It might seem strange to a layman or someone unfamiliar with one of the works of ingenuity by a genius Nobel Prize winner, Paul Robin Krugman, but yes this madness in the streets and the income of people in the capital city of Nepal can be explained, as is obvious with the theories linked to the theory of New Economic Geography done on developing economies, with this theory of economics.
This could be explained with analogies drawn upon the two factors of discussion here, namely, New Economic Geography and the current scenario of Nepal with prime focus on Kathmandu. So first delving into Economic theory would require outlining what the basic idea is behind the theory. NEG basically explains the agglomeration: process of gathering into a mass- centralization of people and resources in a urban location (my personal definition) as an outcome of contributory factors like economies of scale, transport costs, price differentials inherent to large market size. So it explains why a economic region, economically more prosperous and profitable than other regions tend to attract more prosperity and productive economic development. So instead of developmental economic contributory factors like production and service spreading out, they tend to concentrate in a few countries, regions and cities, which will be more populous and have higher income than rest of the geographic locations.
Drawing this analogy would require a scrupulous eye to retrospect the history of Nepal and its strong inter linkage with Kathmandu at a glance. In the medieval and ancient past, Nepal was merely a small coherence of three smaller states or cities: Kantipur, now Kathmandu, Patan and Bhaktapur; rest of the cities were non existent in the then Nepal. Production and economic development has been confined within these three cities with Kathmandu the more formidable among the three. Even through struggle of years in battle, Kathmandu was, has and will, unless until the government thinks otherwise, be the capital of Nepal. So it has enjoyed prosperous times as the central hub of the entire nation.
It is this reason coupled with centralized political structure, most of the major businesses are headquartered here. All of the ministries are here and with this, almost 90% of the bureaucrats dwell in Kathmandu. Home, temporary or permanent, to more than 4.5 million people of the total of about 30 million population, Kathmandu is the ultimate dream of dwellers from rural regions and other cities. Kathmandu has all the jobs in the world for more of the Nepalese poor and middle class. Yet instead of companies seeking more opportunities in term of human resources, natural resources, and other facilities are reluctant to step beyond the periphery of the city. Hence, less job opportunities in other parts of the nations force more people to flood into the city. So what is the reason behind this reluctance of most companies except few manufacturing conglomerates? This problem is more evident in service industry. The answer is the theory of NEG.
The ever so growing service and business portfolio of Kathmandu has lured many companies to operate in Kathmandu. With more people living in the city, human resource is available here in abundance. The availability of transportation facility has made every street, corner or alley accessible to the city dwellers and manufacturing and service companies. This, accounting for the inflation in transport fare and the per capita GDP growth rate of residents of Kathmandu, has made transportation cost relatively cheaper, note that it is not lower. More people are seen adjusting themselves into the crowded micro buses but their numbers are growing exponentially too; for a comfort seeker micro bus and bus rides appeal less, yet hapless as s/he is, s/he has to wait for long hours in ques for those public transport. This portrays the magnitude of crowd influx in the city; yet people are happy because they are paid higher than anywhere in the country for the same job if they had one as same; the per capita income of residents of Kathmandu is higher than other cities.
This influx of people has seen boom of service sectors like Hospitals, Schools, Colleges, IT offices, and others alike. More people demand higher for these services which aptly backs up the fact that the market place has become bigger and so there is more price differentials as can be inferred from the theory. Even manufacturing plants are lured into operating in the city itself with the current trend of housing sector boom exemplifying the effect of growing market size, which grows evidently with surge in population. The market is growing and so are the market players taking Kathmandu the way of perfect market competition from price and product monopoly en route to relatively cheap products bearing in mind the inflation, apparent in Nepal, more so in Kathmandu. These are only instances of businesses which are creating sumptuous lifestyle for Kathmandu dwellers- a temptation for rest of the population.
With contribution from all these factors scale economies are not too far-fetched, as a matter of fact many companies enjoy this business luxury created with good strategical business planning for their businesses. These very economies of scale have balanced the cost of luxury with factor of inflation minus the factor of income. If we draw a relation between these factors we could say that Cost of Luxury (L) is a function of economies of scales (
So factors like these contribute to trade opportunity maximization in Kathmandu as compared to other parts of the country. Considering all these factors, a micro bus ride is bound to be more crammed than now even if their numbers grow exponentially and the streets will be invaded by more motorbikes, an ominous sign of growing middle class, scene palpable in any developing or underdeveloped economy. Then, a solitude seeking soul wanting to dwell the city for thoughts, which could inspire him/herself to write creatively or innovate, in a cab would be less likely to contemplate ideas than indulging in swearing at the busy traffic jams. Yet s/he is unaware that this nuisance is called agglomeration, a phenomenon studied from the perspective of New Economic Geography in economics.
keep it up man
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