Economic Consequences of Maoist Extortion

Posted by: Ishwar Khatiwada

Recent closures of some vibrant businesses and industries in many parts of Nepal attributable to excessive extortion by the Maoist group raise serious questions about the qualities of the group’s leadership. Such actions indicate either a lack of basic economic sense or a complete disregard about the future implications of such actions. The economic consequences of such immoral and unjust actions, including destruction of infrastructure, excessive extortion that forces business closures, cripple the country’s already beleaguered economy. Furthermore, the personal mental trauma and negative psychological fear of extortion go above and beyond the monetary costs that can be quantified more easily.

In a poverty-stricken country like ours, economic freedom along with democratic freedom, is the only way to emancipate people from their abject poverty and uplift society towards economic prosperity. The only viable strategy to achieve this noble goal is to create additional employment opportunities for the people. In any country, no government has all the means to create employment opportunities for the entire working age population; however, employment can be generated at more rapid pace by more active involvement of a resilient private sector.

In a country like ours, the small business sector provides the highest share of employment for the working-age population. Any type of extortion/bribes aimed at this sector will give way to closures and layoffs by employers, resulting in more unemployment, deterioration in the earnings of workers and employers, a rise in the poverty rate and an eventual decline in new business formation and expansion.

When small businesses are forced to pay a share of their profits to extortionist, reinvesting and expanding business comes to a halt and little to no new capital is generated. In the absence of such reinvestment and business expansion, these businesses are bound to grow more slowly, creating fewer jobs and lowering productivity. When business fails to grow, all parties in the economy-employers, employees, consumers, and the government are adversely affected. There is also a breakdown in economic linkages to other sectors arising from such forceful closures creating negative multiplier effect.

In the present globalized economy, a country cannot progress economically in isolation, but rather should foster under economic openness and access to the global economy. A sound economic policy calls for creating a supportive rule of law environment for promoting business and investments, creating a global network, building trust with investors both inside and outside the country, and creating more businesses and investment that help generate employment. Myopic views on the country’s economy that are solely based on populist rhetoric to appease ignorant poor people will not help Nepal to achieve sustained economic progress.

Today, leaders of the Maoist rebels are berating our neighbors and Western countries and misleading the public by cleverly falsifying issues of threats to national sovereignty and liberty. The fact is that our nation will be more liberated, more united and stronger when we attain economic prosperity by upholding more modern views on economic development under a more democratic setting. Dissent and disagreement are inherently embedded in a democratic system, but it is imperative for every political group in Nepal, including the Maoists, to rise above petty party politics to find a common ground on important socioeconomic issues.

The ongoing rampant extortion by the Maoists in our country discourages innovation and investment, ultimately lowering economic growth. International evidence on this is clear. How can people trust those leaders who have been a threat to law abiding business establishments that generate jobs, pay taxes to the government, and directly promote economic development? How can people trust those leaders who have been destroying infrastructures built by the taxpayers’ money? There are some critical credibility problems with those supporting extortion and destruction.

No doubt, Maoist leaders may hold sincere commitments towards the country’s development, but their approach is blatantly wrong. What is obviously lacking in these leaders is the quality of good statesmanship. Nepal does not need outdated populist leaders with false rhetoric and empty promises, but do need more pragmatic leaders who can rise above their party dogma and politics and help lay strong foundations for future economic development. The irony is that this populist rhetoric is seemingly appealing to people who are desperate to elude centuries of vicious poverty. In fact, people who are glorifying these populist leaders also need to know the realities behind their populist agendas and slogans.

Our mature media and civil society should undertake a comprehensive effort to check these populist agendas and educate the people about their shortcomings. The Maoist leaders should realize that their own destructive act so far have portrayed them as a threat to economic and business development in national and international business community. The Maoists leaders will need to show some serious commitment and determination to clear their tarnished image on these issues in the tumultuous days ahead.

The article was published in the Editorial section of the Kathmandu Post.

Economic Consequences of Maoist Extortion was last modified: November 21st, 2014 by Ishwar Khatiwada

Blog Comments

  1. Rudra Pandey

    I saw this article on Kathmandu Post too. Great summary of what is going on in Nepal today.

    Good job Ishwar!!!

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