A fate other than marginality

Are hill economies condemned to remain at the fringes, surviving as appendages to the plains? Or is there a path of development for them that is autonomous, different, creative? Unless economists and philosophers brave these questions and seek answers specific to the hill condition, the road to marginality is wide and welcoming at the economic periphery where highlanders reside.

Nepal, together with the hill economies of all the Himalaya generally, is today stuck in a developmental blind alley. The myopia which has got us into this gully is linked to acceptance of an economic philosophy — the conceptual outlook for managing a country´s household budget and resources—that is biased towards the market and the plains.

The history of how Nepal´s human and water resources have met the market provides ample indication of how those who have ruled and continue to rule the hill kingdom have no understanding of the hill economy. An inquiry into the record yields valuable insights on what not to do in future, and should be useful not only for Nepalis but for politicians, planners and philosophers of Tibet, Bhutan, Himachal and Uttarakhand as well.

Among all the states, provinces and nation-states of the region, by virtue of being the most-sovereign, Nepal should have been in a position to chart an independent course for its economy. Unfortunately, just the opposite has happened, and largely to blame is the intellectual milieu in Kathmandu, where the economic debate rages insipid and lifeless. Nepal has too few economic philosophers able to paint the broader canvas. It has too many econometririans, all of them pujaris of foreign aid who merely add details to someone else´s canvas, who constantly massage hopelessly unreliable data seeking the formulae for hill development.
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If they wish to improve upon the earthy wisdom of the subsistence hill farmer—whose lot it is there job to try and better—Nepali economist must try to traverse the distance from ´economy´ to ´political economy´ of the hills and bring the latter to center stage. Without addressing issues such as control over terms of trade and risks of one-sided dependence (which the subsistence farmer understands), it will not be possible to move away from conceptual blind alleys such as the “mechanistic efficiency” route of neo-classical economics. Study of the political economy will also force planners to acknowledge the role of values which have thus far been ignored in the teaching, learning and practice of economics.

The hills of Nepal beyond Kathmandu´s valley rim must gain the ability to use the state and the values of nationhood as an institutional resource, instead of themselves being used by a “rent-seeking state” as a place of surplus extraction. Only then may the hill population avoid ultimate marginalisation.

The boundaries of social science must be redefined to subsume politics and economics, and link all the elements that are forgotten by today´s scholars and technocrats, students of the economy who see the trees and count them but forget the forest. Nationalism, role and power of the elites, resilience of the subsistence economy, the biases in technology, function of ,a national economy in an aggressive global capital market,and a host of other issues make up the forgotten elements of statecraft in this day and age.

In the real Third World with its plethora of linguistic, religious, ethnic and other identities, decisions about the future are going to be made in a context of power and loyalties where financial gain is but one of many considerations, and per¬haps not even the most important or overriding. This is even more true of the hills, where pluralism is in everything from ecology to culture.

Today, the plains and coastal zones are thriving economies while the hills of the hinterland stagnate, serving merely as reservoirs of migrant labour and natural resources. It is the role of the economists and planners to ensure that the hills begin to enjoy more than the vapid remittance economy of today. In fact, a post-Cold War world may see regional assertion of such forces as favour the plains — technologies with a plains bias and the maritime economy controlling trade in necessities. All this will only push the highlanders back further against the wall.

An Efficient State
Historically, the fortunes of the hills began to take a downturn with the rise of capitalism and maritime trade in the 16th century. Before this global phenomenon, the hills were a place of security and strategic advantage. The high lander Gorkhalis capable of holding a stretch of the Ganga plains from Avadh to Tirhoot, Shivaji´s Marathas from the Western Ghats able to subjugate for a time anything flat between Bombay and Delhi, the Hapsburgs from the Alps adept at controlling the Danube valley — all were highlanders using their locational advantage to impose political will through military power and reap economic largesse.

Such a privileged position collapsed with capitalism´s ascendancy, which altered the temper of technology and its ability to harness nature. This new form of social relation ship had character¬istic features which previous ways of organising society did not. Even though preceding tributary or kinship societies did use money and did charge interest on its use, what changed under mercantile and industrial capitalism was that both money and technology acquired lives of their own. What was good for the growth of money and technology became good in and of itself. Money and competition for its acquisition, which is but one metric of value in a harmonious society, was elevated above all other human values.

To provide the intellectual justification for accumulating money in order to make more of itself, emerged the discipline known as econom¬ics, which took “efficiency1´ as its guiding moral creed. Previously, it used to be “statecraft” and “civics”. (Gvics as a course of study has disap¬peared from South Asian curricula over the last few decades.) This change in social outlook established the concept of scarcity, previously understood as a temporary aberration in the agricultural cycle, as a permanent feature of the economic landscape. Scarcity, indeed, has been elevated as a deity of the market, and a debilitating trade in necessities emerged to appease it.

This conceptual shift also converted many-splendoured humans into mere statistics, as a labour resource and as mass consumers. Once addiction to marketproduce was assured, capital was safe in that its return was guaranteed in the form of interest or dividend. It could grow con¬tinuously, in the process relentlessly concentrat¬ing societal energy in to poli Meal power, independent of the will of tribal heads or feudal chief tans. This is the social force that hill societies, which till mi d-20th century were based on the tributary (eg, the Rana oligarchy) or kinship (the Rai/Limbu ki-pat) systems had to try to come to terms with.

Objects Strange and Ingenious
The early Hindus, Chinese and Arabs had achieved no mean of eats in science, but technology really did not find a suitable soil to grow in their midst. Akbar in India is said to have consigned a Gutenberg press presented him to a storage god own, and the Chinese Emperor Chien-Lung wrote to King George the III that “I set no value on objects strange or ingenious, and have no use for your country´s manufactures.”

To appreciate the reason for this arrogant indifference to manufacturing, one has to that technology is nothing but science which has commercial value—science which can help money make more of itself, as opposed to science which provides aesthetic intellectual pleasure. Only a society organised around the guiding principle of commercial profit would be able to convert science into technology with money-making prowess.

Technology and the growth induced by it have been guided by certain inbuilt value assumptions. One of them is that of efficiency, which then leads on to technologies of mass production. The other is that of comparative advantage or the belief that one should only do that which one does better, faster, easier, cheaper than others in the global or regional market. This in rum promotes the idea of mutual dependency as opposed to self-reliance. It then converts the historical trade in luxuries which could be stopped or taken up at will into a worldwide trade in necessities which has a life of its own and cannot be stopped.

The idea of comparative advantage auto¬matically pushes those who are latecomers to modernisation — those societies deep in the hinter lands and in accessible hills—tothatendofthe efficiency spectrum where their assets, whether natural or social, are valued for the immediate business task at hand and not for the future potential they may contain. So it is first labour that is brought to the market mill, and hill people have always done so whether as Swiss guards to the Popes, Gurkha mercenaries to the British Raj, or watchmen, restaurant hands, or tea plantation workers to serve the big time commerce of the plains. The value of their social organisation, cultural assets and even natural resources finds itself assessed at zero.

Invariably, because of the nature of capital accumulation and development of technology, the natural resources of the hills are assessed through the eyes of the plains. The Nepali hill population and its hydropower– the jana sakti and the jala sakti in popular political parlane are the two best examples of such marginalisation by the global economic order of the past couple of centuries.

 Gandhi and Prithvi Narayan
The impact of ascendant technology-driven capitalism began to be felt in the Himalaya by the mid-18th century, prompting the Nepali nation-builder Prithvi Narayan Shah to opt for self-reliance in textiles and imposition of restrictions on imports. But lacking technology, this policy was bound to remain defensive. The Rana oli¬garchs who followed Prithvi Narayan tried to follow a similar policy of autarky(or total national self-sufficiency), but under cut their own position by applying it to the people but not to themselves.

Another South Asian nation-builder, Mahatma Gandhi, used autarky in textiles, through the home-spun khadi movement, as a potent political weapon two centuries later. Gandhi´s campaign, too, like Prithvi Narayan´s, was over¬taken by technology and its attendant mass consumerism.

Nation-building under the Gorkha rulers of the hills thus began with a bang but quickly wound down to a whimper because of the im¬perative of mercantile and industrial capitalism. Hardly had the hill nation been militarily united when it came up against economic realities.

The decades of the 1600s had seen a sharp increase in hill population, thanks partly to New World imports such as maize and potato, (which provided much more calorific value per hectare and less effort to grow than the indigenous foodgrains).The economic needs of this growing mass could not be met under the tributary system the feudals wished to maintain. To contain social pressure, therefore, they opened the doors to out-migration. Mercenary soldiers were allowed to join the imperial British Indian army, and mass migration of labourers began to the north Indian plains, the eastern Himalaya, and as far as the sugarcane fields of the Fiji islands. The only assets these mercenaries and migrants brought with them to the market mill were their hands, not the other economic potential of their land or their social assets (such as the guthi and kipat arrangements).

Meanwhile, the Nepali elites too fell victim to the new economic order. A tributary society, extracting surplus but unable to re-invest in profi t-making technology because increasing productivity was not part of the Rana social philosophy, could only opt for conspicuous consumption. And what could be more salacious than “objects strange or ingenious” sold by the merchants from across the seas, especially if these goods were denied to one´s own serfs. The history of Rana rule in Nepal is replete with stories of Belgian cut-glass chandeliers, cars dismantled at the foothills and portered to Kathmandu, and furniture and fashion from the best shops in London.

This failure to cope with the forces and pro¬cesses of capitalism went on to de-legitimise Rana rule after World War II. Just before the start of the War, in the mid-1930´s, there was belated recog¬nition that a pauperised mass could rise in revolt; and a Rana potentate, Juddha Shumshere, did seek British help in 1940 to try to initiate industrialisation in Nepal.

However, lacking an austere Protestant work ethic which contributed to capitalism´s flowering in Europe, the Rana efforts not only resulted in no industrialisation but inadvertently opened the eyes of the plains market to Nepal´s water re¬source — which it promptly began to assess through its own criteria (see the accompanying extract of 1945 secret British Government communication, obtained from the British Library India Office and Records Collection, London).

Today, half a century later, Nepal still has not been able to shake off this pre-ordained track and re-define its water resource development primarily for its own needs, independent of the requirements of the plains.

Watery Grave
While human resource stripped of its social as¬sets and converted into labour for export is a recipe for political and cultural stagnation, a natural hill resource such as water, if valued primarily by non-residents, leads equally ominously towards the inarginalisation of hill economies. Be¬sides what grows on undulating terrain and is found under its surface, the hills have valuable assets generated by virtue of their position, such as tourism and water resources. The former is a volatile resource of fad and fancy, its value forever defined elsewhere unless there is local capacity to package and sell dreams. For too long, the water resources of the Himalaya, too, have been sold as a dream to the destitute population.

The waters of an international river, shared between a hill nation and a plains state, belong both to the upstream and the downstream riparians. Its flow cannot be stopped and the international river is thus truly “common”. What is, however, not common but a purely hill prop¬erty are the gorges where storage dams can be built and the river inclines which impart energy to the water. On the other hand, the market for energy has developed in the plains and is controlled by plains interests. Without a marriage of the two through mutual consent, no resource can be bom.

When high dam technologies are proposed with a view to the plains´ needs for irrigation and flood control, a plains bias occurs in the choice of technology. This is clear in the economic method¬ology and tools used to evaluate the “benefit-cost” of hydropower projects — all are designed to make larger (plains-friendly) projects more attractive.

If a path of sequential development could be adopted giving primacy to hill economic devel¬opment (such as with small hydro from east to west), capital accumulation would occur in the hills. If, however, a path is adopted favouring the plains needs for large high dams, barring a miracle of Kathmandu´s rulers finding unknown strength in bargaining with a plains monopsony market, the hills will only receive some baksheesh —in the form of “cost-plus”.

This economic approach, which has prevailed in Nepal through oligarchy, autocracy and now democracy undercuts hill bargaining power and transfers it to the, plains. When a development philosophy of efficiency is pursued, it will automatically bias the case in favour of the large scale, and, without the constraints of enlightened nationalism from a hill elite committed to its home base and confident enough to embrace the best in the world in an ecumenical embrace, a plains-biased assessment will automatically fol¬low, leading to a further marginalisation of the hill community from its own resource _such as a fabulous gorge.

The Satanic Mill
How both labour and water resources of the hills can be jointly made to cater primarily to the needs of the economic machine in the plains — simply by the economic outlook espoused—is shown in the background maneuvering of the British Raj during World War II, when Nepal indicated its interest in industrialising. The British were con-cerned that allowing Nepal to assert autonomy in the production of goods would undercut the interests of Indian industries. At the same time, Britain was under moral obligation to double its annual “present” to the Kathmandu Durbar (given for the assured supply of mercenaries) due to the extraordinary service of Gurkha troops during the war against the Axis powers.

In what should have been to Nepal an early lesson in foreign aid but for omnipresent national amnesia, the British manipulated the negotiation process to assure that the increased annual present would be used for hydropower development so that the plains could benefit from irrigation and flood control as well. They played on the insecu¬rity of the ruling Rana family which, unsure of its future when the British left India, wanted the “present” doubled and capitalised to present value and handed over.

The notes on how this deal was negotiated (see the 1946 secret communication, above, and infor¬mation circular, overleaf) show that when elites lack confidence in themselves, their intellectual marginalisation is a foregone conclusion. When they are seen to falter in negotiations, the consequences for the nation are grave. The Ranas, as late as.1946, seemed incapable of calculating the present value of a perpetual annuity, and, as the secret memos and the subsequent information circular, make clear, remained satisfied with Rs 25 cores when the British came prepared to part with Rs 3.3 crores.

The inability to understand the rudiments of market tools, profit, and resource assessment had cost the nation equally dearly some decades earlier during the conclusion of the 1918 Sarda River Treaty, when forest land was swapped by Chandra Shumshere for a much more valuable river bank in a border river. This, indeed, seems to have been but a prerun of the Tanakpur negotiations and the on going deadlock with India in which Nepalis seem incapable of assessing the value of a national resource (in this case a border river),bargaining a deal, and moving on to better and more productive ventures.

Quid Pro Quo
The nature of the hill-plain interactions in the context of expanding capitalism is such that issues of market access, control of trade and natural resources and profit potential for the stronger party takes precedence over abstract friendship be tween nations. InNepal,thecurrentbugbear is the 1950 Treaty of Peace and Friendship with India, signed by the last Rana Prime Minister even as a democratic upsurge was set to topple the dynasty a few month later.

Therefore, while valid, Nepali minds regard this Treaty with some distaste. Its provisions assure free movement of people be tween the two countries and allow for an independent path of development forNepal, but only after taking due consideration of Indian security and trade sensi¬tivities. No such obligations towards Nepali con¬cerns hamper India, however, which is why the 1950 instrument is regarded by many as unequal and unfair.
Recovering the lost pages of history from the limbo of national forgetfulness, one can conclude that even if white masters had not handed the Raj over to brown masters in 1947, the 1950 Treaty would have been essentially the same, since the imperatives of the political economy had not changed. The 1950 Treaty was born of the funda¬mental forces of global capital at work in mid-century, and merely changing the skin-colour of the driver of this economic machine would not have prevented it being what it is.

As long as Nepal was a feudal subsistence economy, it did not matter enough to formalise a treaty beyond what was agreed in 1816 and 1924; but the moment Nepal wanted modern amenities through industrialisation, and more importantly, when Nepal showed signs of staking a claim to a part of the market, a power born out of trade in necessities could not undercut its own base. The British were not willing to relinquish their control over Nepal´s access to the sea, nor were they ready to give up what to them was a captive hill market. Allowing Nepali manufactures a share in that market—and worse, the larger Indian mar¬ket — could not be done without a quid pro quo, such as the development of Nepali hydropower for the benefit of the plains (see secret notes of 1-12-1944:).

The quid pro quo basically calls for an integration of the hill economy with that of the plains. The philosophy of neo-classical economics in vogue within the corridors of power, be it Singha Durbar or the World Bank, sees the complementarity as innocuous and even beneficial. But there are unanswered questions of equity.

At the theoretical macro-level, building a high dam in Nepal is seen to increase the size of the economic pie. This is seen as inherently ben¬eficial, even if many hill villages get drowned by permanent flood (which is what a reservoir is) to prevent seasonal flooding in the plains. But in¬creasing the size of the economic pie cannot be good in itself, unless one can prevent the marginalised population from receiving a smaller share of the benefits than they did before — which is what tends to happen.

permanent flood (which is what a reservoir is) to prevent seasonal flooding in the plains. But in¬creasing the size of the economic pie cannot be good in itself, unless one can prevent the marginalised population from receiving a smaller share of the benefits than they did before — which is what tends to happen.

Privatise the Lot
There are other questions of who gets how much of the benefits that economics as practiced has been unable to address satisfactorily. The current fascination with privatisation in Nepal is case in point. While it is perhaps justifiable on grounds of economic efficiency, privatisation as being practiced gives “democracy” only to those who have capital — and where has capital accumulation occurred but in the plains? Money stashed in chests, stockings and even banks near and far— the predilection of all hill elites—is to passive to be capital. While the Nepali upper classes are, even today, amassing fortunes, by and large it is the plains eilte that is generating capital.

Governments sensitive to these value considerations do not see money as the only criterion in decision-making. They tend to tread cautiously if they feel that the benefits from the expanding economic pied ue to private efficiency are not being distributed equitably.

The current spate of privatisation of state-owned enterprises in Nepal, of course, has little to do with the initiatives of a Nepali Congress government that came to power in 1991 professing democratic socialism. They were planned in the mid-1980s, but could not be implemented because of the sensitivities involved.

(A World Bank assessment of Nepal´s economic performance, under the Panchayat and at the height of the lndian blockade, notes in june 1989: “An action plan for public enterprise divestiture was prepared, but its subsequent implementation was side-tracked when the high-est bidders for certain public enterprises were non-Nepalese, some of whom had extensive hold¬ings in Nepal, and the Government was not prepared to proceed further.”)

In the 1990s, however, a democratically-elected government provided the legitimacy that was able to override such concerns.

From the perspective of a social science that is broader than neo-classical economics, it is clear that popular sensitivities can never be killed: they can only be painted over, to lie festering and waiting for an outbreak of fever years down the road. If the integrating of the hill economy with the global market (represented by the the plains) is not equitable enough, all the gains from efficiency can be brought to naught by such a fever.

The present approach to privatisation as¬sumes a borderless world inhabited by a tomised individuals with no group interests they hold valuable. But the world does, and should have, borders — not to prevent the flow of noble ideas or to stop international travel and interaction — but to give a people with a sense of shared his¬tory, security from being subjugated by a de-meaning dependency on necessities controlled by outsiders through a biased terms-of-trade.

Only a well-regulated border will allow “national economic development”. That is how Ja¬pan, the East Asian Tigers and, indeed, even the United States have made it as first-rung econo¬mies, free-market rhetoric notwithstanding. If Nepalis want Nepali “national development”, they have to begin by defining the boundaries of that arena, the first prerequisite being a well-regulated frontier.

Elite Fatigue
Nationalism is an attribute of a country´s human resource, and A, sense of shared history among a people giving rise to commonly shared elements of faith considered inalienable and self-evident shape the institutions of a country and define the nation. Global capitalism´s need for labour in its raw form has no use for such an accessory. The collective identity that resists what the market is pushing and bargains as one is anathema.
Nationalism´s collective identity sets up countervailing values, as was realised by the Russian czars after the Crimean War, and by the Japanese during the Meiji Restoration. The East Asian Tigers, too, grasped after 1945 that in the age of global capitalism, nationalism, as well as the values and institutions f ostered by it, can only survive if it is in active partnership with national capital.

In hill societies undergoing unending marginalisation today, the elites have failed to realise this fundamental imperative — to use the state and nationalism as a resource. True to the adage that patriotism is the last refuge of the scoundrel, nationalism has often been used as a shield for further exploitation of one´s very poor.

The commitment of the elites to their own society as well as a continuous demonstration of their faith in the structure which made them elites are important features of national capitalism. Participating in capital flight, whether through clandestine money transfers or out-migration of highly trained scions to the First World, is a statement of apprehension and doubt about the viability of nationalism.

The state has remained “rent-seeking” un¬der the Ranas, under the Panchas and, sadly, under the democratically elected Nepali Congress government as well. While the Rana rule is a memory, and the power of royalty has been severely curtailed, today it is the hefty commissions in making large pur chases for development projects, or renting out state patronage through licenses and permits, that is driving the newly forming political elite away from hard but correct decisions on behalf of the people.

The net result? The masses are poorer be¬cause there is no defender of their social wealth expressed through their institutions. The custodians of national interests have turned rapacious, wringing the surplus out of their citizens´ misery. Nepal´s elites are the gods that have failed.

In Praise of Subsistence
When the state has been weakened as a resource, partly through bad historical covenants but mostly due to poor elite commitment and misuse of the state apparatus, fortunately, the economy does not deteriorate into nothingness. The very resilience of the subsistence economy, which “devel¬opment” seeks to replace, protects the popula-tion. The formal economy disintegrates and dissolves into the family- and kinship-based informal one, keeping the hill economy alive, with the state assuming a secondary or even hostile role.

The informal economy based on a rainbow pluralism of economic units is to the hills what biodiversity is to the world´s gene pool: it is the mostreliable means available for preserving socio-cultural diversity. In the face of the McDonaldisation of the economy, the homogenisation of culture, and a push towards the economy of large-scale efficiency, the infor-mal economy preserves diverse social systems which are efficient and stable within their niches but may not look so to a global planner.

During the Indian blockade of 1989,Nepal´s formal sector was as good as finished. Life in Kathmandu was paralysed and long queues were everywhere, for every thing. In parts of rural Nepal not yet affected by the togh way culture, however, the only scarcity that affected the inhabitants was that of kerosene for their tukki lamps. Their other necessities were met through linkages and transactions in the informal economy outside the ken of state-led structures. The virtues of self-reliance over economic efficiency was brought dramatically home to the Nepalis all across the nation as self-reliant pockets, including some villages with their own micro-hydro plants, survived without a missed beat.

The question of unilateral dependence and surrender of the control over terms of trade are the basic issues of domestic housekeeping in any national economy, and the lessons to be learnt are not to be found in seminar halls of big-name universities, but in the experience of the subsis¬tence communities of the hills. Unfortunately, these 1989 lessons in self-reliance seem to have been quickly forgotten in the aftermath of democracy, even by those who benefited from the blockade´s direct effect of weakening and de-legitimising the Panchayat system.

Even if neo-classical economics sees it only as a constraint, there is intrinsic value in self-reliance, and mass-opting for austerity and against indecent consumerism. Such a movement can only be made fashionable by public figures in all walks of life whom the masses look up to, not by those who slink abroad at first whiff of crisis to surreptitiously protect their investments.

The inability of the hill elites to adopt austerity at least till national development has taken place has encouraged a consumerist culture and placed before the masses the ideal of conspicuous consumption. The models of Prithvi Narayan or Mahatma Gandhi, with their philosophy of frugality with seli-respect, is in irreconcilable conflict with the consumerist ideology of opulence without dignity, as espoused by the rulers from Rana times to this day.

A conflict such as this cannot be reconciled within the current economic thinking, and can only be resolved by a socio-political movement that can inculcate non-consumerist values. After all, followers of Gandhi did adopt frugality with dignity to defeat the mightiest empire of the day. It was basically a political victory of economic minking which placed high value in having some form of self-control over the trade and consumption of necessities.

Until a time hill polity is strong enough to promulgate such an economic philosophy, the hills are condemned to remain at the fringes, mere places from where the water flows, the stones roll, and the impoverished trudge to the plains in search of menial wages.

Gyawali is a water engineer, resource economist, and chairman of Swabalamban, a grassroots organisation working with the marginalised communities of rural Nepal.