My grandmother sought the poor all her life. This hunt intensified during the last few years of her life; being bedridden, she realized that she didn’t have long to live and, therefore, her time for giving was limited. She believed that the way to heaven was by giving. Beggars might have lived without her munificence but I doubt if she could have breathed without them. No giving, no salvation.

The desperate cries of international aid organizations, UN agencies, ADB, NGO’s, INGO’s that, ‘the poor are still among us and we need funds’, reminds me of my grandmother. Without the poor, these agencies cannot justify their existence. They need the poor just like my grandmother needed them.

The problem for those who work in these organizations for uplifting the poor is that people who depend on alms are becoming fewer. And those who are poor are realizing that it is not aid and charity which is going to deliver them from poverty but opportunity.

And this opportunity is being unleashed by the forces of globalization. Look at China and India. These two countries housed the world’s poor. Both have become more open to the world and in doing so are eliminating poverty at a breathtaking pace.

Economic reforms started in the 70’s in China and 90’s in India have done more to eliminate poverty than the combined efforts of all aid agencies could have achieved in the next 100 years. And this removal of poverty has come accompanied with self-respect and dignity unlike the affront and indignity inherent in receiving charity.

These facts are inconvenient to those involved in the effort to increase charitable funding for the poor. The facts lead to an irrefutable conclusion: that what can end poverty is not charity but openness to trade, commerce and investment. This would mean that aid should end, but obviously the seekers of the poor have no desire to becoming unemployed.

The forces of globalization appear irreversible. Even in countries like Nepal where the government has failed to create conditions for economic growth, the poverty levels are falling. There might be limited opportunity but the youth still have an out: they can go abroad. And they are doing just that. Those who cannot go to the US, UK, Canada, or Australia go to the Middle East, Malaysia, or South Korea. For those unable to go anywhere else, India is open.

It is this increasing opportunity worldwide that is keeping the Nepali economy ticking. Despite being one of the worst managed economies, Nepal is still managing growth rates of 4%. Remittances from those who are abroad in better managed globalised lands are doing the trick.

Apart from Nepal, which caters to the needs of thousands of NGO’s, the other bright spot for aid givers is the continent of Africa. There the aid agencies have succeeded spectacularly in supporting poverty.

They have given aid to support brutal dictators like Idi Amin in Uganda who killed and tortured hundreds of thousands and threw foreign businessmen out of his country. They supported Mobuto of Zaire who stashed 80% of the $5billion in aid in his personal Swiss banks. The current favourite is Mugabe who has expropriated the land and wealth of foreigners and destroyed agriculture in Zimbabwe. His population depends on aid. NGO’s could not be happier.

However, inspite of the African dictators and Nepal, it appears that poverty as we know it is going to disappear. So will aid agencies just wind up? No chance of that happening anytime soon. Moves are afoot to change the definition of poverty. Upto now poor have been defined as those who survive on less than a dollar a day. ADB has already said that it considers the poor to be those who earn less than two dollars in a day. Watch out as poverty gets redefined by aid agencies.

I predict that very shortly every one of these agents of poverty would adopt the $2 standard and when everyone earns over that amount then the line will be shifted to $4. The poor will always be there, because the givers, just like my grandma, cannot exist without them.

The Himalyan Times

I write this especially for our Maoist brothers. While the US is commonly vilified as the bastion of capitalism, it is little known that the US too has tried communism. It was only when communism failed that property rights and capitalism took hold.

Let us go back into history and see what lessons America learned from its relatively short dalliance with Maoism much before the ‘great leader’ himself was born.

The year was 1607. The first 104 settlers had arrived from Europe in Jamestown in the Virginia Tidewater region of the US in May. They found soil which was fertile beyond what they had seen in the lands which they had left. Fruits were abundant. Wild game such as deer and turkey were everywhere. There was no shortage of fish and other seafood. And yet within six months 66 of the original Jamestown, Virginia settlers had died. Only 38 survived.

Another 500 settlers were again sent to settle in Virginia in 1609 and within six months 440 of these too died by starvation and disease. This was called ‘starving time’ and one eyewitness described it in English of those times, ‘So great was our famine, that a Savage we slew and buried, the poorer sorte took him up againe and eat him; and so did divers one another boyled and stewed with roots and herbs.’

How could this be? How could there be such death and starvation amidst so much plenty of meat, fruits, and fish. The fault as the witness said lay not in the ‘barrenness and defect of the Countrie’ but in the ‘want of providence, industry and government’.

What caused this lack of ‘industrie’? Were the Virginian settlers lazy and indolent? It could not be. People who were sent there were the chosen ones – the very best of men.

The problem was that all the men who were sent were bonded labourers. They had no stake in what they produced. They were bound by contract to put all they produced into a common pool to be used to support their colony as a whole. This was communism in its purest form. Everyone was supposed to work according to ability and take according to need.

As so frequently happens with present day government policies, the results were the opposite of what was intended. Since hard work was not personally beneficial for the settlers they responded by stopping work.

Phillip A. Bruce, a late 19th century US historian, wrote of the Jamestown immigrants, “The settlers did not have even a modified interest in the soil … . Everything produced by them went into the store, in which they had no proprietorship.” The result as Bruce wrote would be what anyone who has any knowledge of human nature would expect, men, even the most energetic, refused to work.

This is what happened in Mao’s China and in Soviet Russia on a grand scale. In America a few hundred deaths stopped the communist experiment, in China and Russia, millions had to die before these nations abandoned the principles of Marx, Lenin, and Mao.

Jamestown changed course just two years later in 1611 with arrival of the ‘high marshall’ Sir Thomas Dale from the UK. He understood the problem, freed the settlers by abrogating communal ownership. Each man received three acres of land and, other than a lump sum tax of 2 ½ barrels of corn, did not have to contribute anything to the common pool. The colony immediately began to prosper. It prospered because each individual directly benefited by his labour and knew that he would also bear the full consequences of any reduction in output. Private ownership and capitalism worked.

Communism doesn’t work because it destroys the reward and work nexus. Communism doesn’t work because the absence of property rights heralds the end of all incentive to produce. Communism doesn’t work because humans do no wish to sacrifice themselves to the common good.

I do not know or care about the political philosophy of the Maoists. I would, though, like to know what their economic policies are going to be. Do they want to take back Nepal to what America experimented with almost 400 years ago? Nepal lags behind the US in economic development, but is it to be put back by four centuries?

The Himalyan Times

On December 6, 2004, this column carried my article ‘copy China, not India’. A friend, Ramesh, objected. ‘Isn’t India doing well?’ he asked.

India is not merely doing well, it is shining. India has never done better: the stock market is at its peak; foreigners are investing in amounts never seen before; trade is at its all time high; earnings from outsourcing and software exports are the world’s envy; the treasury is bulging with reserves of 125 billion dollars; and more.

The signs of prosperity are everywhere. There are more cars, cell phones, houses, flyovers, cinema halls, shopping malls, foreign goods, and TV channels.

Delhi is beginning to look more like the rich cities of the West than the Delhi I was used to. Clothes from Nike, Levis, Benetton, Hugo Boss, and Van Heusen vie for attention. McDonald, KFC, TGIF, and Dominos offer the most popular of the world’s fast foods. Wines and cheeses from all over the world have finally arrived. Honda, GM, Hyundai, Suzuki, Ford, and Mercedes cars are seen all over the city. No international hotel chain worth its name wants to be left without a presence: there is the Hyatt, Marriott, Holiday Inn, Intercontinental, Hilton, Meridian, Crowne Plaza, and Radisson.

Yes, India has come a long way since Manmohan Singh first liberalized India’s economy in the 90’s. What could not be done with strict government controls in the 45 years of the leftist-socialist Nehru-Indira-Rajiv period, has been achieved in under 14 years of limited market reforms.

Everyone is benefiting. In fact there is no way to keep the advantages limited to a few. What is happening in India is not unique. Goods which start out as luxuries for a handful eventually become everyday necessities for a majority.

Millions of Indians are now hooked to their cell phones. These now exceed the number of landlines in most States. Phones, which were available to eight million people when the government operated the network just a decade ago, are now owned by 90 million. In the next 2-3 years cell phones will be held by 200 to 300 million subscribers.

Under state ownership people could view only what India’s government TV channels wanted. Not any longer. Private telecasting companies have spelt the end of programmes showing Indians how to grow potatoes. Dozens of channels now compete for ‘eyeballs’ with never ending creativity.

Hardly anyone flew during the days of Indira Gandhi, 50 million people will do so in 2005. Outbound tourism from India is set to break all records. Every major country is wooing the India traveler. With the end of monopoly of Indian Airlines and Air India, private airlines, particularly low cost Deccan Air, are taking ‘flying’ to the masses.

Those who owned the Fiat and Ambassador cars earlier now ride in Mercedes, Fords, and Hondas. Those who rode scooters have Maruties, and those who had bicycles have scooters and motorcycles. Those who walked have cycles, or use the new underground trains.

It is not Delhi alone, but other cities also which are being metamorphosed. Benefits are spreading, rural areas are doing even better. Most companies are reporting that the highest growth in sales of their products is being witnessed, not in big cities but, in smaller towns and villages.

So where is the problem? Why did I ask Nepal to copy China not India? It is just that India can do better. It can shine ever more brightly by letting markets, which are doing so well with the half chance that they got, take care of education, employment, and development too. India can overtake China only if it junks wasteful populist measures and reduces govt. intervention in the economy.

India needs to stop collecting taxes in the name of education. It needs to shelve plans to spend 60,000 crore rupees in guaranteeing jobs to the poor. Labour laws need to be rescinded, reservation for small industries and for jobs needs to end. Currency needs to be convertible and foreign investment easier. Customs and excise duties need elimination.

India’s growth will then go from 6-8% which is great, right into the stuff of legends perhaps touching 20%. However, until such policy changes happen it will be China which will remain ahead.

The Himalyan Times

Nepal needs peace. Its people are demanding it. They are demanding it because they know intuitively that the peace dividend can be huge. They know – no economist needs to tell them – that the resources which are being diverted by the government and the Maoists to fighting each other could go towards enriching them, should peace prevail.

I am not an expert on conflict resolution; I do not know what demands of Maoists can be met and what can’t be. However, I do know that to end the recruitment of the young people of this nation by Maoists, alternate employment opportunities are required.

Lack of opportunity is the reason that enabled Maoists to cheaply recruit the unemployed youth. If the young boys and girls had economic opportunity, if they could obtain jobs, or had the chance to start their own businesses, it would have been impossible for them to be hired by any terrorist organization.

People who are making money cannot easily be led to their deaths. The young in Singapore, Hong Kong, Dubai, South Korea, and Australia do not offer their lives for revolutionary causes. They have too much to lose.

In Nepal, the girls and boys joining the Maoist had little to lose. It was easy, therefore, for the leaders of this ‘red revolution’ to capture the imagination of the young. They offered the young a life with a purpose. Yes, you could die, but, is life without a job and without hope of one any better? And, what if you won? You would then have the opportunity not only to chart your own destiny but that of your motherland as well. Many considered the rewards well worth the risk of catching a police or army bullet.

For peace to come, negotiations must go on, and one hopes that they succeed. However, the government must, irrespective of how the negotiations proceed, also take measures to end the conditions which led to so many of Nepal’s able-bodied men and women becoming terrorists.

It is not a pre-condition for Nepal’s economic progress that peace prevails. It would indeed be nice if it happens. If however the country and its citizens have access to economic opportunity and wealth, peace is that much more probable.

What is it that is essential for progress and prosperity? Economic freedom. Let the government institute as many market friendly policies granting people freedom to trade, manufacture, and deal with foreigners, and the chances of ending terrorism increase manifold. People, if they are busy doing business deals will not join the Maoists. Those who are already with the Maoist will find reasons to leave if jobs and opportunity are on offer.

The single most important measure which the government can take is to end all controls and taxes on foreign trade. As soon as this happens, people will become busy with imports and exports. They will become busy selling cheap goods to the Indians and Chinese. They will be busy manning the shops, and running shopping arcades for tourists. They will be busy handling the avalanche of shoppers which will descend on them from the neighbouring countries.

Imagine a duty free Nepal. Keep in mind that labour rates are the cheapest in the world and real estate costs are low. All this results in an explosive combination except that this will be an explosion which doesn’t cause death and destruction, but results in wealth and jobs. Shoppers will forget Hongkong, Singapore, and Dubai for Nepal.

Free foreign investment from bureaucratic oversight and regulation. Open every sector of the economy to investment. Reduce taxes and end the red tape which feeds corruption. Guarantee property rights and apply the law equally to all.

Do this and unemployment will end in no time. It will then be an uphill task for the Maoists to retain their comrades let alone obtain fresh recruits. The opportunity to pursue prosperity is hard to compete against, and the Maoist will soon find that out. Revolutionary slogans sell only if the audience have nothing to lose.

I don’t know when or even whether this country’s rulers will take it on this path to prosperity and peace. I do know that should a leader with vision and guts choose to make the people economically free, peace will follow as surely as the day follows the night.

The Himalyan Times

The evidence is staring us in our face. Government is inefficient. Get it out of our lives. Restrict it. Let it perform only its core functions. We will benefit greatly.

Consider the opening of the skies between New Delhi and Kathmandu to private airlines. The exclusive privileges of RNAC, IA and Druk, have been revoked – hopefully for ever. We now have Jet, Sahara, and Cosmic offering us flights as well.

As would be expected, fares have crashed, service has improved, and travelers have a much wider choice as to the time they leave or arrive in Kathmandu. The benefits are going to the travelers, travel agents, hotels, casinos, and others associated with the tourism industry of Nepal.

Economy airfare to Delhi used to be Rs.13,000. Not any longer. All sorts of offers are available. It is easy to travel for Rs.9,600 if you are alone, and if you are in a group, you may pay just Rs.8,000.

If on average 500 travelers use these flights daily, and they now have to spend Rs.1,600 less on their tickets, that means Rs.800,000 a day is being put back into the pockets of the traveling public. On a yearly basis commuters will save Rs.300 million on their travel to Delhi alone. One can now have some idea of how much government monopolies, restrictions, and licensing requirements are costing the people of this country.

The savings have seemingly come out of thin air. Everyone is smiling. Consumers are paying less despite increase in the general price level. Private airlines are happy otherwise they would not have so eagerly commenced operations. Everyone related to the travel trade is ecstatic hoping that additional travelers will mean more money in their pocket.

The only loss has been that of ‘inefficiency’. Bloated government bureaucracies manning RNAC and IA now have to compete and this competition is making them improve too. Those in the travel trade tell us of how the arrogance exhibited by the staff of these airlines has been replaced by a new found humility.

The only question is, why did it take so long? These steps could and should have been taken much earlier. We had enough examples of the success of ‘open sky policies’ in the world.

Let us take the US. Almost 13 years ago, on December 10, 1991, this is what was published in the International Herald Tribune under the heading “Deregulation is working”.

“… deregulation has mostly done just what it was supposed to do, giving most air travelers more flights, more convenient schedules and substantially lower fares.

… For every Midway or Pan American that has departed, a USAir or Delta has taken its place.

…the number of airlines competing on typical routes has risen by one-third under deregulation. That is why fares are now 20 per cent below what the government would have set under its old formula.

… In a new study, Robert Gordon of Northwestern University shows that hub-and-spoke schedules have added more nonstop flights than they have eliminated. And there are more convenient options for nearly every traveller.

…the Brookings scholars conclude that travelers are better off, to the tune of tens of billions a year in lower fares and added convenience.”

It is apparent that no business should ever be granted monopoly or semi-monopoly privileges. Competition benefits us and it is only a matter of time before the benefits spread to all the people of a country.

The road ahead is clear. There should be no further hesitancy or partial steps. Open the skies completely. Allow any airline from any part of the world to come to Nepal. We need more flights and more competition on every route. Let any airline which is willing to fly from Kathmandu to any place on earth do so.

Further privatize all airports and allow them to cater to not only domestic airlines but to international ones as well. Allow international airlines to fly on domestic sectors too and open the domestic airline business to foreign investment.

The benefits to the people of Nepal would not be in millions of rupees but be in billions.

The Himalyan Times