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Economic Inequality in the ‘Democratic’ Nepal: Dimensions and Implications
Unformatted Document Text:  29 political liberalism to negatively affect inequality (Justman and Gradstein 1999; Mahler 2004; Reuveny and Li 2003; Rodrik 1998) where as others have found it to have no effect at all (Gradstein, Milanovic, and Ying 2001). The South Asian experience, however, squarely contradicts these findings, suggesting that the process of democratization and economic equality may not be compatible in this subcontinent (Gradstein, Milanovic, and Ying 2001; Wagle 2006c). Yet, this may or may not hold in Nepal especially given that this country has remained politically volatile even after the restoration of democracy in 1990, with a vulnerable state of political and civil liberties and democratic institutions (Lawoti 2005; Wagle 2006c), which are the hallmarks of a well-functioning democracy. Now that Nepal has already conducted a brief experimentation with the multiparty democracy, it is also time to assess whether a part of the rising economic inequality is due to the democratization of the polity itself, an issue not fully settled by researchers. More important than the direct interface between democracy and inequality, however, are the mechanisms through which this interface occurs in society. While one expects political equality leading to processes and institutions that are responsive to the public, therefore giving rise to more equitable distribution of resources, this appears to be largely lacking in Nepal as demonstrated by a very powerful and successful insurgency stemming from the exclusionary policies of the democratic governments (Ganguly and Shoup 2005; Hachhethu 2004; Lawoti 2005; Pfaff-Czarnecka 2004; Wagle 2006d, 2006e). These constitute reflections of the deep- seated social divisions that this hierarchical, Hindu caste system has perpetuated for generations (Bista 1991; Lawoti 2005; Riaz and Basu 2007; UNDP 2004). Other channels through which democratic governments influence inequality include their economic policies that affect the masses. While the discussion around the economic policies

Authors: Wagle, Udaya.
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political liberalism to negatively affect inequality (Justman and Gradstein 1999; Mahler 2004;
Reuveny and Li 2003; Rodrik 1998) where as others have found it to have no effect at all
(Gradstein, Milanovic, and Ying 2001). The South Asian experience, however, squarely
contradicts these findings, suggesting that the process of democratization and economic equality
may not be compatible in this subcontinent (Gradstein, Milanovic, and Ying 2001; Wagle
2006c). Yet, this may or may not hold in Nepal especially given that this country has remained
politically volatile even after the restoration of democracy in 1990, with a vulnerable state of
political and civil liberties and democratic institutions (Lawoti 2005; Wagle 2006c), which are
the hallmarks of a well-functioning democracy. Now that Nepal has already conducted a brief
experimentation with the multiparty democracy, it is also time to assess whether a part of the
rising economic inequality is due to the democratization of the polity itself, an issue not fully
settled by researchers.
More important than the direct interface between democracy and inequality, however, are the
mechanisms through which this interface occurs in society. While one expects political equality
leading to processes and institutions that are responsive to the public, therefore giving rise to
more equitable distribution of resources, this appears to be largely lacking in Nepal as
demonstrated by a very powerful and successful insurgency stemming from the exclusionary
policies of the democratic governments (Ganguly and Shoup 2005; Hachhethu 2004; Lawoti
2005; Pfaff-Czarnecka 2004; Wagle 2006d, 2006e). These constitute reflections of the deep-
seated social divisions that this hierarchical, Hindu caste system has perpetuated for generations
(Bista 1991; Lawoti 2005; Riaz and Basu 2007; UNDP 2004).
Other channels through which democratic governments influence inequality include their
economic policies that affect the masses. While the discussion around the economic policies


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