The roads of Kathmandu are bumpy and uneven. Houses and other structures along the road are half torn or demolished. One can see the rubbles of the broken structures everywhere. Destruction seems like the destiny of this city.
One of my friends currently living in the US uploaded the picture of a destroyed house in Lazimpat on his Facebook page and expressed his dissent over the government’s destruction of Kathmandu and making it ‘resemble’ war-torn Afghanistan. This is how an outsider views the current road expansion drive. However, the demolition is for the expansion and standardization of roads in the city, which should have happened long back; but at least it is happening now.
Of course, destruction is always ugly and painful. But when the purpose is good, then any such short-term inconvenience can be overlooked. Such destruction in economics is given the paradoxical term of ‘creative destruction’.
The term creative destruction was first coined by economist Joseph Schumpeter (1883-1950), though it can be traced back to Karl Marx’s analyses of the messy growth process in capitalism. Schumpeter popularized it as a theory of economic innovation and growth cycle, which means that economic development takes place out of the destruction of some pre-existing economic order. Schumpeter viewed the Great Depression of 1930s as a natural part of the growth process, which may have been difficult, but was also refreshing and revitalizing for the economy.
Shumpter’s creative destruction—that development happens out of the destruction of some pre-existing order—can be connected historically with the foundation of Kathmandu valley itself. The valley, which it is believed was a lake originally, was created after the legendry Manjushree cut the neck of Chovar hill with his Khadga (sword), let the water drain and made this pond inhabitable. Because of Manjushree’s destruction of the lake, a new city was created, which now enjoys the prestige of being the capital city.
In their recent book Why Nations Fail: The Origins of Power, Prosperity and Poverty, Daron Acemoglu and James Robinson have extensively highlighted the subject of creative destruction as an essential process for economic growth. They have also presented creative destruction as a driving force for modernization. In a capitalist economy, competition gives birth to new ideas, and to new inventions. Those new ideas, new technologies and new instruments of economic development destroy the old machineries, structures, and legacies, replacing the old with new. Because of this process, old technology disappears and workers in old factories lose jobs. New economic actors oust the old ones. The politicians who have been enjoying the benefits of the old system start losing power.
European history of modern economic growth is a good example of the relevance and implication of creative destruction. When the industrial revolution started in the 18th century in England, the landlords and monopolists started losing their privileges and state favors. The new merchants and businesses that used new technology took the resources away from the landlord, reduced land rents and increased the wages for the workers. The new group also started challenging the political monopoly of the aristocrats. Though the old elites lost hold of businesses and politics, the society as a whole was better off. There were better jobs, flexible working hours, and higher wages. Politics become inclusive and participatory, and democracy was strengthened.
Of course, this is not the 18th century and Nepal is not England. The current road expansion work in Kathmandu is not a massive economic movement like the industrial revolution in England either. However, it has been able to give a message that in Nepal too economic development can be ushered in for correcting the old mess. Nepali people can tolerate destruction if it ushers in fruits of development. The fact that in turbulent political times and policy stagnation the road expansion drive is continuing confirms that if there is political will, the economy can be revamped.
Of course there are both winners and losers in this current destruction. After the completion of the current expansion, the city as a whole will enjoy benefits stemming from cost saving, time saving and a modern look, but it is also true that due to the expansion, some people have lost parts of their houses. Compensation is yet to be distributed to them and the state must step in here. The project has also been politicized and several protests were organized. However, no protest could stop it.
Resistance against creative destruction is not a new phenomenon, and is deep rooted in Nepal. We can see this in many of our proposed hydro projects, road project sites and industry and factory sites. The resistance to change comes from the so-called locals, different political parties, and trade unions. Most of them fear that the development project will threaten the privileges and political authority they have been enjoying till now.
When the resistance to change comes from political authorities, it is difficult to implement and internalize reform. In England when Robert Lee invented the knitting machine in 1589 and went to Queen Elizabeth to request for patent, she refused to grant the patent and instead scolded Lee for bringing a technology which would ruin the employment of poor hand knitters. Her apprehension was that the labor saving technology will be politically destabilizing and will threaten royal authority. Thus, historically, politics is an agent of change as well as an antagonist to change. What is critical is how politicians want to present themselves.
The road expansion drive, and the country as a whole, needs a new beginning and introduction of fresh ideas, technology, and involvement of new actors. One of the reasons for our lackluster economic growth is that we fear destruction, or in many occasions we destruct, but without any creativity. Just imagine how Kathmandu would look like if the current roadside demolition is stopped without completing the reconstruction part? We also need to be cautious that non-creative destruction is more disastrous than the status quo. Our politics is failing because we only deal in non-creative destruction.
The author is deputy director general, Inland Revenue Department. Views are personal.