September 19, 2014 05:30
Who’s afraid of economic development?
Nepal

By Daron Acemoglu and James A. Robinson: Surely even the most kleptocratic dictator would be in favor of economic development. Economic development means greater income, greater taxes and more stuff to grab, so what’s not to like about it? But actually, it often doesn’t work that way.

In the early 1980s in Takasera, a village in Rukum District in western Nepal, a group of locals decided to begin a development project and bought a Swiss-made water mill which would power machinery such as a press to make oil and a saw mill. The community sent a group of men to Kathmandu who learned how to dismantle the machinery and then put it back together again. The machinery was brought back and successfully put into operation.

 

In 1984, a government official wrote saying that in autonomously undertaking this project the community had “usurped the role of the king” and the mill would have to be shut down. When the locals refused, the police was sent to destroy the mill. The mill was only saved because the villagers were able to ambush and disarm the police.

So why was the Nepalese government opposed to the mill? The answer is that the monarchy and the elite surrounding it, who controlled the government, were afraid of becoming political losers. Economic progress brings social and political change, eroding the political power of elites and rulers, who in response often prefer to sacrifice economic development for political stability.

The mill in Takasera was not the first time in Nepalese history that Nepal’s rulers had tried to block development. Historically, the Nepalese political elite have clearly preferred political stability and the political status quo to development and this had inhibited them from taking the actions which were needed to promote development.

In the 19th century a position of hereditary prime minister, known as the Rana, became the real power in the country and Chandra Shamsher, the Rana between 1901 and 1929, told the British King George V that the British faced the opposition of Indian nationalism because they had made the mistake of educating Indians.

 

He closed down as many as 30 schools in Nepal, not wanting to face a similar opposition in Nepal. He went further and deliberately tried to keep his country isolated, for example by refusing to build a road linking the Kathmandu valley to India in the 1920s. The son of Mohan Shamsher, the last Rana who ruled from 1948 to 1951, infamously argued,

“we cannot possibly take steps which in any way may be subversive of our autocratic authority.”

and this included economic development. So economic development was out.

We’ll see in the next blog that opposition to new technologies is the tip of a much larger extractive iceberg.

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