Substitutes and scarcity
In simple economic terms, substitute goods are considered to be those goods that are related to each other in such a way that if the price of one goes up, then the demand for other similar goods increases, and thus its price. For example, if the price of Pepsi goes up; people are likely to switch to Coca-Cola. This eventually leads to an increase in the price of Coca-Cola. Such culture is heavily present in the consumption habits in Nepal, especially where basic utilities are concerned. These issues regularly affect middle- and upper-class families in Kathmandu. The lack of basic utilities such as water, energy and transportation has created many substitutes within these basic utilities, which may be counterproductive for investments in other areas.
Let’s take the example of water in the Kathmandu Valley. An average household needs three kinds of water to survive. The first is water (assuming you can afford it)—and of course its purpose is for drinking. For those who choose not to, or are unable to pay for jar water, there are other options, such as purchasing a filter, purifier, or using gas, kerosene or electricity to heat the water before drinking.
Already, simply for drinking water, there are additional costs involved, thus diminishing the disposable income the person could have invested in more productive economic areas. Having drinking water is simply not enough. We also need to take the water used for cooking into account. Since using jar water is expensive for such a purpose, we rely on tap water, which our Water Ministry supplies on an infrequent basis. So you buy additional buckets to queue in a line in front of the tap whenever possible, or you call the private water vendors to send in their trucks. Furthermore, for cleaning and showering purposes, much more water is needed. This is done by either digging a tube well or by ordering water from private suppliers. Just imagine how much additional income we lose to ensure this most important daily necessity.
Cooking is another major economic activity in Nepal which signals a strong substitute culture. People have begun to use gas cylinders to a large extent. However, the occasional scarcity of gas means you will also need kerosene stoves to cook, or even to have a fire stove installed. You can also opt for an electrical stove when there is electricity. Since you cannot fully rely on any of these options, the only viable choice is to spend your income on one combination or other of these cooking tools.
Thankfully, the recent rains have curbed the oppressive load-shedding schedules we have spent so long planning our lives around. However, during the dry season, you need inverters or solar panels as substitutes for NEA grid power supply to ensure electricity at home. But is having inverters and solar enough? Of course not, since these supply sources, especially inverters, require certain amounts of power from the NEA grid connection—impossible during some parts of the dry season. Therefore, households need to have at least one or two of those emergency lights and other chargers that are connected when the power is on. And still, we need at least a few candles if nothing works. Is this a rational economic system, where a household has to spend money on so many sources of electricity?
If we turn our attention to higher income households, they tend to possess at least one car, but they cannot fully rely on it. Due to traffic congestion, households tend to buy scooters or motorbikes—especially within the Kathmandu Valley. However, the constant scarcity of petrol and diesel, and regular bandas means that investing in a bicycle as well is not a bad idea.
As I have demonstrated, the demand for substitutes based primarily on basic needs has increased in Nepal. This is due to issues of scarcity which ensure that no one can rely on any one product. How this is affecting the economy and income of the people should be an area of great interest to economic policy-makers. If citizens are spending the largest proportion of their disposable income (and time) on products that are considered basic necessities, then where will the money to invest in productive fields, such as stocks, education, health and entertainment come from? Such substitutes ensure much of our income goes towards cultivating various resources to supply basic needs. Therefore, we can argue, there will be less money for people to invest in the service sector: be it health insurance, college education or eating out in a restaurant—an activity that not only provides us with a source of entertainment and a greater feeling of financial and social wellbeing, but can help to boost Nepal’s economy. If the constant battle is to survive, how much time can citizens actually allocate to think and work around issues that do not entail these basic needs?
Dhakal is a freelancer based in Kathmandu
Posted on: 2011-06-12 06:22
Post Your Comment
Today's Paper
The Kantipur in Print
FROM THE PAST 7 DAYS
ENTER KEYWORD OR DATE
FROM THE PAST 7 DAYS
ENTER KEYWORD OR DATE
Abin
All of them discussed the issue. The result was the same...and we have committed to continue discussions on the issue till midnight.
ADVERTISEMENTS
OUR PUBLICATION :
