Frederic Bastiat – A Rebel Against Regulation

Frederic Bastiat – A Rebel Against Regulation

Posted by: on Oct 21, 2013 | No Comments

Nothing exposes the absurdity of government regulation better than Frederic Bastiat’s satiric article – The Candlemaker’s Petition. This classic describes a petition taken out by candle makers against what they term as an unfair competitor – the Sun itself!

Myths About Free Markets Debunked!

Posted by: on Feb 6, 2012 | 4 Comments

The AT&T deregulation in the 1980s offered competitive phone rates to the market. The US airlines deregulation in 1979 facilitated lower airfares and more choices to consumers. Despite these historic successes of a free market system, those against the concept often term supporters as anarchists. Naysayers claim that a free market economy leads to overproduction and promotes greed. Here are some myths and misconceptions about a free market economy:

 

Myth 1: There are no regulations in a free market

 

One of the meanings of ‘free’ might be ‘unregulated’, but a free market is in no way related to it. According to economists, self-set standards and consumers are the two forces that regulate free markets. These are also forces that can replace governmental regulations and save the taxpayer’s money. Let’s take an example of vehicle manufacturers. Manufactures of automobiles analyze market reviews of the products and eliminate features in the upcoming models which irked consumers previously. This is a perfect example of how a so-called ‘unregulated’ market would operate.

 

Myth 2: Inflation in bound to happen

 

Did you think that it is natural for prices to rise as the years go by? No. Inflation is an unnatural phenomenon that acts likes an extra tax on earnings. Inflation helps some groups for a short time. For instance, farmers may sell their products at higher prices, till the time the prices of their inputs surge. In the long term, inflation is beneficial only to the government, as it offers more funds while reducing the real debt value.

 

Inflation is not caused by greedy businessmen – all businessmen are after all greedy. The cause of inflation is only one: the government increasing the money supply to fund its already limitless expenses.

 

Myth 3: Government can offer the best solution to problems

 

One of the political creations of the 1930s New Deal reforms is Social Security, which has only served to increase the burden of taxes since the last eight decades. Most often than not, solutions posed by the government to end economic troubles impinge heavily on the taxpayers. This is because most of the ‘solutions’ are schemes for redistributing tax in areas that buy political support.

 

Free market supporters believe that the true motivation behind any political decision is to help the decisions makers keep their seats. This reality is often ignored by the people who continue to believe that the government will come to their aid. On the contrary, in a free market, the consumer’s voice will determine the quality of products or services and contribute to political, civil and economic freedom.

 

The Military Industrial Complex

Posted by: on Sep 29, 2010 | One Comment

The US deployment of troops in Afghanistan has raised much ironic press against Nobel Peace Prize winner, Barack Obama. It has also brought back speculation with regards to the US defense budget, specifically money allocated to private production of defense equipment and the supply of this equipment to other ‘enemy countries’.

Many journalists and documentary makers have begun quoting Dwight Eisenhower’s farewell speech where with much foreboding he spoke of the Military Industrial complex and its many cancer like outcomes.

Interestingly India for the last decade has been speculating on opening up the private sector, in the defense sector. The government founded a Group of Ministers committee that submitted a report titled: “Reforming National Security System”. Based on the recommendations of the report, the defense sector was opened up 100% up to private investment and was given a 26% FDI cap.

This reform was part of an ongoing dialogue, obsessed with increasing India’s strength and research capability in terms of armaments. The country’s armed forces have been subject to poor, imported, and expensive armament technology for some time. India’s research divisions under organizations like the DRDO have seen negligible progress. Bearing these factors in mind, it seems natural that the government might want to look into private investment in defense by awarding Raksha Udyog Ratnas to reliable firms. But, is the RUR enough? And, isn’t the armament industry in America sufficient admonition against private investment?

Desiring government control is all nice and idealistic but when the money starts pouring in, it would be naïve to expect the government not to try and profit from private defense technology production. Maybe they’ll fling a few wars around the world? People will die.

If you were to glance at the decrepit state of the country’s defense technology now, you might neglect the warnings. The question in itself is not a closed one. Perhaps private investment in defense needs a lot more thought.

Free the Banks

Posted by: on Sep 1, 2006 | No Comments

Whenever I make a presentation on how economic freedom would make Nepal prosper, I am confronted with the objection that Nepal is landlocked, different and what applies to other countries is not applicable here. Nepal is different and landlocked, but, to say that economic freedom would fail here, when, it has never failed to eliminate poverty elsewhere, is a travesty.

Switzerland provides the best example of how a landlocked nation has used its geographical position to great advantage. The Swiss said to the surrounding countries of Europe and then to the world, ‘if you have money, bring it to us. We will keep it safe and if you want the matter kept confidential, we shall honour your desire.’

This single measure of anonymous banking accounts is one of the foremost reasons for the Swiss being among the richest people on this planet. They, on average, earn 34,000 dollars annually.

The Swiss do not consider tax-evasion a crime and a foreigner is not penalized for bringing in money from foreign lands on which tax has not been paid.

Would it be possible for Nepal to become an international financial service centre? Yes, according to a report prepared by Collins and Associates of Boston, USA. However, despite several years of effort by Joseph Collins, the government did not allow it to happen. Collins finally gave up.

Besides confidential banking, Switzerland has a banking system which is one of world’s freest and hence, not surprisingly, one of the most competitive as well.

Banks in Switzerland, offer a wide range of financial services which banks in Nepal, subject to pervasive state control, cannot. Standard Chartered Bank in Nepal does not even offer foreign currency credit cards to its customers fearing that it might run foul of the government controls.

If you want to establish a bank in Switzerland, it does require government approval, but, once you get the permission to begin operations, you are accorded the same treatment as a local bank. There is no restriction on 100% foreign ownership of a bank. Nepal does not allow 100% foreign ownership of banks. A foreign bank can only come in as a partner in a joint venture.

“Free” Switzerland has over 400 banks out of which over 150 have either total or majority control exercised by foreigners. Consider the employment generated, at high wages, and the wealth landing in Switzerland thanks to the marketing efforts of these banks. Any wonder then, that Switzerland retains its reputation as one of the safest havens of capital.

Indians are estimated to have more billions secreted away in Swiss and other foreign bank accounts than the entire foreign currency reserves of the government of India. Under the existing laws, Nepal would never see any of this money.

In Nepal, the government directly controls the five regional development banks and also two of the major commercial banks: Nepal Bank Limited and Rastriya Banijya Bank. The state thus controls 60% of bank lending in the country.

Indira Gandhi during her heyday nationalized most of India’s leading banks and all but destroyed its financial sector. The price for these actions was paid by the Indian taxpayers who bore the losses.

The people of Nepal bear the burden of billions of rupees of losses incurred by the government banks. The true cost cannot be measured as we have no way of knowing the extent of bad loans made in India or in Nepal by government banks under pressure from their political masters.

The good news is that, if the government has the will, the banking system can be restructured in a few months. Sell off the government banks, free the currency markets, abolish irrelevant and harmful controls on banking, permit foreign banks to come in with a minimum of red tape, and allow confidential accounts in the currency of the depositor’s choice. Do this and Nepal would one day become an international finance and banking centre.

The Himalyan Times

David and Goliath

Posted by: on Aug 20, 2006 | One Comment

What is common to Estonia and China? Estonia is in Europe, China is in Asia. Estonia is just a dot on the map, in China you could fit 212 Estonias. Estonia’s population of 1.5 million is 6.5% of Nepal’s. China has 1.3 billion people, 56 times that of Nepal. Estonia is a democracy, China is ruled by one party. You know China, but are unlikely to have heard of Estonia.

However, something ties these disparate countries together. Both have witnessed incredible improvement in the quality of life of its people during the last decade. Both have gone on the path of economic freedom and their citizens have reaped a huge dividend.

These two countries have forever exploded the myth that you need to be either small to develop as many say, or you have to be big as a few maintain. They prove conclusively that size does not matter. Economic freedom is what matters.

Whenever I talked of Singapore’s or Hongkong’s development, people say, “they are tiny, don’t compare them with us”. Now, when I talk of China, they have no answer.

China shed its ideology three decades ago. While it remained politically closed, with the communist party maintaining a tight control, people were given freedom to buy and sell, foreign investors were welcomed and private property allowed.

The results are apparent to anyone who has visited Shanghai, Beijing or many of the other towns and cities. It is joked that the national bird of China is a ‘crane’; you see so many of them around. 40% of world’s cranes, at one time, were in China; such was the construction activity.

While India stagnated under the weight of its socialist government’s regulations, China torpedoed ahead. For a country of China’s size to grow by 8-10% a year was considered impossible, and yet China achieved this feat not for one or two years but for the most part of the last 30 years. China’s per capita income which, at one time, matched that of India is now twice as much.

This happened with only partial economic freedom. China continues to be hampered by huge and inefficient government undertakings whose accounts remain a mystery. What would happen were these to be privatized and China’s economy was to become as free as that of Hongkong is anyone’s guess? Would it grow by 15% annually or 20%?

India now chases China, with a me too philosophy, and has with liberalization more than doubled its growth rates to 6-7% from its earlier 2-3%. If only India had adopted sensible policies immediately after independence the story would have been different.

You might have seen an Indian company dominating the world’s car markets instead of Toyota. It may well have been a Mumbai based MNC providing the world with a news channel instead of CNN.

In 1991 the Soviet Union, called the Evil Empire by the US President Ronald Reagan, ceased to exist and Estonia achieved independence after 50 years of Soviet occupation. Unlike the other newly created nations, carved out of the erstwhile Soviet Russia, Estonia went in for a big-bang liberalization. It rejected advice from those who advocated a gradual approach.

Mart Laar, Estonia’s former PM, told me that it followed the example of West Germany after World War II. Price controls were abolished, currency allowed to float freely, taxes cut, public enterprises (PE’s) sold and foreign investment was welcomed.

The three largest banks in Estonia which control 90% of its banking assets are 100% foreign owned. Rules are there to facilitate foreign and domestic investors, not to hamper them.

The results of sale of PEs, abolition of the corporate tax on profits reinvested in the domestic economy, elimination of custom duties on most imports and a general pro-business environment were spectacular. The economy took off and its people look forward to the day when they will enjoy Western Europe’s standard of living.

Nepal too can achieve similar success. Its people are as intelligent and not any less industrious. Being too small or having too many people is not a reason to be poor. Take off the economic shackles and the people of this country can do what the Chinese and Estonians are doing.

The Himalyan Times

13% – Russia’s tax on income

Posted by: on Aug 15, 2006 | No Comments

America is a haven for capitalists while Russia is a workers paradise. US glorifies profits, Russia vilifies it. This was the conventional wisdom. It has been turned on its head. Bush fought a bruising battle in the US Congress to marginally reduce taxes. Vladimir Putin, the Russian President, did it with ease.

Jan 1, 2001 was the beginning of a new era in Russia. Russians woke up to a flat 13 percent income tax. It was a watershed event. That’s right; it is Russia that we are talking about, not Hong Kong or Singapore. The USSR was founded on the principle that all businessmen were evil and profits were passe – a bourgeois concept.

Now, businessmen can retain 87 percent of what they earn in the land of Lenin! This is something which I would not have dreamed of 10 years ago. Truth is stranger than fiction.

What is surprising is that Russia had just three tax rates of 12, 20 and 30 percent prior to this reduction. The rates were high but comparable with what most countries charge, and, yet, Putin chopped them.

What has been the result of this relatively low tax rate? It has been an unprecedented success for Russia. It has contributed to Russia’s stability which was so lacking in the aftermath of the collapse of communism. The benefits to the Russian economy grow by the day.

Capital flight has stopped and foreign investors have started returning to Russia. This, inspite of the huge losses incurred by the dollar investors resulting from a complete collapse of the ruble in the 1990’s.

Hoover Institution scholar Alvin Rabushka observed in a February 21, 2002 analysis for www.russiaeconomy.org, “the 13 percent flat tax has exceeded the expectations of the government in terms of revenue. For the vast majority of taxpayers, its implementation is simple, and no forms need to be filed.” Adjusting for currency fluctuations, Rabushka adds, “real ruble revenues increased about 28 percent.”

This novel experiment is paying huge dividends for the Russian government by inculcating the habit of paying taxes in people who were used to a culture of evasion. This changed attitude was to be expected; after all, evasion too comes at a cost – black money is difficult to reinvest in business and peace of mind is lost. People, therefore, do pay up when rates are not extortionate.

Russian tax revenue which barely equaled nine percent of its Gross Domestic Product (GDP) has grown to 16 percent. Russia also grew by 5% in 2001. A win-win situation for all concerned. Taxpayers are smiling, Putin has become a hero of the ‘Union of World’s Taxpayers’, and Russia’s government is busy collecting a windfall.

The US meanwhile has six tax rates from 10 to a high of 38.6 percent. Its 46,900-page Tax Code provides elephant size loopholes to the wealthy while the middle classes pay up. Russians file a simple one page form.

It is estimated that tax accountants will gobble up over 150 billion dollars for the paperwork which accompanies the tax payment in the US. This burden is one of the reasons why the US economy will not average even half the growth rate accomplished by Putin’s Russia.

It is ironic that Russia has a 13 percent flat tax while the bastion of world’s capitalism cannot even bring in a flat 17 percent tax. This is what Steve Forbes, a republican contender for the US presidency, had wanted but could not achieve.

Clearly, Russia has more to do if it wants to prosper. Rule of law, freedom of speech and, especially, far stronger property rights are surely needed. The 13 percent income tax is however a very powerful step in the right direction.

Nepal, to make an impact, must abolish the income tax. To do so would signal to the world’s business community, ‘invest here; Russia may have larger markets but in Nepal you need no tax experts and pay no income tax.’

With the abolition of the income tax, foreign and domestic investment would boom and trade would virtually explode. Any loss in revenue would be more than made up by higher VAT realizations by the government.

The Boss

Trade will make us rich

Posted by: on Jul 24, 2006 | No Comments

Countries which trade are rich. Countries which don’t are poor.

If I were to pick up one indicator of the wealth of a nation, that would be its exports and imports. Consider India: its share of world trade which was 2.5% at the time of its Independence, had plummeted to 0.45% by the late 80s.

It was a pathetic performance. India, with 16% of the world’s population, would have had to increase its imports and exports by 32 times to just reach the world’s ‘average’. India remained poor – its people had to survive on less than a dollar a day.

Compare this with a ‘dot’ on the globe: Singapore. With a population of just 4.2 million, its imports and exports are double that of India’s. This translates to each Singaporean trading, on average, 500 times more than an Indian. No wonder an average Singaporean lives comfortably, enjoying an annual income of over US$ 25,000.

Some say that the comparison with Singapore is not apt. Let us compare China with India. ‘Anti-capitalist’ China’s trade with the world has burgeoned to a trillion dollars, five times that of India’s while China’s population exceeds India’s by just 28%. Chinese now enjoy an annual income which is more than twice that of the Indians while just three decades ago the Chinese were poorer.

Contrast Nepal with Switzerland. Both countries are landlocked, but, the similarity ends there. Again trade provides an indication of why Nepal lags behind. Nepal’s imports and exports don’t add upto even three billion dollars. Switzerland’s figure is 326 billion dollars.

On a per person basis, the comparison is even more stark. Each person in Switzerland trades 400 times more than a Nepali. Switzerland’s per capita annual income at US$ 35,000 is one of the world’s highest.

Trade is not the only reason for Switzerland’s wealth. Their banking laws which guarantee anonymity to the depositor also have a lot to do with the Swiss being rich. However, trade plays a significant role.

Why are Singaporeans and the Swiss such good traders, achieving a prodigious percentage of the world’s trade, while the Indians and Nepalese are bit players and do not count? High taxes and stifling controls pursued by Nepal and India compared to the free market, low tax policies (average import duty is below one percent) of Singapore and Switzerland is the reason.

India, upto 1990, was ‘protected’ by the world’s highest tariff rates, import bans on all consumer products, and an inefficient and corrupt bureaucracy bent upon controlling trade.

The results of this ‘protection’ were obvious. Indians who would buy from a Scot and sell to Jew and still make a profit had no opportunity to do so in the world markets.

Post 1990, India began to see sense, but only after its policies had brought the economy to a shuddering halt. It had no foreign currency left and had to pawn its gold reserves. India liberalized and very soon its trade took off and dollar reserves started accumulating.

Within 15 years India achieved what it could not do in the earlier five decades. Its share of world trade has increased to 0.8% and foreign exchange reserves have crossed the 140 billion dollar mark starting from almost nothing.

If this was achieved with only a modest reduction of controls and import duties, consider what can be attained by the abolition of all controls and taxes on trade.

The good news for Nepal is that it can rewrite its laws tomorrow. There is nothing stopping this country from emulating Singapore and eliminating its trade barriers.

The government has to do just this and then watch the people of this country take to trade as a child takes to candy. Nepal will have shopping malls no less full of merchandise than Singapore. Goods will be cheaper too as both labour and real estate are priced lower.

Further Nepal will get as many tourists as it can handle. Why should people from India, Bangladesh and Pakistan go to Singapore, Hong Kong or Dubai when they can come to Nepal with its warm, hospitable people, majestic mountains, and, yes, cheaper perfumes too.

The Himalyan Times

Regulate Less, Save Lives

Posted by: on Jul 17, 2006 | No Comments

It is a fundamental principle of economics that demand for a product increases with a reduction in its price. As regulations are ‘free’, and people who advocate them bear negligible costs, it is virtually guaranteed that demand for government regulations will continue to grow indefinitely.

However, do government regulations really cost us nothing? Is the cost always borne by big corporations and evil businessmen? Businesses may initially bear the costs, but rest assured that they will, as soon as they can, pass on these costs to you and I. How? By an increase in the price of goods that we buy. We as consumers ultimately pay for all government regulations.

Each individual regulation added onto by the government means little to us, and the cost of each may be so infinitesimal, that it is only rational for us to ignore it and concentrate our attention on more pressing matters. The problem is that when the cost of all the regulations imposed on us is added up, it is no longer a small matter.

The only country where an attempt has been made to identify the cost of regulations is the US. The cost borne by its people was estimated at $660 billion in the year 2000. The projected annual cost now for a household of four exceeds $10,000.

Clearly, this level of regulation if imposed on the people of Nepal, would immediately shatter the economy. Imagine if the US regulations, designed to protect buildings against earthquakes in Los Angeles, were made applicable in Kathmandu. All, except the wealthy few, would find themselves gazing at the stars at night instead of a roof.

Even though a rich country can better tolerate regulations, yet it is this regulatory burden – exceeding half of the US federal government’s tax receipts – which has made annual growth rates in America average an anemic two percent.

No one doubts the good intentions of our lawmakers. Regulations are often drafted with thoughts of making our buildings safer, food healthier, water hygienic, air pollution free, aircrafts less likely to have accidents, and labour happy.

The problem is that this plethora of regulations increases the cost of everything we buy and, hence, makes life difficult for the most vulnerable in our society: the poor. They just cannot afford the costly goods.

Theoretically, it is possible to eliminate aircraft crashes by zealous government oversight and regulation. However, the cost of such burdensome regulations would make air-travel so expensive that many more people would die because of the use of road transport, which is far less safe than travel by air.

In Nepal, the best way for government to make domestic air travel safer would, ironically, be by deregulation. Let the government abrogate the monopoly of domestic airlines and permit foreign airlines to compete on domestic routes. This would increase foreign investment, bring in international airlines – with a worldwide reputation to protect – and make flights safer.

Big companies often capture the government agency in charge of regulating by intensive lobbying. They then use regulations as a weapon against their smaller competitors.

In the UK, for example, large businesses wanted an onerous licensing burden to be applied to all food premises. These big companies knew that they would have an easy time complying with these regulations, but their smaller competitors would be forced to close shop.

In the same manner, asking roadside restaurants in Nepal to adhere to standards which are met by Hyatt or Holiday Inn would result in their closure. Commonsense tells us that this is not a desirable outcome.

Likewise, minimum wage laws and other labour legislation cause problems for small businesses. The big companies can pay their staff more than what is required by law and would be happy to see that the small enterprises are forced to do the same. Strict enforcement of wage & labour laws as exist today would lead to the closure of most of the small businesses with unemployment even more widespread than it is now.

We should learn from the example of the developed countries and try to rid ourselves of regulations if we are to banish poverty faster. Deregulating by creating wealth, would save lives. Rich people live longer by about 20 years – that is the difference in life expectancy between those living in the rich and those in poor countries.

The Himalyan Times

Airlines and Regulations

Posted by: on Jan 3, 2005 | No Comments

The world including Nepal has realized the disservice caused to all of us by the state running businesses. Worldwide privatization of government assets has taken place on a grand scale.

However, most people still maintain that regulation by state is essential. Poor service by private organizations is the reason why many of us want government oversight.

In an article on domestic private airlines in the 19-25 November issue of Nepali Times by ‘Artha Beed’, the service – or rather the lack of it – was given by him as a reason for wanting the government to step in. He said that free markets need government regulators to be successful.

Not so. Let us find out what went wrong. When private airlines first took off, the staff was enthusiastic and well groomed, service was warm, and flights were on time. Let us agree with Artha that service and courtesy has since vanished.

Let us, however, compare the situation now with what was prevailing at the time when RNAC was the only airline. Perhaps Artha is too young to remember. People used to queue up overnight to get tickets, service was non-existent, and the staff attitude said, ‘put up with us or walk to your destination’. However, bad the situation now is, it is infinitely better than at the time of RNAC’s monopoly.

Apart from the impossibility of government regulators forcing the airline’s staff to smile (Artha’s desire), regulations boost costs, empower corrupt bureaucracies, and achieve little.

Does it mean that Artha will remain permanently frustrated? Is there no way to make private airlines come upto his expectations? Fortunately, there are ways to improve efficiency and service without the heavy hand of the government.

Ending RNAC’s monopoly was good. What wasn’t good was prohibiting foreign airlines from flying on domestic routes. If you want world class service, then you must let world class companies compete in your markets.

This is not only true of airline business but of all businesses. India was no better. Under the anti-foreign-investment raj of Indira Gandhi, protected businesses produced shoddy goods and customers got lousy service. Now, foreign investment where permitted is changing that.

India which produced the ugly ‘ambassador’, even for which there was a waiting period, now offers its consumers an unlimited array of world-class cars. Its autos and their components are exported to many countries. Would this have happened under the protective regime of the Neheru-Indira era? Never.

Nepal does not need more government regulations but opening up of its market including the domestic airline market to free and unfettered competition. Then it will be companies which best serve the interests of the Nepali consumer which will thrive.

A word of caution here is necessary. Open and free competition does not mean that private businesses, be they airline or any other, will always meet all of the customers expectations. It only means that customers will have a choice and most will be satisfied most of the time. All customers cannot always be satisfied. Airlines, for example, can only provide the level of service which the public is prepared to pay for.

While travelling within the US, I find that airlines do not serve much more than a packet of peanuts and a soft drink. This is because the US airlines have found that people travel on basis of cheap fares. The preference of people is not for fancy service and gourmet food but low ticket prices. Customers want rock bottom fares and that is what they get. They can always pick up-food of their choice at the airport’s fast-food restaurants and are unwilling to pay extra for food and service inside the aircraft.

It is possible that even after the domestic airline market is opened to foreign competition Artha still does not get gourmet food served to him on his half hour flight to Pokhara. This would only be if most travelers value cheaper flights which do not factor in the cost of Artha’s choice of food and drinks.

But again if Artha has resources he should have options. He could buy a plane, hire his own pilot and airhostess, and have food of his choice served to him. Good luck Mr. Beed.

The Himalyan Times

Where is the Gas?

Posted by: on Dec 7, 2004 | One Comment

It is December 7, 2004 as I write this. America remembers it as ‘a day of infamy’. On this day, 63 years ago the Japanese attacked Pearl Harbour.

For me this is a day of infamy in Nepal. Petroleum products have yet again vanished. Throughout the day, queues of vehicles at gas stations lengthened. It is criminal at this day and age for Nepal’s policy makers to repeatedly subject its citizens to this torture.

It is ironic that even as prices at gas stations worldwide decline as a consequence of a drop of US$10 per barrel in price of oil, Nepali consumers cannot fill up their vehicle tanks. How many times does history have to repeat itself before something is done?

That ‘something’ is getting rid of Nepal Oil Corporation (NOC). And I do mean getting rid of it in double quick time. Government has had privatization plans on the anvil for far too long. It is time for action.

NOC must be sold in a fair and transparent manner. But that alone is not enough. Care must be taken to see that it no longer enjoys any monopoly privileges.

Open up the entire oil sector – imports, distribution, and sales – to competition. Allow any company from anywhere in the world to set up base in Nepal.

It is this competition that will end the shortages, bring quality products, enhance the service at gas stations and bring gas prices in Nepal at par with the international market after adjusting for local taxes.

A major benefit of allowing unfettered competition in Nepal would be to end adulteration of petroleum products. This practice wreaks havoc on the vehicles. When companies have to protect their reputation in the open market they see to it that their gas stations sell only quality products. It is only when you have a government protected monopoly that you couldn’t care less about your customers who don’t have a choice.

Why does the economy of this country have to be repeatedly wracked by government mismanagement? Why is no action taken?

Whereas other countries learn fast, Nepal shows a proclivity to take an unduly long time to absorb the lesson of past failures. It should have been clear to all that NOC can’t meet the expectations of the people. The citizens of this country deserve better than over and over becoming a prey of this government organization.

The US, which is the world’s largest consumer of gasoline, too has faced a situation similar to what Nepal faces today. However, that was during the time of one of America’s least economically savy President, Jimmy Carter. He believed in the ‘Whitehouse’ micro-managing everything from the distribution and pricing of oil to rescue of hostages in Iraq. He was a failure and lost the election to Ronald Reagan. Shortly after Reagan took office in January of 1981, he reversed Carter’s actions.

Reagan did this by removing price controls on oil and ending the practice of allocating oil by government fiat. The results confounded Carter and his supporters. They had said that eliminating the price ceiling on oil would result in an unacceptable increase in prices people would have to pay at the pumps.

Did this happen? The results were the reverse of what Carter expected. Deregulation freed the market, ended shortages, queues at gas stations vanished overnight, and best of all the price of oil dropped.

Though prices in the US go up and down in response to international fluctuations, no President since Reagan has ever instituted government ownership or control over oil flows. And the American people have never had to queue up at pumps again.

Private companies in America are adept at fulfilling the needs of their customers. Gas stations are sparkling clean, display prices prominently and many have department stores on premises. And customers have a choice. If you don’t like the service of one you can go to another. Each oil company – Texaco, Chevron, Exxon and many more – have their own or franchised gas stations.

Should the Nepali consumer not be pampered with similar levels of service and have the same choice as his American counterpart?

The Himalyan Times