It is somewhat consolation to us all, that the constitution was eventually ratified and a long political process came to an end. But when it comes to prosperity and growth, the constitution does not have enough ground work for better environment for entrepreneurs. Ultimately, it is not the government that is going to be the engine of economic growth of our country. What government can and should do is to lay out ground rules that encourages innovation and protects entrepreneurs. Government should create an environment that promotes competition by reducing barriers to entry and by preventing the formation of cartels.
This is preamble of the Constitution of the Federal Democratic Republic of Nepal:
Nepal is an independent, indivisible, sovereign, secular, inclusive, democratic, socialism-oriented, republican, multiethnic state which shall be called Nepal in short
That sentence without the word ‘socialism oriented’ is still perfect to describe new Nepal under the new constitution. Since the word is there, what is its implication now? Is government going to take responsibility of providing goods and services for its citizens, even if the market is perfectly capable of doing so?
The constitution guarantees all sorts of rights for individuals for example: right to health, right to clean environment, right to education, right to employment etc. Among the rights that is provided for individuals, labor right and right of consumers provides interesting insight into how policy makers think of private sectors. Following are some excerpts from the constitution:
Every worker and employee shall have the right to form and join trade unions and to engage in collective bargaining for the protection of their respective interests, as provided in law
Every consumer shall have right to get quality goods and services. Victim of loss incurred from low quality goods or services shall have right to compensation as provided by the law
These clauses have an underlying assumption that business are always looking at every opportunity to take advantage of their consumers and workers. And these clauses also have the assumption that government is the big brother which is going to protect us (consumers and laborers) all. Another assumption in those clauses is that the government is benevolent saint that has public interests at its core. Well it could not be further from the truth. The fact that it took this long for the constitution to be drafted and ratified (it took eight years) proves that legislative bodies, political parties and bureaucrats have their own self-interest namely: securing votes, re-election and securing budget. Public interest is the least of their concern even if they make us believe it is.
It is true that businesses look for every opportunities to maximize profit. It is also true that there can be incidents of business malpractices. The way out of this problem then is to create an environment of competition driven by efficiency and innovation. In an environment of fair competition, the businesses that engage in mal-practices will not survive and will have to exit the market. The government should let the force of market work its magic rather than imposing iron clad regulations on businesses, which can lead to many unintended consequences and are very hard to change even if the regulations are not leading to desired outcomes.
This lack of trust in the role of market and entrepreneurial spirit (core of which is competition, efficiency and innovation) is very tragic for Nepal, a country which is in desperate need of rapid economic growth. Rapid economic growth does not come from regulating the private sectors. And policy makers should be very mindful of this.