Nov 30, 2012

Moral Criticisms of Capitalism: Paul Heyne's Thoughts!


Paul Heyne
Yesterday I stumbled upon a lecture titled 'The Moral Critics of Capitalism' by Paul Heyne. It's a shame that I had never heard of him before. Paul Heyne, as I have come to know now, is the author of the acclaimed textbook "The Economic Way of Thinking" and was one of the legendary teachers of economics in United States. I loved this lecture which happens to be his last public lecture and was delivered on given February 17, 2000 in Seattle.

In this lecture he talks about the moral criticisms of capitalism or as he would prefer to say 'market-coordinated' system. As a person who came to the field of economics from theology, he indeed has interesting perspectives on the morality of free market system. Previously an ardent Marxist, Haynes started reading economics when his friends suggested him that he might be on the right track by criticizing capitalism but it would help him if he studied some economics as well. He says later on he found  that 'almost all of the moral criticisms of capitalism that he had been triumphantly parading around in the seminary campus were misunderstandings'. He argues that capitalism evolves naturally and competition is an inevitable thing as long (Read forever) as there is scarcity.

He also says that there, however, is a very valid moral criticism of capitalism that is often forgotten by the moral critics. Capitalism subverts community which almost every one of us are fond of. He suggests people to find ways to nurture community without destroying the market so that we can get the best of both worlds.

You can listen to the lecture here:
So what do you think? Feel free to post your comments below:

Nov 18, 2012

Destination Nepal


Blessed with mesmerising natural beauty and one of the rarest entourage of natural and cultural heritages in the world, Nepal could easily attract millions of tourists — at least in theory. But the highest number of tourists we have received in a year so far was some 736,215 in 2011, which was short of the initial target of a million tourists by more than one-fourth. Similarly, the tourism sector’s contribution to the gross domestic product (GDP) remains less than four per cent.

Nepal’s tourism potential can be estimated by the fact that the total number of tourists that arrived in Nepal in 2011 was just about one per cent of the total outbound Chinese tourists and about six per cent of the total outbound Indian tourists in the same year. With rapid economic growth and a growing middle class, the numbers of outbound tourists from both nations are expected to increase significantly. Hence, even if a significant portion of either Chinese or Indian tourists could be attracted to Nepal, tourism could play a major role in the economic growth of the country. But this is easier said than done.

Problems galore

For a tourist intending to visit Nepal, problems start at home. Travel advisory warnings issued by foreign governments regarding Nepal during the civil war period are still in place, forcing tourists to reconsider their travel destination. Meanwhile, due to the lack of effective marketing, especially online marketing, Nepal is yet to receive the international recognition it deserves with regards to tourism.

Then comes the somewhat hard to find and unreasonably expensive air travel to Nepal. After major international airlines like Lufthansa, Aeroflot and Singapore Airlines cancelled operations in Nepal, there is no direct flight connectivity between Nepal and Europe as well as Northern America. Expensive ground-handling charges, monopolised by Nepal Airlines Corporation (NAC), has been constantly cited as a prominent problem by other airlines. Similarly, the deplorable performance of NAC has resulted in sign-ificant portion of the money spent by tourists to Nepal going to foreign airlines.

Similarly, the poor condition and performance of the country’s only international airport gives a very shoddy first impression. The continuous labour strikes, bandhs and other disruptions, along with the poor state of tourism infrastructures accentuate the negative image, whereas lack of innovation in the tourism sector have limited the choice of tourists to the decades old and already saturated destinations and activities.

Domestic tourism, which has grown rapidly in recent years, suffers from negligence from both the government and private sector. Inconsistency of policies is one of the factors affecting domestic tourism, for example, though domestic tourists are recognized as tourists, they are not allowed to use tourist vehicles for commuting.

What can be done

First and foremost, a makeover of the NAC is necessary. The public-private partnership (PPP) model could be followed for this, but it will also be necessary to look into other options like full privatisation in case the PPP model does not work properly. Also, incentives to international airlines to operate in Nepal must be improved. To this end, more open air service agreements should be implemented.

Since internet is becoming the primary source of information for citizens around the world, it is imperative that Nepal also focuses its marketing efforts online rather than just the traditional mediums. As China and India are developing as major sources of tourist inflow for Nepal, marketing campaigns should focus on these two countries. But while India and China could be the major source of volume, European and North American nations can be the source of high-value tourists.

Attracting these new sources of tourists requires innovation in the packages Nepal will have to offer. Developing religious tourism could be an effective means of catering to the Indian and Chinese tourists. Hence, the upcoming priorities of the concerned authorities,especially the government and Nepal Tourism Board, should be to develop major religious destinations of the country like Lumbini, Pashupatinath and equip them with appropriate tourism infrastructures.

The discourse related to tourism in Nepal is overwhelmingly focused on dev-eloping tourism for economic growth. However, the fact is, economic growth and development also attract more tourists, especially the high value tourists. For example, Hong Kong, despite its very limited tourism resources, attracts more than 36 million tourists a year and India’s tourism growth has been, in part, a correlation to its rapid economic growth.

With right actions, Nepal’s tourism sector could be the best sector to bring prosperity to the country.

-Surath Giri

Oct 2, 2012

13 shocking facts about ordinary people's life in North Korea


I recently finished reading Barbara Demick's Nothing to Envy: Ordinary Lives in North Korea. My understanding of life in North Korea hitherto was based on my interaction with a North Korean defector who was the keynote speaker on our graduation ceremony of summer course in Hong Kong and a couple of documentaries I had watched, most notably the documentary called “Inside North Korea”. This book, in which Demick follows the life of six North Koreans of various walks of life, provided me a much deeper understanding of what it's like to live as an ordinary citizen in the 'Hermit Kingdom'. Here are the 13 facts about life in North Korea that I found shocking:

1. It is compulsory for every household to have the portraits of Kim Il-Sung, Kim Jong-Il and Kim Jong-Un. Nothing else can be hanged on the wall except the portraits, not even the family pictures. The portraits are supposed to be cleaned regularly with the special piece of cloth provided by the government. The authorities can come for a random inspection any day and any time and having a dusty portrait can land you in prison or labour camp.

2. Even in the best of times North Korea can produce only about 60 percent of the food needed for its population, and it currently cannot afford to import the rest. In the 1990s, more than 1,000,000 people died of hunger and starvation. The hospitals however were forbidden to list the cause of death as starvation. When United Nations and other international provided food for the starving population, the food was taken by the army to feed themselves and sell the rest in the black market. The undernourishment has caused a whole generation of North Koreans to have stumped heights and abnormal body structures. A North Korean child on average is 8 inches shorter than his/her South Korean counterpart because of undernourishment.

3. By 1996, even frogs and stray dogs were almost extinct from North Korea because people ate them in absence of any other food. People even ate grass and barks of trees to survive. Several people were executed for cannibalism as well. Majority of the people who stole things from defunct government factories to sell them for food or started a private business to survive during the famines were later executed for violating the 'socialist' principles and 'giving up to the charms of capitalism.'

4. During the 1980s (still is?) North Korea  was chronically short of chemical fertilizer and needed to use human excrement since there were few farm animals. Each  family had to provide a bucketful each week, delivered to a warehouse miles away. In exchange, they were given a chit  certifying that they had done their duty and that chit would later be traded for food. Failure to provide bucketful of human excrement would result in punishment for the family.

5. Less than 1 percent of the population has access to Internet. The 1 percent consists of elite students and government officials. Majority of the population doesn't know what Internet means. Similarly, until recently general people didn't have access to cell-phones. One of the defectors, whose story has been included in the book, was an elite student in the Pyongyang University and after growing tired of the restrictions that denied him access to knowledge defected to China where he for the first time, found out about Internet. He never returned back.

6. All the outside books, publications, films and broadcasts have been banned. Citizens can legally use radios and televisions only after getting a license and after the sets have been pre-fixed to play the nationals stations only. Anyone found tampering with the radio sets and television sets to gain access to foreign, especially South Korean channels is sent to prison. General public doesn't know till date that man has already walked on moon.

7. There are spies everywhere. Spying on one’s countrymen is something of a national pastime.  Neighbours denounce neighbours,friends denounce friends. Even lovers denounce each other.  Even a small complaint regarding the terrible shortage of food or a joke made about Dear Leader during drunken stupor or a critical remark made regarding the news in the television  attracts questioning and gruelling by the Secret Police and often results in imprisonment of the 'offender'. Children are encouraged to spy on their parents. Children ratting out on their parents and relatives are featured as heroes in newspapers and other medias.

8. Ordinary citizens need a travel permit to visit cities or places other than their hometowns like in the medieval Europe. Ordinary citizens rarely get a travel permit to Pyongyang as it is reserved for the bureaucrats and elites of the army.

9. Until the 1990s, girls  weren’t supposed to ride bicycles. There was a social stigma—people thought it unsightly and sexually suggestive—and  periodically the Workers’ Party would issue formal edicts, making it technically illegal.

10. Most of the cities of North Korea have a fictional history. The government has altered the history to undermine the role of Japanese in their development and glorify the Worker's party. Senior people born before the Korean War are forbidden to talk about the history of the cities.

11. North Koreans currently use a calendar known as “Juche Calendar” which begins in 1912  with the birth of Kim Il-sung . So, year 2012 is Juche 100 for North Koreans. Kim Il-sung is the eternal president of the country.

12. Children are taught from their initial years in school that Japanese, American and Christians are evil and war mongers and it is the Great Leader who is saving North Koreans from being killed or harmed. First grade math book has following questions:

“Eight boys and nine girls are singing anthems in praise of Kim Il-sung. How many children are singing in total?” 

“A girl is acting as a messenger to our patriotic troops during the war against the Japanese occupation. She carries  messages in a basket containing five apples, but is stopped by a Japanese soldier at a checkpoint. He steals two of her  apples. How many are left?” 

“Three soldiers from the Korean People’s Army killed thirty American soldiers. How many American soldiers were  killed by each of them if they all killed an equal number of enemy soldiers?”


All of the larger elementary schools have one room set aside for  the purpose of teaching about the Great Leader, called the Kim Il-sung Research Institute. This room is kept clean, bright, and better heated than the rest of the school. The Workers’ Party conduct periodic spot checks  to make sure the school janitors were keeping the place immaculate. The room is treated like a shrine. Even the  kinder-gardeners know they qrenot permitted to giggle, push, or whisper when in the special Kim Il-sung room.

13. The North Korean society is divided into a hierarchy system as discriminative as caste system prevalent in countries like Nepal and India. Every North Korean belongs one of the three categories, namely - the core class, the wavering  class, and the hostile class . Government officials, dictator's family, relatives and favorites, resistance fighters who fought against Japanese and their families, people who fought for North Korea during the Korean war, members of the Worker's Party with trusted loyalty to the dictator fall in the core class and enjoy special privileges accordingly. Wavering classes consist of people whose loyalty to Dear leader is questionable whereas poorer segment of the population, South Korean POW, Japanese sympathizers fall under the hostile class. Hostile class is the first to suffer any persecution brought on by the government and are assigned the toughest and least awarding jobs. Children from hostile class, no matter how good they are, rarely get an opportunity to pursue higher education in major universities or live in Pyongyang. People from hostile class are constantly under surveillance. If a person from core class marries a person from lower classes, his/her prospects of a good career is doomed.

If you have any more information, please share in the comments below!

Oct 1, 2012

Economic Freedom: The Ignored Agenda


The recently released Economic Freedom of the World Report 2012 by Fraser Institute, a prominent think tank in Canada, shows a bleak picture of economic freedom in Nepal. Nepal’s economic freedom, albeit slightly better than the previous year, still has a long way to go. In the study which uses a measure of 42 economic and political components, Nepal is categorized among the least free economies in the world, ranking 110th among 144 countries. Nepal has scored 6.33 out of 10 which is below the world average of 6.83. So much for the notion that Nepal has adopted an open economy since the political changes of 1990s.

For one, the key to most of our economic ailments may lie in the absence of economic freedom. The prolonged transition and the resulting escalation of chaos, anarchy and corruption have thrown Nepal into a turmoil. The people’s movement of 2006 and doing away with monarchy has failed to live up to the promise of better economic opportunities and better living standards. It is time that our discourse brings the hitherto ignored but most essential component for economic prosperity?economic freedom, from fringe to focus.

Empirical studies have shown that societies with higher degree of economic freedom enjoy higher living standards, higher per capita income, higher economic growth rates, higher life expectancy, cleaner environments, lower unemployment rates and lower infant mortality rates. Moreover, the poorest 10% of the population of economically free societies are better off than the poorest 10% living in economically not free societies.

The importance of a free economy is also heightened by the fact that countries like Hong Kong, Singapore, Estonia, which are relatively small and have limited resources, are among the freest economies in the world and have living standards much higher than resourceful countries like Nepal, Congo, and Venezuela. Contrary to the arguments that economies like Nepal are too small to open up and adopt free market, the sample of freest economies in the world suggests that it is the relatively small countries like Nepal that need economic freedom the most. It is so because countries like these have only one thing to count on for development and prosperity: human ingenuity and entrepreneurship that can flourish only under a system that allows economic freedom to individuals.

It is time that we stop blaming countless factors and actors for our poverty and stagnant economy. For too long, Nepalese have been revolting against one or other political agendas and political changes have come frequently too. From autocratic Rana regime, absolute monarchy, constitutional monarchy and parliamentary democracy to republic, the political journey has been long and eventful. Unfortunately, the economic journey has not been equally dynamic. The basic characteristics of the economic system, although slightly changed with political changes, remain largely the same. Contrary to the limited but effective government required for economic freedom, we have unlimited but a pathetically ineffective government. Virtually no sector of the economy has remained untouched by political interference. From decision of where roads will be built to how an educational institution will be directed are fraught with political wrangling.

Similarly, citizen’s equal access to economic opportunities remains a distant dream because of the nepotist tendency of political leaders to hand out favors to their near and dear ones. The access has not been able to go beyond the small circle of elites with close connections to the leaders. The nepotism in political decision making, even in economic matters is far too evident in the way licenses are awarded ranging from hydro-power projects to new transportation routes. Non-competitive practices plaguing the economy, which political leaders and intellectuals often blame on the market economy, are in fact the result of the government’s inability to provide security of life and property of people daring to go against cartels and syndicates. Even more unfortunate is the fact that such practices are still prevalent mainly because they are backed up by the vested interest of political parties.

Politicization of labor in Nepal has become exemplary in the world. Very few places in the world are so anti-investor and anti-entrepreneur. Very few places in the world have labor and trade unions so intent on killing the golden goose called “entrepreneur”. Nepal has scored 3.33 in the Hiring and Minimum Wage regulations, 4.13 in hiring and firing regulations and 2.05 in the mandated cost of worker dismissal. This is definitely not an encouraging scenario for attracting foreign investment and technology in a country with a serious deficiency of capital. Similarly, Nepal has scored 3.22 in the extra payments/bribe/favoritism category making it one of the most corrupt countries in the world.

Hence, economic freedom, the prerequisite for prosperity, remains absolutely ignored in the current political and economic discourse of Nepal. This will not only diminish our prospects of prosperity but also undermine the promises of the countless revolutions we have had so far.

-Surath Giri

Sep 13, 2012

The Secret of the Successful "Socialist" Sweden


Whenever I get engaged in a debate where I argue that mixed economies, although very promising in theory, get too mixed up too work, I invariably face a statement similar to this: "But look at the Scandinavian countries, especially Sweden. Mixed economy and welfare state is working so well there and in fact  doing better than the free market economies."

Well, Sweden seems to be the ultimate example of the promise of welfare state. But is it really? When a well-functioning and sustainable welfare state seems to elude every nation around the  world, Sweden seems to have turned into reality all the rosy promises offered by socialists. What's the secret of the successful socialist Sweden?

Institute of Economic Affairs has recently published a discussion paper by the Swedish author Nima Sanandaji which has tried to explain the secret. The discussion paper entitled "The surprising ingredients of Swedish success – free markets and social cohesion" makes a few points about the Swedish success which are as follows:

Sweden did not become wealthy through social democracy, big government and a large welfare state. It developed economically by adopting free-market policies in the late 19th century and early 20th century. It also benefited from positive cultural norms, including a strong work ethic and high levels of trust.
 
As late as 1950, Swedish tax revenues were still only around 21 per cent of GDP. The policy shift towards a big state and higher taxes occurred mainly during the next thirty years, as taxes increased by almost one per cent of GDP annually.

The rapid growth of the state in the late 1960s and 1970s led to a large decline in Sweden’s  relative economic performance. In 1975, Sweden was the 4th richest industrialized country in terms of GDP per head. By 1993, it had fallen to 14th.

Big government had a devastating impact on entrepreneurship. After 1970, the establishment of new firms dropped significantly. Among the 100 firms with the highest revenues in Sweden in 2004, only two were entrepreneurial Swedish firms founded after 1970, compared with 21 founded before 1913.

Since the economic crisis of the early 1990s, Swedish governments have rolled back the state and introduced market reforms in sectors such as education, health and pensions. Economic freedom has increased in Sweden while it has declined in the UK and USA. Sweden’s relative economic performance has improved accordingly.

Sweden was a poor nation before the 1870s. As a capitalist system evolved out of the agrarian society, the country grew richer. Property rights, free markets and the rule of law, in combination with large numbers of well-educated engineers and entrepreneurs, created an environment in which Sweden enjoyed an unprecedented period of sustained and rapid economic development. In the hundred years following the market liberalization of the late 19th century and the onset of industrialization, Sweden experienced phenomenal economic development (Maddison, 1982). 
 The complete discussion paper can be downloaded here

So what do you think? Feel free to share you views and opinions in the comments below.

Sep 8, 2012

The Kiwi Revolution: How New Zealand transformed itself


Sir Roger Douglas, the Finance Minister of New Zealand during the initial reforms.

I just watched a documentary about the economic reforms and the transformation of New Zealand from one of the most heavily regulated economies until 1984 to one of the freest economies in the world today.

New Zealand is one of the freest economies in the world making it a prime example of how free markets can make create competitive economies and prosperous societies. However, New Zealand didn't always use to be so. In fact, until 1984 it used to be a paradise of the welfare statists as it used to be one of the most heavily regulated economies among the advanced countries in the world. It was also among the first developed countries to introduce welfare programs when Labour government introduced welfare programs in 1930s.

By 1984, however, decades of heavy-handed state interference in the economy and excesses of Prime Minister Muldoon had taken its toll pushing the Kiwi economy to the brink of bankruptcy.

In an ironic twist of events, the Labour government that came to power in the 1984 elections initiated sweeping economic reforms towards a free economy. The reforms were pushed even further by Nationalist government that came into power in 1988 continued it until 1991 transforming New Zealand into what it is today. The reforms, no matter how beneficial, were very painful though. But I was very surprised by the way Kiwi people accepted the reforms and the way both National party and Labour party put aside their ideological agendas and pushed for reforms and even pushed further reforms initiated by the other party.

Here is the documentary in four parts in You Tube. It is a must watch for anyone interested in economic reforms and free market economics.

First episode: Fortress New Zealand


Second episode: The Grand Illusion


Third Episode: The Great Divide


Final episode: The New Country


Happy watching! By the way, what do you think about the economic transformation of New Zealand? Feel free to share your opinions in the comments.

Aug 23, 2012

How to make good policies? : 10 principles


1. A sound policy has government do only what individuals and associations cannot do for themselves.

2. A sound policy considers long-term consequences over all groups of people not just the short terms effects on one group.

3. A sound policy will enhance: choice, competition and freedom.

4. A sound policy focuses on measurable outcomes, not just inputs and good intentions.

5. A sound policy aligns incentives by moving up the hierarchy of Friedman's Law of Spending.


6. A sound policy would enable governance (like decisions about taxes and expenditures) closest to the people.

7. A sound policy would impose the same standards, norms and punishments for non-performance on governments as are imposed on non-state providers.

8. A sound policy will not sacrifice the rights of an individual for the interest of many.

9. A sound policy is based on the premise that people are responsible, resilient, and self-governing given the right set of incentives and framework of law.

10. A sound policy should often have an expiry date (sunset clause).

(Source: Social Change & Public Policy by Parth J. Shah)