Forty-two days into the nationwide lockdown, the focus of the government rests upon flattening the curve – as it should be. But the simultaneous economic quarantine has managed to bring all sorts of economic activities to a grinding halt. At the most telling fronts, it has taken a hit on the GDP, escalated inflation, surged unemployment and disrupted livelihoods of daily wage laborers who have little to no economic buffer.
As an economic fallout spirals, the need to ease the restrictions and restart the stalled economy is making rounds. And in an effort to weather the storm, economists have come up with potential exit strategies. While some opine that agricultural production, job creation and investment in infrastructure should be high on the government’s agenda in its flight to make the economy grow, others suggest the urgency to scrap pork barrel funds, and cut down on junkets to prompt the country on a sustainable economic trajectory. Yet, nothing from the government.
Amidst all this uncertainty, one thing is for sure that the crisis has exposed flaws and inefficiencies that have forever plagued our economic structures, political leadership, public policies, among others. Perhaps the only silver lining now is that this gives us a chance to rethink development and enact sweeping reforms to start building a more inclusive and sustainable economy.
To begin with, the notion of institution needs to change from extractive, wherein power and opportunity is concentrated in the hands of a few, to inclusive wherein participation is allowed and encouraged.
The course of our political institutions has invariably been extractive. Those who have controlled the power have set up economic institutions to enrich themselves and augment their power at the expense of the society. Even in the midst of this raging pandemic, priorities of the government are premised on political longevity and vested interest rather than economic recovery and public interest. Provided that the shift from party-politics to crisis management is to take place (if ever) and timely fiscal, monetary and financial policies are introduced, chances are the economy will bounce back; hopefully sooner rather than later. But per usual, decision making will be guided by short-sightedness and politically-motivated quick fixes to extract the wealth for politicians themselves. Simply put, it would only be a stop gap and nothing more. The ever so strong feedback loop between politics and economics has resulted in the creation of a similar set of extractive economic institutions. The absence of a level playing field has hindered investment in new technology, constrained competition and imposed unwarranted barriers to start and scale businesses.
Therefore, a policy action is necessary to open avenues for all Nepalese and put them at an equal footing. The government needs to eliminate barriers to exercising economic freedom which disproportionately raise inequality. The ease to start, grow and close a business; the ease to realize the rewards of productive behavior through simple taxes, freedom of contract, efficient rule of law and increased property rights; the ability to curb rent-seeking through implementation of streamlined bureaucracy and transparency mechanism are the necessary reform agendas.
For all we know, the government will continue to introduce short-term fixes; but for the making of sustainable prosperity, it is systemic flaws that require addressal. Because a country cannot get its economics right, if it is unable to get its politics right!