By Prof. Tone Bleie, Director
Centre for Peace Studies, University of Tromso and
Dev Raj Dahal, Head, FES Nepal
Introduction
Nepal’s post war politics and economy in
these days is characterized by political crisis, poisonous mistrust between
rulers and citizens, interference by foreign forces, deepening inequality, and
economic stagnation as a result of state weakness, brain drain and capital
flight.
From the vantage points of toiling workers in the still swelling
informal urban and rural agricultural and non-agricultural sectors, of somewhat
better-off unionized workers or the small class of stone-rich industrialists,
the unfolding crisis in the European Union(EU) may seem distant from these
ground realties in Nepal. Perhaps the affluent aid intermediaries in the
government and NGOs are the only in Nepalese who so far are alarmed. Indeed,
there are good reasons for worry that assistance from important donors like Denmark, the UK
and Germany
may shrink - if the crisis persists. Reduction in Nepal’s aid volume is one probable
outcome, which arguably might be far from wholly negative from a sustainability
perspective. Europe’s woes and prospects of recovery may expose both
Europe’s and Nepal’s integration in a capitalist system which places
exploitation of labor and nature above human dignity, welfare, democracy and a
sustainable future for coming generations. Europe
is no longer a bastion of prosperity and stability, where steady growth is a
means of redistributed welfare from cradle to grave. Even super-affluent Norway, is
likely to soon face painful crisis management dilemma.
Labor Rights under Attack
Europe’s political mandarins are cutting minimum
wages, pensions and social safety nets to save private banks and the euro, the
European common currency. The saying goes that populations have lived too
opulently, the welfare systems are irresponsibly generous and need to be
drastically reduced. The labor movements in the Germany,
France and Greece, for
example, have to variable degree forged compromise or mobilized on the streets
against the onslaught on workers’ welfare. Huge groups of workers and
pensioners find their entitlements and incomes slashed. Importantly, in
reality, this recent rapid declines in real wages is a last spurt, following
decades of only moderate wage rises or stagnant wages, as the relative wage
proportion of the Gross Domestic Product has fallen steadily. The differences
behind this development inside and outside of EU (in Norway the high profits from oil
and gas production have to be factored in) the overall trend of decline is
similar. When workers and households earn less they have in recent decades
borrowed for consumption and investment (i.e. housing and enterprise).
For long, the banks profited greatly, while ordinary citizen got indebted. When
the borrowing party came to a crash landing, commercial banks faced massive
losses.
Nevertheless, leading political players in EU and the finance
executives – in spite of evidence to the contrary - continue to argue that too
powerful labor unions, overgenerous safety nets and high wages “damage”
economic growth. The reality is that in many European countries the
percentage of workers being unionized have declined dramatically since the rise
of Thatcherism in the late 1970s and early 1980s, which has led to a depression
of workers’ real wages. What is under communicated in public debates is
that most governments in EU, and even Norway’s center-left government,
gave enormous financial support to the commercial banking sector in the crisis
years 2007-2008. Some EU states like Spain got huge cheap loans from the
European Central Bank and the International Monetary Fund, many others borrowed
massively at higher interests from private banks.
These loans had to be paid the following fiscal years, creating
deficits in public budgets and unleashing an escalating crisis which sought to
be handled “responsibly”. What happens if the current crisis management is not
only insufficient, but also out rightly flawed?
Blinkered Capitalism at Play
We see a dramatic development of austerity measures and erosion of
popular power, which is potentially self-destructive for the capitalist
economy. This development is characterized by the EU politicians’
generosity towards private banks, and acceptance of the conditionality that the
states have to cut their public budgets dramatically. Spain is an
illustrative example with massive downsizing of allocations to education and
health. In Greece and Portugal, the
size of pensions for workers and public employers make basic necessities of
life increasingly unaffordable. Elderly and unemployed of all ages flock to
street clinics and kitchens run by charity-based and voluntary associations.
The unemployment rates among youths are soaring to over 50 percent in the worst
affected countries such as Spain
and Greece.
Hard hit are also university graduates who can’t repay their back-breaking
debt, and are desperate to grab opportunities to migrate to relatively
unaffected EU countries such as the Netherlands
and Germany, or to
super-affluent Norway.
It is no longer the welfare or faith of the electorate or citizens which
characterizes political rhetoric, but the important “trust in the free market.”
Another effect is declining tax incomes, which make debt repayment harder and
subsidy to social security measures weak.
The current trends of imposed conditionality on the state for approval
of loans to private banks, tacit acceptance of soaring unemployment, service
cuts, shifts of the reproductive burden to civil society organizations and the
family (and women in particular), are not very dissimilar to the neo-liberal
monetary policies imposed on Nepal and most other developing countries since
the last 20-25 years that bred unemployment, poverty, inequality and increasing
social crises. In the EU states (as indeed in the US) the real economy and labor have
become “gold mines” for the overblown finance capital sector.
Democratic Deficit
This Fiscal Stability Treaty signed by all EU countries except the UK and Czech Republic
on 2 March 2012, seems to secure its ratification by January 2013 from at least
12 countries for its legitimacy. This treaty sets a so-called “golden
rule” for the budgets of all member countries. This rule implies that
structural deficits (budget deficit adjusted for fluctuations) have to be
corrected by decision of Supreme Courts, not by parliaments. The reforms
will have to be cuts in social services and labor markets reforms. The crisis
fund (to be led by finance ministers) is authorized to mobilize funds from the
member countries and the finance markets (subject to the ratings of the rather
non-transparent credit bureaus). A member is irrevocably and without conditions
obliged to provide financial contributions. If a country needs financial help,
it is the EU Commission and the European Central Bank, together with IMF, which
decide if the public debt to an applicant country is “sustainable” and what
“the real need” for financing is. What seems to be underway is a
non-reversible transfer of sovereignty (from parliaments and treasuries) to
these institutions. The Treaty undermines the sovereignty of parliamentarians in
the EU to decide the incomes and expenditures, and transfer powers to the EU
Commission, the EU Court
and the managers of the crisis fund.
What appears to be unfolding is a new phase of building down Europe’s
democratic institutions and welfare systems, a process which got kick-started
with the Maastricht
treaty in 1992 and has been notably reinforced in various EU Summits since the
early 2000s.
Norway’s
Exceptionalism – Will it Last?
Norway is a non-EU country, known worldwide for
trust and closeness between elected politicians, bureaucrats and citizenry, a
well-functioning social democracy and a high level of development aid. It’s
this week 40 years since the first of two popular referendums with a
No-majority vote against membership in the EU. The popular skepticism against
the weak democratic foundations of the union and the intractability and
unaccountability of the EUs powerful technocrats and bureaucrats have
oscillated, but is currently again getting very strong. The pro-EU camp is
currently conspicuously silent. It is a small nation of five million citizens
and its progress is mainly attributable to its governance models for harnessing
of its white (water) and black (oil and gas) “gold.” While the thriving
off-shore industry provides the state coffer with vast daily income, it is just
a matter of time before the mainland-based economy will be affected by the
crisis. Many Norwegians have accumulated debts about double of their annual
gross income and risk facing severe payment problems if the rent level on loans
rise and the inflated housing market face a down-turn. Norwegians might right
now be Europe’s most optimistic citizens, having a low unemployment rate and
continuing a lavish consumerist lifestyle, aided by very low bank rents and
decent income rises, due to a largely intact corporate negotiation
system(between the state and the labor organizations).
This system has withstood the otherwise strong influence of liberalist
management models in the public sector. The per cent of GDP which goes to development
cooperation remains one of the highest in the world. With a predominantly
public education system, including a free university education, the
universities are attractive study destination for youths from crisis-affected
Europe and developing countries like Nepal. If student fees are adapted
to Swedish universities’ standards, there are proponents arguing that Norway cannot
remain “an odd outpost” in a globalized world of market-driven education.
Should the upcoming parliamentary election result (as it look in opinion polls
right now) in a shift of government and the new coalition government include
the populist Progress Party (Framskrittpartiet), the era of fee university
education might be over and Norway may no longer be a world champion of development
assistance. A recent evaluation of Norwegian development cooperation with
Afghanistan 2001-2011 concludes that the effects on sustainable peace and
security are at best elusive. This conclusion fits conveniently the Progress
Party’s rhetoric that development cooperation is a waste of public funds.
Both these not unlikely developments should be noticed in Nepal.
Conclusion
The question today for Nepal is to how best forge its own model of
governance, which incorporates basic dimensions of democratic qualities,
such as transparency, accountability and inclusion of a diverse citizenry,
learning from its own mistakes and from the unfolding crisis management in both
EU and non-EU countries. The “medicine” being applied in EU is not only
“too little too late”, but a flawed liberalist solution. It stimulates only the
–supply-side of the economy –putting several European democracies, welfare
states and peoples under dramatic strains, not the demand side Keynesianism.
The EU members with strong legacies of social democracy, such as Germany, Sweden,
Denmark and Finland play
separate roles in the unfolding political drama and pursue different coping
strategies balancing sovereignty and integration. Norway has so far escaped the
crisis. With a legacy of people’s sovereignty and referendums ending in
majority votes against EU membership, the country is nevertheless integrated in
EU’s inner market through a comprehensive trade agreement and will increasingly
face pressure against its painstakingly built social democratic institutions. A
least developed country like Nepal
is still far more vulnerable, because of its weak public institutions,
personalized party system and civil society and misuse of economic resources.
The crisis has hit the “old social contract,” while the recent political
in-fighting over state control and erosion of legitimacy of the old state
edifice, have hindered a new convergence into a genuine national system of an
accommodative state, real economy and full citizenship. The warning message
from the European scene is that unilateral adjustment of labor and poor
citizens can incubate a model for authoritarian cannibalistic capitalism,
political extremism, a weakened state and defective democracies.
Nepalese crisis management must reorient the economy to production of
basic needs to stem the impending food crisis, modernize informal sectors (as
an entry point for agro-based industries) and look at areas of competitive and
comparative advantages for the production and export of goods. The unfolding
failure of the neo-liberal experience requires more reflection and analysis by
Nepalese planners and policy makers of the cost of deviating from “the golden
mean” and to understand the limits of external conditionality to its
indigenous development and post-liberal constitutionalism. A more
self-reflective learning from the still stable, but not flawless social
democracies of Europe, tells us how democratic
values, institutions and a demand-driven economy need to balance better private
profits and public goods. Our ultimate concern should be how to enhance the
self-dignity of a diverse citizenry and to improve the conditions of majority
of poor adults and children - making them the real owners and beneficiaries of
a rule-governed regime led by true and humble democrats. Crisis fluctuations
seem to be an inbuilt feature of the capitalist system. But its current
destructive character even in the Euro-Atlantic so-called advanced countries
should make us realize it soon no longer business as usual.
Source: The Reporter Weekly,
October 1, 2012
