Views of a Nepali Economist

The Secret Document That Transformed China

In 1978, the farmers in a small Chinese village called Xiaogang gathered in a mud hut to sign a secret contract. They thought it might get them executed. Instead, it wound up transforming China's economy in ways that are still reverberating today.

The contract was so risky — and such a big deal — because it was created at the height of communism in China. Everyone worked on the village's collective farm; there was no personal property.

[...] In Xiaogang there was never enough food, and the farmers often had to go to other villages to beg. Their children were going hungry. They were desperate.

So, in the winter of 1978, after another terrible harvest, they came up with an idea: Rather than farm as a collective, each family would get to farm its own plot of land. If a family grew a lot of food, that family could keep some of the harvest. [...]

[...] One evening, they snuck in one by one to a farmer's home. Like all of the houses in the village, it had dirt floors, mud walls and a straw roof. No plumbing, no electricity. [...]

[...] Despite the risks, they decided they had to try this experiment — and to write it down as a formal contract, so everyone would be bound to it. By the light of an oil lamp, Yen Hongchang wrote out the contract.

The farmers agreed to divide up the land among the families. Each family agreed to turn over some of what they grew to the government, and to the collective. And, crucially, the farmers agreed that families that grew enough food would get to keep some for themselves.

The contract also recognized the risks the farmers were taking. If any of the farmers were sent to prison or executed, it said, the others in the group would care for their children until age 18. [...]

[...] Before the contract, the farmers would drag themselves out into the field only when the village whistle blew, marking the start of the work day. After the contract, the families went out before dawn.

It was the same land, the same tools and the same people. Yet just by changing the economic rules — by saying, you get to keep some of what you grow — everything changed.

At the end of the season, they had an enormous harvest: more, Yen Hongchang says, than in the previous five years combined.

That huge harvest gave them away. Local officials figured out that the farmers had divided up the land, and word of what had happened in Xiaogang made its way up the Communist Party chain of command.[...]

Labels: capitalism, china, communism

How the U.S. Lost Out on iPhone Work

Inefficient and Unfair

......there are (at least) four problems with capitalism, which the current crisis has revealed rather than caused:

1. The rise of low-wage competition from Asia, the slowdown in the rate of innovation, and the difficulty of monetizing some innovations has lead to a long-standing dearth of profitable investment opportunities and thus to slow real growth. One effect of this has been that money has flowed into malinvestments instead, creating a tendency towards speculative bubbles and slumps.

2. Top-down control of companies is inefficient, both for Hayekian reasons (bosses haven’t the knowledge or rationality to control big organizations) and because of perverse incentives and selection effects.

3. Capitalism concentrates ownership of (some) risky assets into a few hands, and thus creates greater fragility and vulnerability to crises than is technically necessary.

4. There’s a division between ownership and control. The problem of collective action, allied to the fact that the key asset in many firms is human rather than physical capital, means that shareholders are unwilling and unable to control firms. The result is that they become mechanisms whereby bosses and key workers can tunnel assets away from formal owners to those with real power.

Will emerging markets fall in 2012?

As 2012 begins, however, investors are wondering if emerging markets may be due for a correction, triggered by a new wave of “risk off” behavior........few believe that the rapid economic growth and high trade deficits that Turkey has experienced in recent years can be sustained. Likewise, high GDP growth rates in Brazil and Argentina over the same period could soon reverse, particularly if global commodity prices fall – not a remote prospect if the Chinese economy begins to falter or global real interest rates rise this year. China, in turn, could land hard as its real-estate bubble deflates and the country’s banks are forced to work off the bad loans.

.....The empirical argument is simply historically based numerology: emerging-market crises seem to come in a 15-year cycle. The international debt crisis that erupted in mid-1982 began in Mexico, and then spread to the rest of Latin America and beyond. The East Asian crisis came 15 years later, hitting Thailand in mid-1997, and spreading from there to the rest of the region and beyond. We are now another 15 years down the road. So is 2012 the year for another emerging-markets crisis?

Four keys to a better tax system

• Broaden the base and lower the rates
• Tax consumption, and not income
• Tax bads and not goods
• Keep it simple

Labels: brazil, capitalism, china, emerging markets, iPhone, taxation, thailand, turkey, US

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1. Is Capitalism Dead?

2. Nepal Telecom plans to improve the service quality. Finally!

3. Government to provide jobs to unemployed Nepalese youths.
*All 14 zones will eventually have Employment Information Centers
*Currently, youths who have registered in Model EICs in Kathmandu and Biratnagar will be given jobs
*2332 youths from Kathmandu and 2000 from Biratnagar have applied for the scheme
*35,000 youths have registered for the program for 2011/12
*Rs 1 million has been allocated for current program

4. IMF urges Nepalese government to give more power to the Nepal Rastra Bank, the central bank, to handle sick banks

5. Relationship between Nepalese and Indian inflation

 

It is pretty clear that most of the time, Nepalese inflation always is a few points higher than Indian inflation. The primary reason for this is due to the fact that price of commodities--food or otherwise--consumed in Nepal come from or through India. Therefore, the Nepalese price for the same commodity is a few rupees higher than in India due to factors like transportation costs and retailers' profits. The other reason is also the pegging between NRs and IRs. Any rise in inflation in India has to be accompanied by a few percentage higher rise in inflation in Nepal to avoid any NRs flowing from Nepal into India. The reason why NRs flows to India in such cases is because higher inflation in India means higher interest rates in India to combat inflation. In such instances, if Nepalese interest rates remain low, people will take their money to India to take advantage of higher interest rates in India.

6. Sectoral Contribution to GDP


Like any developing nation, Nepalese agricultural contribution to GDP is declining while services is increasing. The recent surveys from 2010 and 2011 will probably show that agriculture is now only around 30 percent of GDP.

Labels: capitalism, central bank of nepal, GDP, IMF, inflation, nepal rastra bank, nepal telecom