Photo: Axel Drainville / Flickr
Photo: Axel Drainville / Flickr

Neoliberalism, foreign aid and trade unions in Nepal

Interview with anthropologist Mallika Shakya on Nepal's political economy.

The story of the economic transformation of the early 1990s is a fairly well-established one. But the particulars of how neoliberal policies unfolded in different countries, particularly in smaller economies, is often lost in the broad sweep of global history. In Nepal, this narrative has also been eclipsed by overwhelming media and academic attention to the country's decade-long armed conflict between the Maoist rebels and state forces, and the constitution-writing processes that followed. When the economic story is told, decades of changes are often explained through a smattering of macroeconomic indices.

However, a closer examination of those years reveals how market liberalisation, foreign aid and trade-union politics intersected in Nepal. In her recently published book Death of an Industry: The cultural politics of garment manufacturing during the Maoist revolution in Nepal, anthropologist Mallika Shakya looks at Nepal's garment industry, which boomed in the 1990s but collapsed after 2005. She argues that Nepal's neoliberal story can't be told without looking at both international and domestic factors. Shakya, an assistant professor in the Department of Sociology at the South Asian University, spoke to us about the paradoxes of foreign aid, the insularity of Nepal's economists, and the paucity of scholarship on the country's trade unionism.

Himal Southasian: Could you tell us why the story of Nepal's garment industry, as told in your book The Death of an Industry, is significant to understanding Nepal?

Mallika Shakya: I would say that the garment industry was an important part of the evolution of the modern Nepali economy and society. Garment export boomed in the 1990s and was responsible for as much as USD 200 million in exports per year during that decade. For an economy with an export value of under USD 700 million a year today, this was a high figure. Most of this export went to a single market – the Unites States – through a specific trade apparatus called the Multi-Fibre Agreement (MFA).

The garment industry had a very visible presence in the country. In the 1990s and early 2000s, walking around the streets of Kathmandu, one could not help noticing that it was among the largest employers of the urban proletariat. Listening to migrants pouring into Kathmandu from different parts of Nepal, it was clear that one of the biggest pulls was the garment industry.

Mallika Shakya<br />Photo: Nepal Economic Forum
Mallika Shakya
Photo: Nepal Economic Forum

As an anthropologist interested in economics and development, I use the garment-industry data to tell a bigger story about Nepal's modernisation. My book explores how postcolonial nationalism and development seeped into countries like Nepal, which was spared British colonialism, and thus showed interesting deviations.

In the early years of decolonisation, state-building in the Global South had a certain pedagogical element of development to it: a belief that your state gave you a livelihood and dignity. That was what democracy and independence meant at that time. For example, in the Bandung Conference of 1955, the founding fathers of newly declared states like India, Indonesia, Tanzania and Ghana took up teacherly roles to sow imaginations of development among their people to legitimise the new nations they founded and ruled.

Nepal missed the bandwagon of democracy of that era. Its imagination of development was hijacked by the Panchayat autocracy in the 1960s and 1970s. It was only in 1990, when Nepali people overthrew that regime, that citizens' aspirations about livelihood and dignity entered the discourse of democracy and state-building. We can almost say that 'development', as is commonly understood, was the pedagogy of post-Panchayat democratisation in Nepal. The garment industry is really at the heart of all this, as the largest manufacturer-exporter, urban employer and an important vehicle of modernisation during those years.

From being one of the principle drivers of economic growth in the 1990s, garment exports dropped by half in 2005, following the expiration of the MFA. By 2010, the figure had gone down to USD 2 million. I examine the death of the garment industry within this historical context and argue that Nepal cannot be understood without unpacking the idea of development or progress (bikas in Nepali). As anthropologist Dor Bahadur Bista wrote in his masterpiece Fatalism and Development, the paradox of development is a mirage, both in its public appeal and its slipperiness. Very little has been done to differentiate the Panchayat idea of development from its post-Panchayat version and to juxtapose this particular Nepali experience against the global setting.

The story of Nepal's garment industry captures the creation of a new subaltern class in a neoliberal polity, and the cultural aspects of that class's economic agency. This question was especially prominent in Nepal's garment factories with its diverse ethnic makeup: Madhesi, Janajati and Bahun-Chhetri workers shared the shop floor with each other as well as with workers from northern India, most of them working in a relatively well-off neighbourhood in Kathmandu. This make-up had an important implication on the state's attitude towards the sector during its decline, as it saw the industry as being owned and operated by Indians, even though this was not accurate. The garment-industry shop floor should be an eye-opener for those who deny cultural politics in economic policymaking. And I think this makes Nepal an interesting case study in global discourses on the cultural politics of development and state-building.

HSA: What was the Multi-Fibre Agreement (MFA) and how was its impact different in Nepal from other countries, such as Bangladesh or India?

MS: The MFA was at the root of the making and dismantling of the global garment industry. It was a tool of the American trade war. People often think of the MFA as an 'agreement' signed between two countries, but it's not. MFA was a one-sided policy 'arrangement' the United States created to manipulate its garment (or fibre) trade with third-world countries, especially vis-à-vis China. It is a useful reminder of the fact that America's trade war with China did not begin with Trump; it has been around for at least half a century longer.

As early as the 1970s, the US had begun to fear China's prowess in garment manufacturing. As American labour unions took notice of the offshoring of jobs, they began exerting pressure on the government to protect domestic workers by imposing a quota to limit imports. The US government used this quota system as ammunition in a massive trade war.

The MFA was first formalised in 1974. It spelled out precisely how many pieces of garments each country could export to the US. But it also developed an elaborate enforcement mechanism for monitoring it on a day-to-day basis. The MFA cut down Chinese (and Indian) garment exports significantly while smaller (and supposedly 'harmless') countries found their exports encouraged. Nepal was given the highest Southasian quota of 2.3 pieces per capita, on the grounds that its garment industry was the most nascent compared to its neighbours.

Post-MFA, China has clearly emerged as a protagonist in the narrative about garment competitiveness; Bangladesh has joined the ranks as a success story. But what is intriguing about this talk of Chinese and Bangladeshi 'success' is how the realpolitik of international trade is almost completely cloaked in the way foreign-aid discourse preaches development fixes for third-world countries. Stories of success and failure are told as if the country in question enjoys complete economic sovereignty and is on a level playing field with other actors in the global economy. But the reality is that political and financial elites in places like Washington DC tightly control who can and cannot run this race. I have tried to unpack this 'anti-politics' of trade for the global garment industry. Curiously, even though Nepal was the biggest victim of MFA trade politics, we hardly see any analysts of international trade take Nepal as a case study for investigating the MFA-related legal apparatus, as was done for Bangladesh and elsewhere.

HSA: The narrative of neoliberal policy changes in the early 1990s around the world is a fairly well-established one today. What were the specifics of that transformation in Nepal?

MS: There is a risk of misinterpreting Nepal due to regional amnesia: Nepal walked a different trajectory from its immediate neighbours regarding decolonisation and democratisation. I have already discussed how the country's polity remained authoritarian when a large part of Southasia was celebrating independence and democracy. A new establishment came to power in Nepal just as marketisation engulfed most of the world, allowing the neoliberal wave to hijack democracy in the country. It should not come as a surprise that Nepal has been portrayed by bureaucrats of foreign aid as the poster child of economic liberalisation and that its performance on social justice remained weak. If we overlook this particular episode in Nepal's history, we may end up fetishising neoliberalism without understanding its local context.

It is unfortunate that neither economists nor anthropologists working on Nepal have really acknowledged this specificity about the 1990s. Economists are caught in the myopia of tweaking policies without addressing deeper roots; anthropologists leave the Pandora's box of neoliberalism unopened. My book is an attempt to fill this gap: to look at the paradox of development and modernisation through a shop-floor ethnography.

HSA: You describe how the trajectory, both upward and downward, of the garment industry was essentially linked to American trade politics and the conditionalities of international financial institutions. But how much of that decline was a result of the Maoist insurgency?

MS: The story of the death of the garment industry crosses path with the Maoist movement twice: first, as a force that tipped the balance in letting the industry die and thus aggravated the misery of workers and others earning their livelihoods in the garment-industry ecosystem; and second, as the flag bearer of militant (if unarmed) resistance in Kathmandu that channeled the voice of disgruntled garment workers into intensified calls for republicanism, secularism and federalism.

I feel that much work on the Maoist movement in Nepal focuses on guerilla warfare in the mountains. That is an important aspect of the movement, but writing the Maoist movement as a guerilla warfare alone constructs a kind of exotica. I am hoping that my ethnography of an urban frontier of the Maoist revolution will help de-exoticise the scholarship on the Maoist movement.

HSA: A fair portion of your book details the aftermath of Nepal's industrial decline and its impact on both the workers as well as the owners of the garment industries. Could you briefly tell us what happened to them?

MS: I looked into the exodus of people from the garment industry and the country. This included not only workers, but also factory owners, embroiderers and artists, truckers and customs clerks, money lenders and brokers, and union activists, many of whom migrated to the far-flung corners of Malaysia, India, West Asia, Europe and the US. In the book, I discuss both the migration of the former garment businessmen, as well as the union uprising, factionalism and rivalry among workers, many of whom had no other option but to seek livelihoods in dangerous frontiers of war far from their homeland. What comes to mind is the story of an entire demography falling off the edge, as journalist Alex Perry once put it. It is almost a déjà vu of Victorian journalist Henry Mayhew's portrayal of the London street life in the 19th century.

HSA: You talk about the 'paradox of aid' in looking at the impact of foreign aid in the country's political and economic life. What do you mean by the term and what have been its implications in Nepal?

MS: I was alarmed by the hegemony of the aid industry in Nepal, obviously overshadowing the work of those it funds, but more problematically, also influencing those in the government, academia and civil society, who should be challenging the hegemony of aid, but are not. This seems to have allowed the aid industry to sustain a narrative that is rationally unsustainable.

On the one hand, the foreign-aid experts' advocacy of growth supremacy along with ideas of trickle-down effect became an excuse for state inaction on redistributive justice and social protection. On the other, policymakers were so fixated on dealing with the bureaucracies of foreign aid that achieving productivity and competitiveness – which they vigorously advocated in the name of growth – became secondary concerns. In the garment industry, while almost every aid advisory report preached productivity as a yardstick for industrial success, the aid industry did not generate detailed productivity analyses that could set the direction for this industry. Even as Nepali garment businessmen lobbied in the US Congress and Senate for preferential treatment for Nepali exports into the American market, the policy analysts at the World Bank and International Monetary Fund maintained that the Nepalese garment industry deserved to die if the market so desired.

Such competing narratives left Nepal with a policy conundrum, which both acknowledged the importance of the garment industry and dismissed its human implications. This contradictory politics of admission and omission left the industry in the lurch as it hit turbulence. By the time the industry 'died' in the mid-2000s, its perception had been so skewed that the state outright dismissed the human disaster involved, let alone address it.

Although this was what my ethnography showed, I was aware that this unfortunate paradox doesn't exist only in Nepal. I ended up extending my investigation of the paradoxical discourse of aid to probe how these contradictory narratives are constructed and employed opportunistically by aid organisations.

HSA: In your book you stress on the distinction between mass-manufacturers and what you call 'ethno-contemporary' craft producers. Why is that distinction necessary and do industries other than garment follow a similar pattern?

MS: I challenge the notion that industrialisation begins with 'basic' sectors and proceeds to 'complex' ones, or that development should begin with craft but end with mechanisation and mass manufacturing. This teleology worked for the United States and a few other countries, but there is no reason why this should be true for the entire globe. Hong Kong, for example, demonstrates as buoyant a form of industrialisation as, say, Japan or Korea or India, each catering to a different cultural landscape. The diversity of capitalism has been ignored by mainstream economists.

In Nepal, I saw two very different ways of making and selling garments – mass-manufacturing and ethno-contemporary craft work. Instead of one leading to the other, the two seemed to coexist interdependently, drawing on differing cultural capital distributed unevenly among the various cultural groups in Nepal. There were situations where cultural capital trumped monetary capital (as was the case with craft goods) and when material considerations of productivity mattered more (as was the case with mass manufacturing). I felt this was a necessary observation to make about industrialisation in Nepal even though the statistics of national accounting did not allow for nuanced distinctions about cultural capital.

HSA: We noticed the absence of economists of Nepal in the bibliography of the book. What is your assessment of the state of economics scholarship and writing in Nepal?

MS: Perhaps it is the aid hegemony that is to be blamed for how outmoded economics scholarship is in Nepal. Or perhaps it is the insularity, especially among the small circuit of state bureaucrats and their economist protégés, which has made them very inward-looking. Scholarship other than those associated with mainstream ideas of neoliberalism and techniques of neoclassical economics is dismissed as 'not economics'. Data is often confused with knowledge, so much so that statistical gatekeepers and party apparatchiks cloak themselves as scholars. So there is little diversity of opinions and perspectives when it comes to both economic historiography and quest for policy solutions.

I have long argued that countries like Nepal should look for solutions in the global and regional peripheries of academia and planning, and not at the centres. But even as some liberal thinkers who previously advocated free trade and growth supremacy are beginning to reflect on what went wrong for development in the 1990s in Nepal, economists in the country remain arrogant and immune from reflective thinking.

HSA: In contrast to the rich scholarship on urban trade unionism in various cities of Southasia, not much attention has been paid to urban trade-union activism in Nepal. Meanwhile, you depart from both orthodox and heterodox researchers in looking at ethnic and class factors behind workers' movement in Nepal. What did you find?

MS: Since Nepal saw the rise of a radical trade-union movement at the turn of the century – a time when traditional forms of unionism was increasingly considered irrelevant in many other parts of the world – I somewhat struggled to find the right framing to convey my story.

And you are right that there is almost no scholarship analysing unionism in Nepal. I started out by reading anthropology of work from India. But discourses on union-led and other forms of resistance in contemporary India are not about rewriting the nation, but about the support or opposition for certain political parties. Meanwhile, Nepal is going through a process of state restructuring. That is why I did not find it very useful to rely on Indian labour discourses to explain Nepal. I have looked for comparative narratives beyond Southasia, especially in Africa.

I found economic historian Karl Polanyi's framework of 'double movement' more interesting to make sense of what happened in Nepal. Polanyi suggests that the unprecedented rise of amoral free market will have to be eventually punctuated by popular uprisings calling for social protection and social justice. In Nepal's garment industry, workers became disillusioned after losing their jobs once the industry declined. On receiving no support from the state, they went on to build a radical collective movement almost from scratch. It was unfortunate that unions affiliated with the Nepali Congress and the United Marxist Leninist parties were indifferent to the concerns of a newly disenfranchised garment proletariat. The state media echoed the voice of the elites, who dismissed labour grievances as sour grapes of incompetence or delegitimised Nepali garment workers as Indians. The new labour militancy then took up the Maoist banner and challenged the incumbent regime as a whole, thus connecting labour concerns with a wider range of social-political demands calling for a regime change.

Something very similar has been happening in South Africa, with uprisings like the miners' wildcat strike in Marikana, and through vanguard unions like Association of Mineworkers and Construction Union (AMCU). Other Cold War 'frontier countries' – that saw democratisation and neoliberal change around the time the Berlin Wall fell – have similar stories. Now that the two largest so-called left parties have merged in Nepal, what happens to the workers' anti-incumbent stance of the last decade is yet to be seen. Was it sheer opportunism? Will it be co-opted? Will it find a way of influencing traditional unions? We don't yet know. I think it is too early to tell.


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Himal Southasian