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Unleashing Nepal: The History of Rent-seeking Mentality

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The second in the series (click here for the first one about the Chakari system) reproducing — with permission from the author — sections from the book Unleashing Nepal by Sujeev Shakya, this is the section Sowing the Nepali Rent-seeking Mentality (pp. 16-18).


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Sowing the Nepali Rent-seeking Mentality

There is a rich tradition in Nepal which encourages the aristocracy and rich land owners to do nothing but tend to the renting out of their land. Upper caste males of the Brahmin, Chhettri and some Newar castes frowned upon the idea of working. The belief was that work was meant for the lower castes and the only dignified service for those of the upper caste was religious activity (for the Brahmins) or military service (for the Chhettris). [The higher cultural value placed on white skin over dark skin, comes from this. Being pale, for example, signified — or was interpreted as, among other things — being privileged enough to not have to labor outdoors in the sun!] The pattern of elite members of society showing an aversion to work, remaining content with doing nothing other than collecting rent and being socially praised for such inactivity, is what I call here the rent-seeking mentality. It has its roots in Nepal’s early history and is a disposition to economic activity that resurfaces in various forms to this day. Till date, we are yet to become a society that believes in the dignity of labour, and finds doing a task as respectable as ordering a task to be done. [Both emphases mine.]

With an agrarian economy lacking private enterprise and facing mounting administrative and military expenses, the Nepali state could only respond to a shortfall in funds by exploiting its primary asset, land. Prithvi Narayan Shah was quick to realize that lacking a strong cash economy and inheriting a weak government revenue and expenditure system, land remained his primary asset. He had to maximize the productivity of the land he owned as it was the only means of increasing state revenue. He therefore made land central to the feudal and economic structure of Nepal and controlled access to it through the pajani system, in which there was no guarantee of continued rights to the land. Below, we will describe the various land tenure systems and ownership modalities that were already in operation in Nepal, and explain how combined with pajani, they eventually weakened the empire.

Birtas were land grants given out by the state to individuals1 with the individual retaining all rights to the produce of the land along with the rights to earn an income from litigations, administrative fees and taxes on the surrounding area. This system placed the Birtawals2 as the effective rulers over the tracks of land which they were renting from the state in return for supplying troops, weapons and ammunition to the expanding empire. If Birta land grants were an effective way to rent out state-owned land to ensure productivity, the Jagir system was an ingenious way to continue the expansion of the empire while running the government at a deficit. Adapted from a system that was introduced by the Muslim rulers in India during the thirteenth century, Jagirs were short-term land grants which were mostly given for military services in lieu of cash salaries. This greatly reduced the cash burden on a state that lacked a strong cash economy, ensured productivity in newly acquired lands and was a successful means of payment, as a large number of land-hungry hill men thought the promise of fertile land in the Terai was worth more than the risk of death in military service.

Besides Birta and Jagir systems of land grants, Guthi land grants were given to temples and monasteries for the benefit of the local community. Rakam land grants were given to craftsmen and skilled workers as payment for their labour. Birta and Jagir started to replace other forms of land ownership under Prithvi Narayan Shah’s rule. For instance, Kipat land was part of a more traditional form of communal land ownership practiced in the Eastern regions of Nepal by Rai and Limbu ethnic groups. Large tracks of Kipat land were converted into Birta and Jagir lands to fund the expansion of the Nepali state. Although the land system adopted by the new state of Nepal facilitated its expansionary steps, in the long run it was to prove a disastrous and costly system for the state. Under this system, the direct relationship between the state and the peasantry was replaced and superseded by the Birta or Jagir tenant. Thus the administration of justice and the protection of the peasantry, which according to Prithvi Narayan’s Divya Upadesh were the direct responsibility of the king and state, were never experienced in that way by the peasants. For the peasantry, the state effectively was replaced by the Birtawal or Jagirdar. The word Jagirdar is still popularly used to refer to someone who has a plump ‘rent-seeking’ job that includes working as a driver in an NGO. [Emphasis mine.]

To make matters worse, the one relationship the peasantry had left with the state was one of exploitation through taxes. The state did not tax Birta and Jagir grant holders as they were land grants given with a tax exemption and so the burden of paying taxes to the state fell on the underprivileged class of peasants who owned small tracts of land compared to the vast tracks owned by the Birtawals and Jagirdars. This required peasants to work on Birta and Jagir land paying a rental fee for the rights to cultivate that land. These rents were often preposterously high as bith Birtawals and Jagirdars tried to maximize their income during their limited tenure on the land. The pajani system ensured that there was no guarantee of continued rights to the land. Since the bulk of Birta and Jagir owners were members of the nobility, they rarely presided over the lands they were granted. Being in Kathmandu made it easier to secure the blessing of the king and earn larger land grants. This meant that they had to contract out the actual administration of the land, further removing the peasantry from any direct contact with the state. This contractual hiring of administrators, called the Ijara system, was also deployed by the state to collect taxes from the peasantry. Till date, the system is perpetuated by political parties which use different village representatives to collect money and propagate the party ideology; this method stems from the same mindset that was operating at the time. [Emphases mine.]

After Prithvi Narayan Shah’s death in 1775, the expansion of the state continued but successive rulers were unable to institutionalize either a strong governance system or a progressive economic policy. The empire thus made little progress — the traditional feudal economic system that was prevalent in Gorkha and the surrounding regions continued. The financial pressures on the Nepali state were tremendous; in 1772, three years before Prithvi Narayan Shah’s death, the annual cost of maintaining an army of around nine thousand strong was about Rs. 450,000 while its revenues amount to at most Rs. 300,000 for the same year.

The nobility’s dependence on Birta grants and Jagir assignments for their own individual affluence created a lot of competition between them. These systems also were in stark contrast to the political and administrative system of the British East India Company, which followed a more modern system of land ownership, taxation, and governance. The two systems came into conflict in the Terai, where local land-holders would get rights to land from both the British and Kathmandu and declare themselves and their land as belonging to either party, depending on what was convenient at any given time. The British were used to having clearly demarcated boundaries and found it difficult to adapt to the more ambiguous Nepali land system. Land rights under the Nepali land system also included rights to adjudicate law in, administer and tax these lands. Further confusing the British East India Company’s administration. These land disputes eventually led to the 1814-15 Anglo-Nepal war.


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1 Only Brahmins during Prithvi Narayan Shah’s time, but to other castes as well by the time of his descendants

2 Birta land grant recipients.

(For more on the Birta, Jagir, and Kipat system and land-reform programs implemented in the second half of the last century and how they impoverished and marginalized the indigenous population of the country, read Dr. Om Gurung’s Social Inclusion: Policies and Practices in Nepal.)



Added after the publication of the blog because of relevance.

Nepali Times (Nov. 14, 2018). Success in Nepal means not having to work. [Added on Nov. 18, 2018.]


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