that, the accumulation of Capital is a key to economic growth. This theory was brought forward by W. Arthur Lewis after World War II who later won a Nobel Prize in Economics. He explains, the key to growth is Saving, which enables the economy to acquire Capital. The output from this capital can again be used to generate more capital. As the capital accumulation accelerates, we have growth. Growth in turn generates employment and employment generates income to the people, tax income to the government and the overall welfare will increase which we call the increase in human welfare.

However, we should also note that, accumulation of capital alone might not generate economic growth. At least, this was not the case in many developing countries. Other factors, such as education, inclusive participation in the economy where no one will be discriminated based on ethnic origin or gender or anything, technological change matter and most importantly, the economical and governmental institution. All these factors are separate area of specialization. For example, another Nobel Prize winning Economist Joseph Stiglitz has published influential papers about institutional economics and how and why institutions matter. In today's context, a combination of all these factors might be important to achieve economic growth. But, within this context, we should not ignore the importance of Capital. Being against Capital means telling not to use machines for production, telling not to use his skills to a doctor or lawyer or teacher. The argument that anti-capitalists make, that Capitalism has caused inequality is vague. Of course there is inequality in the society but is capitalism really responsible for that ? Suppose I have a brother who is unemployed, like me. So, both of us are equal. No problem so far. But If I study hard and became a doctor and earn half a million per year and my brother is still unemployed, this has caused a huge inequality. But is this a problem ? I could give some portion of my income to my brother and at last, we both are better off. But anti-capitalists tell that Capitalism is fault, which means, the skill I acquired as a doctor is faulty.

In a country, if such form of inequality exists, this might be because of unfair tax system, either income tax or property tax. Inequality also might exist because the government is discriminatory, i.e. It discriminates the ethnic minority or women etc. So, for every problem, we should see what the causes are, not putting the whole thing as verdict. This would mean that a football player plays foul, like Uruguay striker Suarez, and you campaign that Football has caused injury, so it should be banned.  

Consequences of Child Marriage

By: Bikal Dhungel

Child Marriage is a serious issue in developing countries. Also in developed countries it is present, though not so many cases. The UNFPA writes that every year, around 13.5 million girls get married before the age of 18, one third of them even before the age of 15. One in three girls are married before the age of 18. However, not only girls, but also boys gets married before 18. UNFPA writes further that 18% of Child Marriage involves under-aged boys whereas 82% are girls. It shows that, females are more likely to be married before the age of 18.

Child Marriage is not easy to eliminate as it is written on papers. Countries with high prevalence of Child Marriage have signed international conventions that criminalizes it but the countries have no capability to implement this country wide. Therefore, the causes of these should be dealt with to end this practice. Researchers claim that, it has less to do with the government rules rather poverty and gender inequality in general. Parents with lots of children especially daughters simply want to get rid of them by transferring the responsibility to the new family where she goes after marriage. Moreover, we should also not forget that especially in poor countries, it is not an easy task to take care of girls. Especially in the case of civil war or violence, incidences of sexual abuse becomes normal. So, marrying is an act of getting rid of this to some extent.

The consequences of Child Marriage does not limit within the family. The society, country and the international community as a whole bear the consequences of it. Fact is, girls are not treated equally as boys in poor countries and even worse treatment for the daughters in law. This has psychological consequences for girls. Teen age is an age to grow. When they are denied enough nutrition, their mental as well as physical development will suffer. In addition to this, if the girls give birth, the children are more likely to get mal-nourished and lack in other abilities in the future.

After marriage, most of them also quit school because they have to support in household works. Also other vocational training will not be done. As a consequence, they will continue to be in poverty trap. Other aspect of this is, there are enormous talents in the mind of children, both boys and girls but when the do not get a chance to use their talents, it is simply wasted. The whole world suffers from this wasted talents.

When the practice of Child Marriage becomes a culture, the children of today are also likely to do the same for their children. This circle can go on forever. A country cannot develop when a large portion of its population are trapped into such ties. So, governments should think about ending such practices. But then the question arises, how to end this trap. Are legislation enough ? The answer is no. As I already mentioned above, this is not about the problem of legislation. This is about women empowerment, about justice and about education.

In the village level, first of all, education for girls is required. After girls are able to think about themselves, a children's clubs should be formed where children from 6-18 participate and discuss about matters related to them. When any of the friends are to marry before 18, they should have a power to take the issue to village or district chief who will then take action against the parents who force their child to marry in early age. The clubs can first of all try to convince the parents who are about to do such things. When children get responsibilities and voices, they are likely to act for the good of children. Such children's clubs are successful in many places throughout developing countries.

In the governmental level, policies to end poverty helps as a contraceptive to child marriage in macro level. Other policies like population control by encouraging people to have fewer children, policies that ensure gender equality will also mitigate the system to some extent. So, no one can solve the issue alone. Children themselves, the family, community and the government, all four should be brought to discussion and policy implementation. We might not be able to eradicate child marriage fully but this will surely reduce this practice and we all benefit.  

Economic Success of Germany: Post World War II

By: Bikal Dhungel

The article deals about the economic success of Germany after World War II until today and tries to find out what were the mechanisms that made it so successful.

Let us first go back to 19^th century (1800-1900). It was the time when Industrialization spread throughout Europe. Iron industries, transport, chemicals had already begun to expand to commercialize. Germany, with its location in the heart of Europe was moving away from agriculture to industries. There were already many industries operating before the beginning of 20^th century (1901-2000). First of all, it is important to review the political structure of that time in the year 1900. There was an emperor, the Kaiser, Kaiser Wilhelm II. In the state level, there were still kingdoms, like the Kingdom of Bavaria, Prussia, Saxony and Württemberg. There were grand duches, duchies which does not exist today. Moreover, there were Colonian Governers. Yes, Germany too had Colonies. Cameroon, Togoland ( today only Togo ), German East Africa ( today Burundi, Ruanda and some part of Tanzania ), German New Guinea ( Part of today's Papua New Guinea ), German Samoa and German South West Africa ( today Namibia ). These Colonies were lost to allied powers after German defeat in World War I.

Along with the loss in World War I, Germany also lost a substantial part of its economy. Especially the heavy war losses it bear and the compensation it had to pay to the victors made it poor. John Maynard Keynes wrote a book in 1921 with the title ' Economic Consequences of the Peace ' blaming the Treaty of Versaillies for imposing unfair war compensation on Germany. He wrote that, this might radicalize Germany and might cause another World War. This was proved to be true. World War II indeed happen. The post World War I saw dramatic changes. Germany lost all its colonies, Hitler came to power, democracy was abolished and finally the big destruction took place. During the war, all major cities had gone astray. Additionally, there were heavy losses of industries, infra-structure and the inflow of refugees brought a tragic scenario in whole Europe. Destruction was also heavy in neighbouring UK and France.

World War II gave rise of the US as a Super Power. The US saw Western Europe as an ally and the economic stability of Europe was a strategic interest of the US. The secretary general came up with an idea of a plan to rebuild Europe. This was later called Marshall Plan, named on his own name George Marshall and the destroyed states got financial injection to rebuild. In the case of Germany, that money was intelligently used. The ashes were cleared off, bridges and buildings were built and a room to kick-start economic growth was made. For this reason, the US always remained as a good partner of Germany in times of need. But after that, all of the tasks were done by Germany itself.

In 1946, the GDP of Germany was the same as in the year 1897 according to Maddison data. From 1946 to 1948, the ashes of the war was cleared off and path to growth was made. As a result, Germany grew at an average of 6.5% from 1949 to 1973. A golden rule of Economics/Accounting says that, if you grow with 7% per year, in 10 years the income will double. So, from the year 1949 to 1973, the German wealth almost tripled. Also after that period, it continually grew. From 1974 to 1990, it grew with an average of 2.3%. The period of growth was termed as 'Wirtschaftswunder' ( Economic Miracle ) So, the question arises, what caused this growth ? How was it possible. First thing to honor is the economic policy of then Finance Minister, Ludwig Erhard who later became the Chancellor.

His economic policy focused on Capital Accumulation. There was a huge investment on forming capital that was used to increase production. When production grows, labors tend to migrate from agriculture to industry. Agriculture that time had lower productivity. So, when people started to work in large scale production, their productivity grew which gave a huge boost in gross domestic product. A rising productivity increases competitive advantage which in turn will increase trade and export. Worker produvtivity increased by an average of 5% from 1950 to 1970. As productivity increases, wages increases and purchasing power increases. As purchasing power increased, domestic demand increased and the economy grew even further. Soon after, as the economy grew, the German population was unable to supply the labors required. Hence, the Guest Worker Schemes was introduced that brought millions of workers from Italy, Spain Greece, Turkey and Yugoslavia. Apart from that, the finance minister had reformed the currency from Reich Mark to German Mark. The new currency was devalued in the initial stage that helped to achieve competitive advantage. But as the economy and purchasing power grew and the Germans started to demand normal as well as luxury goods, it gave birth to 'Life-style Economy' and the growth of service sector. Automobile, Machinery, Electric Goods, Chemicals grew rapidly and they were the drivers of German export. Already in 1953, Germany had a trade surplus of 1 billion.

We should also consider that, growth of production alone is not enough to sustain economic growth. Other reforms are required as well. Then comes the role of institutions. Institutions provide the rule of the game in the society that supports growth. European Payment Institution was established to liberalize trade in Europe. A Central Bank, today called Bundesbank was established to maintain currency stabilization and to oversee credit institutions. This is extremely important. An undisciplined financial institution can ruin the economy in massive scale. The Recession of 2007/2008 was primarily caused by the financial sector that involved in irresponsible lending. So, the role of Deutsche Bundesbank was immense in stabilizing the economy. Internationally, the Bretton Woods System and The General Aggrements on Trade and Tariffs ( GATT) today called World Trade Organisation was established to support in trade rules and international payment systems. Within Germany itself, the financial institutions played important rule. Frankfurt am Main was made financial hub, with the few large banks located there. The system of Sparkassen ( Cooperative Banks ) is the unique character Germany has today. Sparkassen are quasi state banks but are autonomous in their policies. Their main goal is to support the small and middle scale industries locally. The profit they generate are again used for social purposes. This means that, they do not involve in profit maximizing businesses or any kind of speculation but limit in their goal of helping businesses and keeping the economic life stable.

Moreover, the geography of Germany is favourable for economic growth. It is a country that has a shared border with nine countries in Europe, a North See and the Baltic See. The internal trade are supported by Rhein, Elbe, Danube Rivers. There are fantastic highways and railway lines that connect the cities. The big Hamburg Harbour makes possible to trade directly across the Atlantic. The internal factors like Political Stability, fair distribution of resources and social security are not to be undermined. Apart from the East West Conflict, the country remained stable most of the time. Fair distribution means tax justice which was based on mutual solidarity. The high earners paid higher taxes and low income citizens enjoyed other rights. Social Security is another uniqueness that makes Germany special. In the mid 19^th century, Bismarck established the social welfare system. The unemployment benefits, benefits for students, women, handicapped etc ensured that no one in the society feel discriminated, both socially and financially. Still today, Germany has one of the most human social policy in the world. Education is free for all. Also when you were born in a poor family, you can grow up to become rich. The equality of chances helped the country as a whole. There are other insurances which gives people the feeling of security. This is important because when the future is insecure, people tend to save a lot and invest little and consume less in the present. Due to lower consumption, production will be lower as well. When production is lower, employment creation will be lower and unemployment grows, tax revenue will be lower and the economy tend to go into recession. So, in the German context, it was avoided by social security system.

When we come back to the industries, the motor of growth, there is a unique culture of 'learning by doing'. Learning by doing is the major factor of innovation and productivity. It creates specialization. Specialization creates competitive advantage. Germany has a dual education system, one that is based on Universities, another, called Ausbildung, a Vocational Training which is quite popular where the youths will be trained in the industries to work there. More people go for Ausbildung than for the Universities. In addition to this, the honesty of citizens, their work ethics and the feeling of responsibility towards the society helps to maintain the culture of work.

So, to conclude everything, it was not a single factor that contributed the growth of Germany. It was mainly the specialization of firms, their culture of learning by doing scheme, the government support of the firms and the government take over of things that could not be done by the industries. This include, the collection of data, which could be used by firms and institutions. Think tanks, bureau of statistics, financial institutions all played their role well whose main aim was economic growth that was shared by everybody. Moreover, it was the Marshall Plan that gave a boost, the growth of technology, population and immigration, culture of saving, social security system, favourable geography, human capital, healthcare system, strong work ethics, political stability, trade openness etc etc as well as many factors contributed to economic growth. As a result, Germany stands today as second largest exporter in the world, hub for technological progress and a countries that is known for its high quality of goods in all sector, automobile, electronics, chemicals etc. Other nations can learn from Germany. Not all traits are possible to copy, but they can choose at least some to improve their economy.  

Fall of Traditional Banking

By: Bikal Dhungel

This article is not about rich countries. This can be generalised for poor countries but I deal with the situation of Nepal.

Nepal has no problem with liquidity. Financial Institutions have money but only the problem is, they dont want to lend. Why they dont want to lend is because the large portion of borrowers lack collateral. Without collateral, it is hard to get any fund from financial institution. However, every economist or development expert knows that, availability and access to financial sector is crucial for economic growth. Without an opportunity to borrow, the poor will never come out of poverty trap. As they cannot get fund from traditional banks, they turn to landlords or other unconventional way of borrowing mostly with very high interest rates. Countries have recognised this problem and step in to lend the poor either directly or through the schemes like Micro-credit, which was first introduced by Bangladeshi Economist and Nobel Peace Prize winner Mohammad Yunus.

Access to finance and credit is vital for poverty reduction. The poor need liquidity to come out of poverty trap. This might be for investment in businesses, education, health or buy other goods. In the present situation, they borrow from friends or neighbours or other family members. Poor also go to moneylenders who charge very high interest, sometimes as much as 100%. The interest rate in traditional banks would be much lower. But still, they dont lend to the poor. Reason for this, as above mentioned, the poor dont have collateral. Also if the banks would lend them, normally poor borrow a very tiny amount leaving the banks with less profit. The transaction cost is higher hence lending is not lucrative. Also in the case of default, banks do not want to run after the poor as it is time and money consuming and the gains from this are tiny.

In poor countries where the banking culture is not well established and where only selective businesses and political elites have access to finance, the problem of adverse selection remains high, which means, the ability of banks to select good borrowers from bad ones. So, in such an environment, moneylending by the local moneylenders gain popularity. In a typical village for example, the moneylenders also live in that particular area. So, they have local knowledge, meaning that they watch the borrower in regular basis. Chances of misuse is lower and the loan repayment can be transferred to generations. This is an advantage for the lenders but if the borrowers cant read and right, this can cause a serious problem. There are many inter-generational poverty trap based on such lendings. The grandfather had borrowed some money sometime and to pay that back, his son or even grandson should work for free at the lenders fields and the credit never finishes. This is why the program of Microfinance gained popularity. Micro finance charge little bit more interest rate than traditional banking, sometimes even lower rates are applied but they are not 100% and never passes over to the borrowers children or grand children. The default rate in microfinance is lower than traditional banking.

What is especial about it is that, this is basically a group lending. There are few people in a group and to borrow money, they need an ok by other group members. The members monitor the borrower closely because if she fails, their credit rating will be bad, giving incentive to spend the money intelligently. Microcredit has over 97% women, may be because women are careful money managers. And frequently there are group meetings where they discuss about the current situation, business possibilities, how the current business is running, etc. This scheme was extremely successful in terms of lending. In 1997, there were about 8 million users worldwide, in 2010, it grew to 140 million. There was a huge savings available in south asia wide and the scheme was expanded into other financial services as well. In 2009, there were almost 600,000 micro finance institutions in Nepal and the number was growing. To shorten it, Microfinance indeed changed the lives of millions which traditional banking sector couldnt. Still, the long term impact of it is still to be seen.

However, Microfinance is not without controversies. There were rumors that institutions use Mafia methods to recover loans, using brutal methods like physical harm. Others point that many microfinance institutions are profitable so why do they still charge high interest rates. But interest rates differ in different places. Then there is an issue of long term impact to economic growth. Some people use it for investment but some for consumption. Those who use it for consumption, are likely to be trapped in debt, so how to deal with these issue is a matter of discussion. But there are still some evidence that microfinance was able to reduce some poverty. Yet, the great change is still to be seen.

The aim of this article was to show that, as large portion of the population is poor in Nepal, they are using Microfinance scheme because it is more suitable for them. Even though the importance of big banks will remain, their share in lending is decreasing day by day. However, if they fail to come up with creative finance packages, they might be out of business because what we see as successful models of cooperative banks in Europe had a similar origin like Microfinance. The most successful story of saving associations are in Germany. The German Sparkassen is quasi state institutions who are autonomous in some degree but operate under an umbrella of national board. They are called the lending institutions to the middle class. They basically support local businesses and even the profit are retained and can be used for social purposes. They are non-profit institutions but not fully. It has proved to be a successful model. During the financial crisis of 2007/2008, the Sparkassen were able to maintain their liquidity and they survived the crisis without any problems. However, even in Germany, it doesnt mean that there are no big banks. There are several big banks but it will not be appropriate to compare Germany with Nepal. What I mean to say is, where there is a problem, there will be a solution. Where the traditional way has failed, innovation prevailed and it will gain importance even further in the future.

Rise of Corporations

By: Bikal Dhungel

Left and right wing sympathizers and critics of globalisation have one thing in common, their views about the Corporations and the capitalistic behaviours of these corporations. In some points, they are right, especially the growing power and their global character. When we look at the top 100 economic entities of the world, the 2012 figure shows that, only 49 are countries, and 51 are corporations. Many corporations are richer than nation states. For example, Exxon Mobil is richer than South Africa or Austria, British Petroleum (BP) is richer than United Arab Emirates, Volkswagen, one of the thousands of companies in Germany is richer than another EU state Czech Republic, General Motors is richer than New Zealand and Siemens is richer than over 100 countries of the world. The story goes on. As corporations grow, their political weight grows as well, either in the form of indirect influence or direct lobbyism. Also their impact in the economy grows. However, this is broadly seen as positive because corporations also generate large number of jobs, are a major source of tax income for the governments in terms of income tax of its employees or corporate tax. Corporations like Walmart, Tesco or UPS have millions of employees. But also public bodies come in front on the list of largest employers, like the United States Department of Defense, which is the largest employer of the world with 3.2 million employees including the US Army, and the People's liberation army of China, which hires 2.3 million people according to 2008 data.

The current form of corporations is a phenomenon that started in the beginning of twentieth century or slightly before that. The early corporations grew massively. The Standard Oil Corporation of the US, which belonged to John D Rockefeller made him the richest man in human history who possessed 292 billion dollars in today's money. He was almost 6 times richer than Bill Gates. Similarly, Ford Motors is another example which grew ever after it was established. The Great Depression and World War II largely reduced the number of corporations, however, after that, many other joined. After the growth of BRIC states, yet others arrived and recently since the internet boom, IT giants came to dominate the world. Companies like Apple and Google are among the top corporations with highest revenues. But in general, Oil Corporations fully dominate the list, probably because oil are connected with other types of corporations. Automobile Industries, Production etc directly depend on oil, so any price turbulence will directly impact them. Where the future of oil industries is heading to is going be an issue in the future as the amount of available oil is decreasing and the investment in green energy is gaining popularity.

Coming back to the issue to anti-corporatism, the left and right wing sympathizers base their argument on history. Most of them are true might these arguments might not be valid today globally. Going back to the history, it was not the United Kingdom that colonized India in the first hand. It was British East India company that involved in peaceful trade with India, which included both Pakistan and Bangladesh that time. In the time of 150 years, it gained popularity and established itself as a rich company that also influenced local policy. The British East India Company got a right to collect tax and other facilities given by the Mughals. Slowly, it started to help the fall of mughals and soon after found itself as a main force in Indian politics. With many such issues, the East India Company was dissolved fully in the mid 19^th century and then the United Kingdom took direct control of India. Similar practices could be seen elsewhere, for example in South Africa. In the twentieth century, corporations continually intervene in local policies according to their wants and demands. In 1951 Iran, there was a democratically elected president Mohammad Mossadegh, who wanted to nationalize the Iranian oil. The Anglo Iranian Oil Corporation ( today British Petroleum, BP ) toppled him and installed the monarchy under Mohammad Reza Pallavi who ruled until the Islamic Revolution under Ayatollah Khomeni. During this period of Pallavi's rule, the Anglo Iranian Oil Company made billions of dollars in profit. Elsewhere, for example in Nigeria, The Royal Dutch Shell and other Oil Companies are responsible for the bad governance in Niger Delta. The government is extremely rich whereas the oil revenues never come to the public, as a result, the inequality is extremely high. Developing Countries where there are huge natural resources, there is bad governance, who are believed to get funds from corporations to stay in Power. Like Democratic Republic of Congo, which is rich in resources, like Coltan, the material used to make Laptop Computers. One exception is Botswana. Despite having large amount of Diamonds, the UK educated head of government helped to retain an accountable government which divided the wealth of nation in a fair way. Due to this reason, Botswana has the highest per capita income in Africa and is seen as an example worldwide. Unfortunately, the story is quite opposite in most of other countries.

The story can go on but what I would like to mention here is, corporations are not bad everywhere. There are also good corporations. Corporations are the major investors in research and technology that improves our life. The appliances we have today were all made by corporations. With an exception of internet, which was made for the US Army, almost no innovation comes from the side of the government. But even in internet, it was refined and made better by private corporations. Also most weapons technology come from government side but the development of weapons should not be received as a positive development because at the end of the day, they are made to destroy human lives. Only a very small portion of them are used for providing security.

The recent developments in IT sector already gives a signal that large scale corporations will grow. As the ones in the past which involved in mal practice, corporations these days are mostly good. Today's age is information age, every single action will reach the corners within a matter of seconds and also for the corporations, being green, being ethical, being social will generate more profits because people tend to prefer them in comparison with firms that do otherwise. Corporate social responsibility has grown to be an integral part of many big firms. So, firms are adjusting to a new role as a player in a society that cares for social well being along with profit motive. Hence, the criticism of right and left wing people might not be valid anymore but sooner or later they should realise that they are themselves dependent on the technologies invented by corporations and can hardly live without it. What they should also understand is that corporations will continue to grow and this time, the most of this growth is likely to be for positive cause.