The Economic Cost of General Strikes in Nepal part 1

This post reviews the key aspects of general strikes and analyses the economic cost of such

strikes in Nepal. Data analysis shows that average direct cost of general strikes stood at NRs. 1.8

billion per strike day and NRs. 27 billion per year at current prices during 2008-2013. The lost

output per year accounted for 1.4 percent of the annual gross output. The total accumulated

output loss due to general strikes in the five-year period amounted to NRs. 117 billion. With such

losses, general strikes decelerated annual GDP growth rates in a range between 0.6 percentage

point and 2.2 percentage points during the study period. The impact of general strikes was quick

and significant on inflation and tourist arrival rates. The monthly inflation rate jumped to over 9

percent as a result of two-day general strike while the strike called for three or more days led to

an inflation of more than 10 percent. Similarly, tourist arrival declined over a lag. However, gross

fixed capital formation and foreign direct investment appeared to be less affected by general

strikes, which might be due mainly to their bottomed out levels.

The economy of any country is affected not only by economic factors but also largely by

non-economic factors such as the political system, values and institutions. The political

system plays a key role in determining the pace and direction of a country’s economic

performance. A country with a political system that strives to create conducive

environment and facilitates investment can bring about drastic change in the economy

and achieve higher rate of economic growth in a short span of time. In such economy,

citizens have less motivation for participating directly in political activities as they are

engaged in economic activities. Experiences of developed economies, where people have

less time and interest for political activities indicate this fact. On contrary, in

underdeveloped economies, citizens are exposed to various problems. So, they participate

in political activities knowingly or unknowingly in the hope that their problems will be

solved through political channels. Thus, a large section of population gets involved in

political activities directly or indirectly. As a result, many political parties, their affiliates

and interest groups come into existence in underdeveloped economies. These parties and

activists normally put forth their demands or express their opposition through general

strikes, blockades, lockouts, picketing and other similar activities. Such activities, in turn,

lead to political and economic uncertainty, industrial insecurity, and thus may paralyze

the overall production system.

During the 104 years of Rana autocratic rule and 30 years of Panchayati single party

system introduced in 1960, Nepalese economy could not grow and people suffered from

poverty, illiteracy and malnutrition. After the political change of 1990, people grew

expectations that the new political system would bring better conditions to their lives,

however, the situation could not improve due to political instability and unrest prevailed

in the country. Instead, it turned worse and the economy even became weaker, which

provided a ground to flourish a decade-long armed conflict. After all, the decade-long

armed conflict came to an end in 2006, but political transition prolonged keeping socio-
political agendas in front and the economic agendas aside. In this context, general strikes,

blockades and lockouts organized by various political forces, labour unions, professional

groups, business communities and civil societies have become common phenomena in

Nepal.

Even though people from every walk of life have right to express their grievances and put

forth their demands through legitimate means such as general strikes to put pressure on

the concerned authorities, such activities often create inconvenience to the general public

and bring serious negative impacts on the economy.

Against the above background, this post tries to review key aspects of general strikes

and examine the cost of such strikes to the economy of Nepal.