Economics in the National Interest

<br>Professor. Madhukar SJB Rana

Sept. 3, 2010, 5:45 p.m. Published in Magazine Issue: Vol.: 4 No.-07 September 3-16, 2010 (Bhadra 18, 2067)

Nepal is blessed by Nature with ample natural resources, which our politicians, systemically, and their planners have failed to harness. This sustained, systemic failure is mainly due to their lack of vision caused by their overarching aid dependency resultant from their neo-colonial mindset, inferiority complexes and the rent benefits accruing to them from aid.

Despite foreign aid’s emphasis on good governance Nepal’s chronic mal governance is also due to this because of the overarching aid dependency as politicians, planners and policy-bureaucrats are spoon fed with alien ideas, money, material and machinations that go to serve their global interest –not ours.

Let us, today, pay homage to Lord Peter Bauer who first warned us of the pitfalls of foreign aid as early as the 1970’s. It was Bauer who had first had argued that central planning, price controls and protectionism perpetuates poverty especially nurtured by foreign aid. His wisdom was recognized even by the World Bank in its 1997 World Development Report when it acknowledged the outdated and naive assumption that good advisers and good technical experts by formulating good policies would lead to good execution and rapid modernization.

They simply forgot that modernization necessitates transformation from within based on indigenous leadership pursing the concept of organization development and change management over a sustained period. Considering how frequently the World Bank changed its development themes it is no wonder that their enterprise became a self-serving venture with a rapid fire, fit-for-all prescriptions. Never mind the culture of that nation nor its level of institutional development to be able to absorb the recommendations designed externally and expeditiously with very little participants by the stakeholders.

Aid is the primary source of graft and corruption. Let me quote International Alert’s Phil Vernon. When asked “Is Aid Working” he said:

“Despite billions of dollars being spent on development assistance over the past 60 years, it is doubtful that aid is really working as intended, i.e. providing sufficient impetus to overcome the strong forces that keep people poor…If asked to project ourselves forward in time to 2030 and imagine whether, looking back, we would call today’s aid policy and practice successful, many of us would find it hard to say yes.” ).

"Between 1970 and 1998, when aid flows to Africa were at their peak, poverty in Africa rose from 11% to a staggering 66%" - roughly 600 million of Africa's billion people are now trapped in poverty” says the Zambian economist Dambisa Moyo (Aid, therefore, is part of the problem and not part of the solution for good governance.

To be honest, Nepal is merely a clog in the wheel of development being propelled by the western industrial nations in their mission for universal liberal democracy, human rights and security (from radical social movements; international migration, terrorism and global warming).

Such is the ideological weapon being unleashed upon the developing countries for the ‘end of history’  and to maintain their cultural domination-- underscored by the savage debt burden unleashed through tied aid.

Aid agencies located in situ (e.g., USAID, DFID, and DANIDA) are glaring symbols of colonization through aid. They bypass, completely, the foreign ministries and are not accountable in any manner or form to national parliaments.  Aid bureaucracies, as well as national bureaucracies, must be down sized and right sized by having just a few core ministries that are constructed with the aim to have both strategic and macro-economic impact. For example, the Ministry of Industry, Supplies and Commerce should be appropriately amalgamated into the Ministry of Finance and Economy while the Ministry of Agriculture henceforth should be made responsible for agro-industrialization.

Why merge ministries? For better coordination, communication and control and strategic impact by creating self-contained synergies within related sub sectors to maximize multiplier benefits through backward and forward linkages .

Is this not a parody of democracy and sovereign equality of nations? In the quest for human rights the industrial nations resort to non-governmental organizations, created and funded by them, to protect and promote human rights under the guise of ‘civil society’ so as to ensure weak, compliant states. Worse, it completely destroys the developing nations’ social capital as traditional voluntary organizations are annihilated from the national socio-political scene.The first act of nationalism, therefore, must be to set limits to foreign aid which is a self-perpetuating institution by: (a) developing one’s own development and growth strategies; (b) bringing under the Ministry of Foreign Affairs’ fold all bilateral and multilateral foreign aid, including those from INGOs, and (c) deepening and opening alternative avenues for international finance massively (remittance, tourism, transit trade, international financial centre, carbon trading and fdi mobilization; and (c) downsizing the bi-lateral international aid bureaucracy in situ and also requiring them to hire national experts especially educated and trained in the countries concerned.

Total debt forgiveness is necessary as aid has robbed Nepal of its competitive advantage through padding of costs and chronic delays mainly in the infrastructure sector. Use the funds released from debt forgiveness to emancipate the people living below the poverty line as their rightful entitlements to micro- credit; sanitation; irrigation; education; health, housing and skill training—no matter what caste, creed and culture or race, religion and  region.
(Excerpts of the paper presented by Rana who is South Asian Institute of Management Former Finance Minister )

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