Nepali Times
Economic Sense
Democratic authoritarianism


The winner of the current political tournament between autocracy and democracy suggests there will be two finalists. The chances of the political parties being eliminated by the state and the Maoists look likely. The outcome will have a direct bearing on the economy and it may be time to start looking at the scenarios.

It has become fashionable to say that despite everything, Nepal's macro-economic health is sound (See: Ameet Dhakal in The Kathmandu Post, 4 December). Dr Chandra Gurung of WWF Nepal has been ardently arguing that things are not as bad as they seem. Has the suspension of parliament really had a positive impact on the economy? The macro-economic indicators have not looked too bad and it is debatable whether Nepal would have entered into the WTO or brought reform-oriented legislation with an active parliament.

As we have seen with other countries, you don't really need democracy for economic growth. Every time some westerner lectures to the Chinese about democracy, they retort: 'Do you want us to become like India?' Beijing has shown how political ideology can be used to boost the economy and it is being replicated in Vietnam and elsewhere. There are the obvious examples of Singapore and Malaysia that have sacrificed individual political freedom for economic growth. The Middle East has no democracy but plenty of oil which has greased its economic engines.

In Pakistan, Pervez Musharaf has used autocracy to reform the economy, arguing that the "country comes before democracy". In Nepal we tried autocracy for centuries and for 30 years under the Panchayat, we had crony capitalism. Whether Nepal will be able to leverage economic reforms in an autocratic state is the big question. The way political power and business nexus has grown in the past two years is also a cause for concern.

Some economists always argue that democracy and reforms are complimentary. The US is cited as the best example of how democracy can push the economy in the long run and nearer home, we have examples like Taiwan and South Korea. However, it is important in a democracy for strong regulators capable of wielding power to act as effective watchdogs on business and politicians getting too cosy with each other.

In a democracy, political parties need money especially at election time. Patronage undermines the voting process and dilutes democracy. The inability of the Philippine economy to emerge despite democracy and the leadership failures of African states are examples of money politics destroying the benefits of electoral choice.

India vis-?-vis China also reflect how an elected elite can create wealth for a few people and not the nation as a whole, whereas a one-party state is more accountable to national welfare. The biggest benefits of a democracy, however, accrue decentralised growth spreads.

The challenge for those who see more pluralism as the answer to Nepal's owes is to ensure that democracy is more inclusive and see that rural Nepal contributes more than the 20 percent it currently does to the GDP. How to bring about effective regulatory mechanisms for businesses that will ensure governance and reduce corruption, how to make businesses, political parties and the government more accountable?

The debate on autocracy or democracy is unending. The economic agenda should take the front seat and whatever system we go for, it is accountability of the leadership that is more important. Surely, the current hybrid governance is the worst option. Like all short-term measures, it has long-term impacts.

(11 JAN 2013 - 17 JAN 2013)