Stepping into the Economy of Tomorrow

“Socialism collapsed because it did not allow the market to tell the economic truth. Capitalism may collapse because it does not allow the market to tell the ecological truth,” Oystein Dahle, former Vice-President of Exxon of Norway.<br>Dev Raj Dahal

May 8, 2011, 5:45 p.m. Published in Magazine Issue: Vol. : 04 No.-21 April 29-2011 (Baisakh 16,2068)

In a decent society, livelihood, education, health, home and job are not limited to only wealthier sections of people. Not even freedom is allowed to only those who monopolize economic and organizational power. Promotion of inclusive economic development, constitutional stability and peace in Nepal requires using public tax to guarantee minimum income for all people and reduce poverty and powerlessness that dehumanize working conditions. The twin global crises of central planning in the 1990s and neo-liberal policies a decade latter altered the relationship between state and market in favor of a compromise of the state, capital, labor and nature and necessitated Nepalese leaders to adopt the third way-- social market economy. The classical economy of exclusive profit maximization based on greed devoid of gender, social and ecological considerations banded people together to form a collective resistance. Similarly, social, economic and political policies framed so far on the basis of disciplinary paradigm too failed to unfold preferred future for future generations. The economy of future will, therefore, encourage scholars to think outside their disciplines and take cognitive, cultural, social and ecological costs into account. An economy can be formed by processing these elements.

The perpetual economic growth has both social and ecological costs. Both workers and employers as a part of the same society and nature have to reorient their thinking for “sustainable development,” a development that seeks the codetermination of public policy and public accountability to constitutionally designed laws, behavior and institutional incentives for self-governance. Democracy cannot become a stable system when the vast majority of Nepalese people are paralyzed by poverty, inequality and joblessness and transformation is achieved only by breaking laws.  The formation and operation of the economy of tomorrow require fundamental change in the rules governing the production, dispensation and distribution of public goods in the optimal interests of whole society without destroying the capacity of nature to regenerate. The future economy, therefore, conceives humans as species-beings, considering that their collective emancipation rests on common life of the living species as a whole rather than the pursuit to dominate nature and colonize all other lives. In other words, the economy of tomorrow is going to be “system-sensitive,” which optimizes the interest of all the stakeholders within the system and generates institutional incentives for cooperation. Ecological and economic interdependence requires collective decision making by the affected citizens.


How can a system-sensitive economic knowledge, law, policy and change be legislated to exonerate Nepal from its post-conflict condition? Obviously, first, by a simple recognition that whole is greater than its parts. Laws that glue modern society must be compatible with planetary awareness, human rights standards and human responsibilities. Second, is the creation of an economy in the expanded context enabling it to serve the society, nature and culture rather than the other way round. Third, public interest orientation of politicians as democratic system requires continuous contextual learning and feedback loops where people are in touch with their leaders and engage in dialogues among themselves to frame public policy. And finally, emancipation of workers from basic needs deficits and fear of uncertain future brought by technological innovation and new stratification of society. These are essential conditions to reduce the vicious cycles of ecocide, pollution, extortion, predation and violence in Nepalese society and foster virtuous cycles of eco-balance, production, exchange, cooperation and peace.  

The first strategy of the government is to tackle the structural crisis by implementing international standards in the social and labor market policy domains. It is essential to use economy as a means of good life by re-skilling labor to compete in the knowledge economy which requires high skills, productivity, effectiveness, innovation and adaptation.

The second strategy is to create job opportunities for all workers necessary for a livable minimum wages. In Nepal, annual inflation of above 10 percent has made minimum wage of about $87 inadequate to support even a nuclear family. Without robust economic growth above 3 percent and production revolution the capacity of society to pay taxes for subsidy and social welfare cannot be made sustainable. The economy of tomorrow will be based on ethics of community based not only on self-interest  but also on direct reciprocity and bearing personal costs to help others. This means social solidarity of people will be the bedrock of political and economic order. What is essential is to de-alienate workers from their products as the process of alienation robs them of their humanity, the capacity to choose life fit for free human beings. 

The third strategy is proper utilization of nation’s natural and human resources for democratic equity for low-wage workers so that they are neither socialized to system disruptive politics including the economic base of the state nor alienated from liberty to decide their future. Incentive for wealth creation and progressive taxation to uplift dispossessed and low wage workers can improve social trust and secure peace dividend. 

Addressing the multiple crises Nepal is facing in food, climate, energy and polity requires “fundamental rethinking,” about sharing resources of society commonly referred as “common good,” so that hostilities do not exist between social security for the workers and industrial security for the employers. This model requires an active role of state in the mediation of policies, forging strong linkage of industry with agriculture and trade, social protection of informal sector workers and social development that benefits all classes of society. The Comprehensive Peace Accord has underlined the need for a “common development concept” though multiversal ideologies of ruling parties defy the possibility to do so as their competition for power has contested the need for a new constitution, development and peace. The imperative of sustainable economy also requires the social modernization and realization of both constitutional and human rights. Post post-state economic, ecological and technological challenges call for corresponding coordinated solutions.

The fourth strategy is to expand social enterprises, including non-profit cooperatives, support self-employment, job-oriented and livelihood-enhancing activities and equal access to social security especially regarding health, education and unemployment benefits. There is a tremendous scope as the 3.5 million Nepalese workers returning from abroad have skills, wage capital and financial capital to invest in productive sectors. The role of the government is to create secure environment for business, production and exchange for them. The exodus of  poor youth from the countryside abroad to meet their basic needs has positive effect on remittance flow which has given life to rural economy but it also has some negative effects as it has left the agriculture sector stagnated and increased enormous social costs to their families and societies. The remittance contributes 23.4 percent to GDP which is helpful in maintaining current account surplus, in spite of huge trade deficits. The turmoil in the Middle East does not make remittance flow resilient nor does domestic political instability ensure good prospects for tourism and economic growth. In this context, Nepal needs to devise economic policies to capitalize full value of the nation’s natural resources offered by its diverse topography, intellectual and human resources, reduce corruption, free-ride and resolve the problem of collective action.

Social Contract

The economy of tomorrow needs a strong sense of social contract at national, regional and global levels to shape globalization and shift a focus from symbolic to real economy so that economy first serves the basic needs of people.  The productivity system of feudalism, capitalism and imperialism is based on the vertical division of labor and specialization where workers did not have much say in decision making. These systems did not bear the costs of increased poverty, inequality, illiteracy and ecocide and improve the life of ordinary workers. The economy of future will be based on participation on co-production and sharing of benefits between workers and employers. International Framework Agreement is specially designed to standardize the working condition of workers and enable unions to debate global economic governance and build access over international financial institutions. The economy of future will be based on the energy of future such as bio-gas, solar, wind power and other alternative sources. Protection of environment needs a policy of eco-labeling — espousing ecologically sensitive products and practices at multi-level governance and burden sharing by developed and developing countries.

The economy of future will rest on the refinement of the dominant development paradigms of MDGs, PRSP and post-conflict reconstruction as they accord little attention to distribution, human rights and environment aspects. The Directive Principles and Policies of Nepali state defines economic objective to “transform national economy into an independent, self-reliant, and progressive economy through equitable distribution of economic gains based on social justice and elimination of economic inequalities.” It upholds the spirit of future which is participatory, just and democratic. Its key elements are welfare state, social market economy, funding of social security system, ensuring the rights of marginalized in the informal sectors, fundamental reforms in the financial sectors etc in the framework of good governance, rule of law and human rights. Economy based on social justice requires transformation of the root causes of conflict. But this does not come from the system itself. It comes from alternative thinking and leadership arising out of social movements of workers, citizens, environmentalists, peace, minorities and civil society from below. 

Institutional Culture and implementation

Nepalese society needs effective state to hold societies together and develop institutional capacity to resolve the crisis of laws and social problems. One main problem associated with Nepal’s labor laws and international human rights obligations is the implementation gap of existing laws including the promotion of women’s “equal access to full employment and decent work.” Current development incentive of gender mainstreaming will allow women to engage in economy, social policy and polity in better way. Gender justice seeks to break the traditionally ‘prescribed role” of women and move into an interactive public sphere. Already a host of policies such as social security, care work, gender budgeting, decent work, labor market reforms, quota, access to the institutional resources of the state, etc are now being implemented. The capacity of unions lies in becoming visible in the life of its members, potential members and general citizens, increase their relevance with the other stakeholders of society and build a public profile in seeking cooperation of the state, private sectors, civil society and the attentive public in achieving the goals of state for development beyond growth mania. It has included inclusive growth, well-being and quality of life.    

Constitutional political economy

The Interim Constitution of Nepal 2007 has expanded more social rights of Nepalese citizens resembling a sort of social democratic state. There are four rationales for social market economy: Nepali state’s endorsement of civil, political, economic, social and cultural rights embedded in the Universal Declaration of Human Rights, adoption of social charter for South Asia, solidarity of the state, private sector and civil society on social justice and inclusion of many non-negotiable rights pertaining to livelihood. The structural condition of poverty in the country does not enable politicians to escape from the policy of social justice. But, the capacity of Nepali state to implement those rights is limited owing to its loss on the legitimate “monopoly on power” and achieve governance goals. The contribution of tax to GDP is only 12 percent. The international community also treats it as a weak and “fragile state” incapable to maintaining elite consensus for peace, security and development.  Only a synergy of the state, capital and labor in the framework of tripartite guidelines can restore the state’s monopoly on power and enable it to perform core economic functions—growth, social equity and sustainability. 

Accountable governance

Nepal’s recent history has taught us that liberation of economy from constitutional vision of social justice in the 1990s has caused democratic deficit, regulatory failure of state and underproduction of public goods. An economy cannot grow in security vacuum, social support of workers, corporate ethics and alienation of people from the basic needs who are also citizens, consumers and human beings. This means social solidarity with the society creates enabling framework for investment in business. The workers too as multi-classes—bonded-labor, blue-collar, white-collar, green-collar, professionals, and self-employed having multiple identities --have to understand their obligation as workers, citizens and human beings and act with the principles of subsidiarity, connections and the possibility to create win-win solution.

To discipline the use of power and evaluate its influence is the duty of decentralized nature of civil society built on the disposition of human will and enlightenment. Altruism and charity are the main civic virtues. In a democracy, civil society’s main tasks are: appeal the goodwill of public, democratize institutions related to production, distribution, exchange, shape the public agenda for good life and form a deliberate public. Civil society and workers should act together to achieve well-beings what citizens cannot accomplish individually. Post-conflict Nepal needs transitional, reconstructive, transformative and reconciliatory peace building efforts where the constructive roles of all the connectors of society are necessary to transform the fragmentary worldview on economy. 

Green Growth

The post-global economic crisis agenda of an economy of tomorrow is legislative action in the area of environmental sustainability, control climate change and use alternative energy sources to break the vicious heating of atmosphere by about 1 degree Fahrenheit in the last century and fast melting of Himalayan and other glaciers and the rise of seal level by taking into consideration efficiency of resources, low carbon emission and sustainable energy sources, production system and products. It articulates the transition of what Fritjof Capra calls an “economy of goods to an economy of service and flow,” restoring the economy’s natural support system, stabilization of population growth, wage-led economy and eradication of poverty. The nature’s ecosystems are cyclical. The waste of one become foodstuff and fodder for the other. In contrast, economic system is linear as the release of its wastes unleashes chain reactions which are too much for the planet to absorb. Economy is also discriminatory causing over accumulation, exploitation of people, breakdown of local communities and ecosystem, and feral conflicts for resources unless it is properly regulated by the state. In this context, mitigation of climate change requires capacity building, transfer of technology and resources for adaptation of new green technologies. Nepalese planners have to rebuild its faltering economy and manage hydropower, forestry, biodiversity and engage in disaster preparedness. 


Economy of tomorrow requires first, the recognition of the common interests of capital and labor mediated by the spirit of Constitution. This helps to moderate the old politics of divide and rule of workers and the downtrodden. Second, minimization of the cost of participation in the production, distribution and sharing of wealth without undermining the ecological system. Since majority of Nepalese workers are working in either informal sectors or abroad, creation of their stake in the polity requires democratic equity and a system of ecological, social, gender and inter-generational justice. Building the capacity of a class-neutral constitutional state is also essential to implement workers all rights underlined in the constitution and its capacity to create enabling environment for investment in production and services. In a market economy, proper taxation can modify consumer behavior and attract them to ecological products. In the same way, shifting subsidy to alternative energy, reforestation and reordering of fiscal priorities can reduce carbon emission and increase the sustainability of life-support system.
The ability of unions lies in mobilizing the collective interests of workers and enable politically legitimate collective action. Political parties of Nepal have time and again broke the rules to make a difference, while the unions have only subordinated their interests to them, bargained  for some sectoral gains and coordinated with employers for industrial peace and security. Now the time is to show leadership in promoting non-militant, consensus-oriented civic culture. The unity of unions on common agenda can offer them choice, utilize their strength to generate changes in the dominant ego-centric economy for the eco-economy that heels the society and bring fulfilling transformation.  
Dahal is a head of FES.


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