Kathmandu:

One can get a digital quartz watch for under $100. As against this, mechanical ones, made entirely by hand and termed as, ‘grand complications’ (GCs), may sell for over $1,00,000. A rare Patek Phillipe GC may even cost over a million US dollars.

Why would anyone in his right mind pay so much for a complication - grand or not. After all, the quartz version is as accurate and doesn’t stop for years while the GC requires winding. Yet, some people do want it. If there is a demand, markets will supply it.

However, why are the governments GC’s? Economically, that doesn’t make much sense.

Take for example, the desire of governments worldwide to eliminate poverty, now everyone knows that the way to eliminate your own poverty is to get a job and save. But that simple logic is far beyond the government’s ability to understand. So what do governments do?

They enact laws and regulations which make it difficult for jobs to be offered. Foreign capital coming into Nepal could provide jobs, but the government restraints, controls and in many areas like retail, travel, accounting, and law, prohibits it completely.

To make matters more complicated, it enacts labour laws and other labour ‘friendly’ legislation, which further reduces incentives for businesses to open shop, and, if despite these hurdles they do open, they will try and minimize hiring of employees.

Then there is the grandest of all complications - the income tax which is specially designed to whittle down private capital, hence of business expansions, future prosperity, and jobs.

So what should governments, do? Abolishing regulations and the income tax would be easy, too easy, and therefore that is not the way governments function. Remember government is a GC. Every government pays lip service to being pro-poor, pro-consumer, and against profiteering businessmen.

So what do governments do? They build walls of protection against imports. Their actions - tariffs, quotas, licenses, and outright bans on imports - make the country a high cost economy. Consumers are done incalculable harm, even as domestic businessmen are protected from competition.

Of course, to mitigate the effect of these policies government may sometimes institute price controls or rationing. The effect of this is to send all controlled supplies into the black market. Then the government to mitigate the effect of price controls, will enact laws to punish black marketing which, will then end availability by sending supplies underground. So it goes on.

Governments portray themselves as tourist friendly. The Nepal government for example will say, “Come to our country, it is the only Shangri-La on earth”. And then instead of allowing any airline to fly in, it will try and protect NAC’s turf to the extent of bankrupting the tourist industry; it will make tourists wait at an inefficient government airport in long lines to clear immigration and charge visa fees to boot. Hotels already groaning under the weight of trying to meet expenses with few tourists are compelled to pay VAT, income taxes, and various other levies.

Government is the grandest of all complications, and unlike the GC watch which is available only to those who want it, we all get a GC government whether we want it or not.

(The writer can be contacted at: everest@mos.com.np)