Inequality, Inclusive Growth And Nepal

Hira Bahadur Thapa


Various reports on inequality produced by different agencies demonstrate one irrefutable fact. People are becoming richer but their number is shrinking. Worryingly, poor people are increasing in number. This scenario is quite disturbing even though some countries are rising up the ladder of economic success.
It is applicable to developed and developing, rich and poor countries. There may be rich people in some countries, whose wealth may surpass that of rich people living in other countries. Measuring one’s wealth world-wide may present a particular picture of inequality. Doing same within a country itself shows us a different status of rich and poor people.
What is undeniably true is that the world at large suffers from the problem of economic inequality. This reality is one of the most fundamental factors challenging the liberal economic policies. A strong resentment is visible in Europe and America, the bastion of economic liberalisation and globalisation.
In the 2016 US presidential elections, we noticed deep polarisation of society in advanced economy. There common people have felt that they have been unfairly denied the fruits of economic development. Many political pundits have opined that right wing political groups are rising due to uneven benefits of globalisation. They believe that anti- free trade wave is sweeping America, whose president Donald Trump is pursuing America first policy.
Ongoing US-China trade disputes, though bilateral talks are continuing to resolve the differences, exemplify their preferences to protect national interests at the expense of the consumers. Imposition of import tariffs by these two major trading partners in a tit for tat fashion kills the very important principle of free trade. They favour Beggar Thy Neighbour policy, the foundation of protectionism.
Oxfam’s latest annual report estimates that 26 richest people on earth own the same wealth, or have the same net worth, as the 3.8 billion people, who comprise the bottom half of the world’s wealth distribution. Super rich people are getting richer fast with the proportion of their added wealth going up. The combined wealth of world’s billionaires grew by $ 900 billion in 2018. Calculated on daily basis it is nearly $2.5 billion, which is a staggering amount in a world where millions of poor people do not earn $2 a day.
How to fight this grotesque injustice is a huge challenge to the policy makers. In this vein a noted economist Kaushik Basu in his Project-Syndicate essay has suggested that there is no moral question involved on the part of the rich, who may not be willingly prepared to give up their wealth though some philanthropists like Bill Gates and Warren Buffett have been donating large sums every year for public welfare schemes of their choice.
Quoting from some international institutions’ findings as mentioned in a report entitled “Fighting Inequality in Nepal” 10 percent rich people’s wealth is 26 fold more than that of poor 40 percent people. The incomes of rich 10 per cent Nepali people are three times higher than 40 percent poor people in the country.
More painful is the picture of Nepal as depicted in the recent “Corruption Perception Index” prepared annually by Transparency International and Nepal is ranked 124th meaning that corruption perception-wise country’s position has come down compared to last year’s. This adds complication to our policy makers, who have to shoulder the Herculean task of improving the quality of Nepali people by simultaneously speeding economic growth rates and curbing increasing cases of corruption because more corrupt people will worsen the state of inequality in the society.
Quite astonishingly, Kaushik Basu has argued that there is a positive side of inequality. He contends that a certain amount of inequality is both inevitable and essential to drive the economy. But the problem today is that the level of inequality is unsustainably high and, therefore, effective economic policy has become an urgent policy initiative.
In human society we see interesting examples if we analyse our history. Some people like Bertrand Russell, the famous British philosopher and American economist and a Nobel Laureate Paul Samuelson were super rich despite being socialist- minded. That is why some criticize them of becoming hypocritical. To Kaushik there is no contradiction who believes that the right to call attention to the need of addressing inequality must not be restricted to the poor.
There is empirical evidence that both protectionism, favoring country’s products and discriminating against foreign goods and pursuing excessive redistribution policies focusing on social spending programs are not durable solutions in fighting economic inequality.
An effective approach to help resolve the growing problem of economic inequality is enough investment on human capital development. Through this more resources should be diverted to education and other programs that impart skills and training.
Key components of successful strategy to secure inclusive growth that address economic inequality are greater human capital investment, improved infrastructure, pro-competition regulatory reform, anti-corruption measures and adequate social security systems in the opinion of Professor Lee Jong-hwa.
In Nepal, the Oli government has embarked on different policy measures keeping in view the present needs of accelerating economic development. Its slogan “Prosperous Nepal and Happy Nepali” is directed to exploring avenues of development, particularly the infrastructure sector. This has been positively viewed by the international community, the most convincing proof of which is the successful convening of Second Nepal Investment Conference, where prospective investors have displayed keenness to undertake projects prioritised by the government. Let us hope that objectives of the above forum would be realized to reduce pervading inequality in the country.
(Thapa was Foreign Relations Advisor to the Prime Minister from 2008 to 2009. He writes on contemporary national and international issues)  

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