On its June 1 issue, The Economist published an article lauding capitalism, particularly liberal market policy, for its ‘impressive’ role in reducing extreme poverty from 43 to 21 percent over the period of two decades since 1990. Liberalism has been acclaimed as the major factor in boosting annual growth rate up from 4.3 percent in 1960-2000 to six percent in 2000-2010, helping almost one billion people cross the extreme poverty line demarcated by the income of $1.25 a day. [break]
Undoubtedly, capitalism is one of the major factors that drives the economic growth of a country today. It is also true that liberal market, as an essential tenet of globalization, has provided people with new income opportunities on a global scale. The impacts of liberalism are evident in the global network of communication, influx of foreign goods, in and outflow of people for education and employment, and so on.
It is now possible for a Sherpa of Solukhumbu to sell her cheese in a Swiss market. A Dalit laborer now can run off from his patron and head to the Gulf for labor. A medical doctor and an engineer can migrate to Canada, Australia or the US for better earning opportunities. Elderly parents back at home can talk to their migrant offspring over Skype and be comforted. A lonely wife can assuage her grief with the money IMEed by her husband from Malaysia. Indeed, remittance seems to compensate for the loss of the nations’ young potential. The credit for all these opportunities, of course, goes to liberalism.
Yet, do these economic opportunities necessarily help poverty reduction? At what cost do they help an individual come out of poverty?
First of all, claiming that liberalism is the magical mantra of economic growth is an outlandish argument. Thomas Friedman, a staunch supporter of free-market, calls it a ‘one-size-fit-all’ type of ‘Golden Straitjacket’. It incessantly puts pressure on the government to deregulate the market.
However, this approach has already been proved wrong. The great recession that the so-called Global North felt in 2008 could present a fresh example of it. In fact, liberalism has never been successful in fostering economic growth in any country. According to Bad Samaritans authored by Cambridge Reader Ha-Joon Chang, the success of capitalism has never been accompanied by liberal policies. It is through state-administered policies that counties like Japan, Singapore, South Korea and even China have achieved economic advancement.
Secondly, an income rate of US $1.25 a day as the threshold of poverty itself is a misleading concept. It does not take into account dynamics such as inflation, and assumes poverty as a static condition. Monetary value of US $1.25 in the year 2013 cannot be as much as it was in 2005. For instance, the amount of US $1.25, roughly equivalent to Nepali rupees 113 now, is hardly enough to purchase a kilogram of rice and lentil soup.
According to Nepal Rastra Bank, one percent rise in food inflation pushes an additional 100,000 people into poverty, and food inflation in Nepal rose by eight to 18 percent during the period of 2007/08 to 2011/12.
Even if we assumed liberal capitalism to be a driving force for reducing poverty, the loss that we bear due to it is hardly compensable. Evidence from Nepal shows us rather a grim picture colored by inequality, insecurity and corruption.
Nepal adopted liberal policies in the 1980s; and liberalism has been a basic guiding principle of national plans since 1992. Arguably, Nepal has achieved some results in terms of poverty reduction; while 42 percent people were poor in 1995/96, the number has now decreased to 25 percent. However, the gap between the people belonging to so-called higher and lower castes, and between urban and rural areas is widening. The poverty gap between the privileged castes such as Bahun/Chhetri and Dalits has increased from 25-percent in 1995/1996 to 27 in 2011/12. Likewise, poverty rate in rural Nepal is 27.35 percent, which is nearly double the 15.46 percent in urban areas.
One of the major impacts of liberalism has been the growing dominance of market over agriculture. Although agricultural sector still employs 74 percent people in Nepal, its contribution to the national GDP has severely decreased; from 60 percent in 1970 to 36 percent in 2011. In other words, agriculture is no more a safe haven to earn a livelihood. As a result, a large portion of agricultural work force has migrated for foreign labor opportunities, and a considerable number of people have been engaged in informal sectors.
More than three million people have migrated till date. According to the Department of Foreign Employment, currently 1,927 people officially migrate each day. Although the remittance that we receive from these people might be welcome, the impacts of migration are not encouraging.
While brain drain is a long-term impact, the security of Nepali migrant workers has been an immediate concern. Every year, 1000 Nepali die in foreign lands, Nepal receives three coffins on average each day.
Another detrimental repercussion of liberalism has been the growing corruption that has haunted almost all sectors of Nepali society.
With the advent of market economy, profit making has become the main motto of people, whether they are involved in business or bureaucracy, politics or activism, media or academia. Not a single sector is free of corruption. According to Transparency International, Nepal is the third highest corrupt country in South Asia. Additionally, rising consumerism has set new standards for personal and family needs, which can hardly be met by a fair income.
The recent decision of the government to extend both the duration and production capacity of Upper Trisuli Hydropower Project presents a fresh example of corruption. In fact, the contractors should have been punished for not being able to accomplish the project on time; but the government has rewarded them by extending it, creating an additional financial burden of US $ 43 million on the nation.
With all these repercussions, how justifiable is it to claim that economic growth, at the behest of liberalism, helps reduce poverty? Undeniably, economic growth is important. Mere economic indicators, however, do not define poverty; dignity and freedom also have a great stake in it.
According to Amartya Sen, poverty occurs due to the lack of positive freedom to unleash one’s own potential to lead a life that one has a reason to value. Therefore, only opportunities that foster economic growth along with equality, justice and dignity as a precondition to positive freedom can help a country come out of poverty.
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