The Causes of Unemployment: What’s Being Overlooked?

Wages Are Determined by Productivity, Not Employer Benevolence

Walter Edward Block, an American economist and anarcho-capitalist scholar, occupies the Harold E. Wirth Eminent Scholar Endowed Chair in Economics at the J. A. Butt School of Business at Loyola University New Orleans. He is also affiliated with the FEE Faculty Network.

Concern over unemployment has become nearly universal. Commentators, analysts, and economic observers are producing a steady stream of explanations in an effort to diagnose this persistent weakness in the economy.

Their theories are varied, imaginative, and often persuasive. One frequently cited factor is the sharp decline in the quit rate. Workers who might once have moved on to greener pastures are now remaining in their current positions. At first glance, this argument has merit: fewer resignations mean fewer vacancies and, consequently, fewer opportunities for new hires.

Yet the picture is more complex. Employees are likely staying put because they doubt better prospects await them elsewhere. In that sense, elevated unemployment may be helping to create this trend rather than merely resulting from it. Moreover, a workforce that is largely content with its existing positions can hardly be viewed as evidence of economic decay. If people are satisfied with their employment circumstances, that is generally a sign of stability, not distress.

Others attribute unemployment to a mismatch between the skills workers possess and the abilities employers are seeking. This explanation certainly points toward an important issue. As Wall Street Journal columnist Allysia Finley observed: “Government subsidies and public schools have funneled too many young people to credential mills, which churn out grads who lack the skills that employers demand. Many would be better off training in skilled trades, for which demand is enormous.”

Viewed through this lens, the challenge is not simply one of labor supply versus labor demand. Rather, it is a disconnect between the qualifications being produced by educational institutions and the practical capabilities businesses require.

However, the most significant imbalance between supply and demand may lie elsewhere—in minimum wage legislation. Strikingly, this factor is often absent from mainstream discussions of unemployment. Yet students in introductory economics learn a straightforward principle: when a legally imposed minimum wage exceeds the market-clearing rate, the quantity of labor supplied surpasses the quantity demanded. The result is unmistakable. The gap between those seeking work and the jobs available to them is unemployment.

Imagine that the market wage for a particular category of labor settles at $20 per hour. This figure reflects the approximate value that workers in that role contribute through their productivity. In economic terms, compensation tends to mirror the value employees add to a company’s revenue stream. While markets rarely achieve perfect precision, competitive forces continually push wages and productivity toward alignment. Whenever a significant discrepancy emerges, market pressures work to close it. Compensation is not primarily an act of generosity; it is a reflection of the worker’s contribution to the enterprise.

Now suppose legislation requires employers to pay $30 per hour for that same position. New York City Mayor Zohran Mamdani has proposed raising the minimum wage to that level by 2030, even promoting the memorable slogan “$30 in ’30.” It is difficult to imagine a catchier phrase.

But what becomes of a worker whose productivity generates only $20 per hour in value? An employer hiring that individual at the mandated rate would absorb a loss of $10 for every hour worked. Sustained over time, such losses would threaten the viability of the business itself. No enterprise can remain healthy under those conditions.

Supporters might respond that a more modest minimum wage increase would avoid such consequences. That is true—to a point. A wage floor of $5 per hour would not endanger the job of a worker capable of producing $20 worth of value each hour. Yet consider someone whose productivity amounts to only $2 per hour. Hiring that individual at $5 means losing $3 for every hour of employment, a proposition few businesses can afford.

One of the most persistent misconceptions is the belief that, without minimum wage laws, wages would collapse toward zero. History suggests otherwise. Minimum wage legislation did not emerge until the 1930s, yet labor markets functioned long before then. Wages rose and fell according to the familiar forces of supply and demand. During periods of labor scarcity—such as the years following the plague in Europe—workers gained greater bargaining power, and incomes climbed accordingly. Their labor was valuable because it was needed.

From this perspective, unemployment stems not from the free operation of markets but from distortions imposed upon them. Wage controls, central-bank manipulation of interest rates, and government efforts to sustain businesses that cannot survive on their own all interfere with the market’s natural balancing mechanisms. These interventions, it is argued, are among the primary forces that generate unemployment.

Sources:

Allysia Finley, “Why Unemployment Is Rising Among Young College Grads,” Wall Street Journal, February 8, 2026.

Thomas E. Woods, Jr., Meltdown: A Free-Market Look at Why the Stock Market Collapsed, the Economy Tanked, and the Government Bailout Will Make Things Worse (Washington, DC: Regnery Publishing, 2009).

Could Artificial Intelligence Finally Deliver the Promise of Central Planning?

Even the most sophisticated algorithms can only work with information that already exists—and meaningful economic information emerges from markets, not planning boards.

In the early 1970s, Chile embarked on one of the most ambitious economic experiments of the modern era.

Seeking to reshape the nation’s economy through technology, the country’s socialist administration enlisted British cybernetics expert Stafford Beer to create a computerized system capable of overseeing economic activity on a national scale. The initiative became known as Cybersyn.

Under the plan, factories throughout Chile would continuously transmit production data to a centralized network. Government officials, seated in a futuristic operations center lined with screens and control panels, would monitor economic performance in real time. Armed with enough information and computing capacity, planners believed they could guide the economy with scientific precision.

The vision embodied a long-cherished aspiration of socialist thinkers: the belief that advanced planning could outperform the spontaneous order of markets.

Yet Cybersyn never achieved the breakthrough its architects envisioned.

As the decade unfolded, the Chilean government imposed price controls on thousands of products while extending state ownership across major industries. The consequences were swift. Shortages became increasingly common, underground markets flourished, and the economy grew harder—not easier—to coordinate. Rising political tensions eventually culminated in the military coup of 1973.

To many observers, the conclusion appeared straightforward: centralized planning was incapable of reproducing the intricate coordination that markets accomplish every day.

Still, the dream refused to fade entirely.

The New Argument for AI-Driven Planning

The rapid rise of artificial intelligence has breathed new life into an old debate. If socialist planners of the past failed because their technology was too primitive, could modern AI finally overcome the obstacles that defeated them?

A number of contemporary commentators have suggested exactly that. In 2019, Jacobin published an article titled “Yes, a Planned Economy Can Actually Work,” arguing that vast datasets combined with powerful algorithms could potentially solve the classic calculation problems associated with socialism.

Even some economists have entertained the possibility. Before being awarded the Nobel Prize, Daron Acemoglu noted that advances in artificial intelligence might make centralized planning more viable than previously believed, implying that corruption could prove a greater challenge than technical feasibility.

At first glance, the argument carries weight. Artificial intelligence can absorb and analyze staggering amounts of information at speeds no human planner could ever match. Compared with the tools available to previous generations, today’s computational power is extraordinary.

But does greater computing power actually solve the fundamental problem?

To answer that question, it is necessary to revisit one of the defining economic debates of the twentieth century.

In 1920, Austrian economist Ludwig von Mises published his influential essay “Economic Calculation in the Socialist Commonwealth.”

Unlike many critics of socialism, Mises did not build his case around corruption, incompetence, or selfish incentives. Instead, he granted socialists their most favorable assumptions. Imagine, he proposed, that planners are highly intelligent, entirely benevolent, and sincerely devoted to public welfare.

Even then, he argued, the system would fail.

The reason centers on the indispensable role that private property and markets play in generating prices.

When the state owns the means of production, markets for capital goods cease to exist. Without markets, there can be no genuine prices for machinery, raw materials, equipment, and countless other productive resources. And without prices, rational economic calculation becomes impossible.

Prices are far more than numbers attached to goods. They are signals created through voluntary exchange, conveying information about scarcity, demand, and competing uses for resources.

Consider a straightforward construction decision: whether to build a floor using wood, ceramic, or marble. Prices instantly reveal valuable information about the availability of each material. If ceramic becomes scarce because demand rises elsewhere, its higher price encourages builders to consider alternatives. If timber supplies tighten, the rising cost of wood alters the calculation once again.

No one involved needs to understand every underlying cause. The price itself carries the essential message.

Remove that signal, and decision-making begins to resemble navigating through fog without a compass.

Several decades later, Friedrich Hayek expanded this critique in his landmark 1945 essay, “The Use of Knowledge in Society.”

Hayek argued that the central economic challenge is not one of computation but of knowledge. The information required to coordinate a modern economy is not stored in a single repository waiting to be processed. Instead, it is scattered among millions of individuals.

Much of this knowledge is deeply local. It reflects particular circumstances, shifting consumer preferences, temporary opportunities, specialized expertise, and practical experience rooted in specific times and places.

A significant portion is also tacit. People frequently possess useful knowledge they cannot fully articulate or quantify.

Markets solve this problem by continuously generating and transmitting information through prices. Central planning, by contrast, lacks an equivalent mechanism.

Some advocates of technology-driven planning assume Hayek’s argument merely reflected the computational limitations of the mid-twentieth century. But his critique was never primarily about processing power.

It was about institutions.

The crucial information needed for economic coordination does not exist in a ready-made database waiting for collection. Much of it comes into existence only through decentralized decision-making conducted within a framework of private property and voluntary exchange.

Artificial intelligence excels at analyzing data that already exists. What it cannot do is replace the decentralized processes that create that data in the first place.

An economy is not a machine that can be steered from a control room. It is a living, evolving system shaped by countless independent choices made every day by individuals, businesses, and consumers.

For that reason, artificial intelligence does not eliminate the socialist calculation problem. While algorithms may process information at unprecedented speed, they remain dependent on meaningful economic signals generated elsewhere.

For more than a century, every major technological breakthrough—from early computers to big data and now AI—has inspired predictions that governments would finally be able to manage complex economies from the center.

The technology changes. The argument remains remarkably familiar.

Artificial intelligence can undoubtedly analyze information with extraordinary efficiency.

But only markets possess the ability to discover that information in the first place.

ENERGY RELIABILITY IS ONLY AS STRONG AS ITS MOST VULNERABLE LINK

Expanding power generation while neglecting the final stretch of delivery infrastructure is like building half a bridge and expecting traffic to flow.

This January, Tennessee received a stark lesson in the realities of electricity—and in the hidden vulnerabilities that can bring an entire system to its knees. Winter Storm Fern swept across Middle Tennessee, coating communities in thick ice. Tree limbs snapped under the weight, power lines collapsed, and at the height of the crisis nearly 230,000 households were plunged into darkness amid dangerously cold temperatures. Across the state, 23 lives were lost as a result of the storm, while many residents endured outages that stretched on for almost two weeks.

Importantly, the failure did not originate at power plants. Electricity was still being generated. The real breakdown occurred within the distribution grid—the vast web of poles, wires, transformers, and equipment responsible for carrying energy from generating facilities to homes and businesses. When that network faltered, the lights went out.

Warning signs had appeared long before the first sheet of ice formed. Nashville Electric Service (NES) had reduced its tree-trimming budget by roughly one-third despite internal audit reports cautioning that overgrown vegetation near power lines would significantly amplify outage risks. When the storm arrived, those concerns became reality. Fallen trees and broken branches were visible on street after street, triggering widespread disruptions.

What makes the situation particularly striking is that Tennessee has not been standing still on energy production. The state is home to the nation’s first small modular nuclear reactor project under development in Oak Ridge, while the Tennessee Valley Authority continues to expand partnerships aimed at increasing alternative energy capacity throughout local communities. Yet none of those achievements matter when electricity cannot complete its final journey to consumers. Winter Storm Fern exposed that weakness in dramatic fashion.

Whether it is a family home, a manufacturing facility, a hospital, or a massive data center, the source of electricity is often secondary. Reliability is what truly matters. People and businesses care less about where power is generated and more about whether it arrives when needed. Unfortunately, large portions of Tennessee’s distribution network remain dangerously susceptible to the next major ice storm.

Fortunately, the solutions are neither mysterious nor untested. Proven technologies, smarter maintenance strategies, and practical policy reforms already exist and are delivering results in neighboring states. Tennessee has a clear opportunity to strengthen its grid through several actionable steps.

Introduce genuine competition into grid maintenance.

A significant share of the work required to strengthen electrical infrastructure—including underground line installation, vegetation management, and replacement of aging equipment—does not require exclusive utility control. Across Tennessee, qualified private contractors possess the expertise and resources to perform these tasks efficiently. Requiring utilities to competitively bid maintenance projects rather than relying solely on internal crews or preferred vendors can lower costs, accelerate project timelines, and ultimately deliver better value to ratepayers.

Allow resilient technologies to compete and succeed.

Modern grid technology has transformed the way utilities respond to outages. Advanced systems can pinpoint failures instantly and automatically reroute electricity around damaged sections, often restoring service within seconds instead of hours. Rather than waiting for crews to locate a problem manually, smart grid infrastructure acts almost like a self-healing network. According to findings from the U.S. Department of Energy, these technologies can reduce outage durations by nearly 50 percent.

Build on legislative momentum created by the storm.

In response to Winter Storm Fern, lawmakers introduced legislation that would require utilities serving more than 10,000 customers to publish annual reliability reports, develop 10-year resilience plans, and implement structured vegetation-management programs backed by oversight and measurable trimming schedules. These measures represent a meaningful starting point.

Yet transparency alone will not reinforce a single power line. To create lasting improvements, investments must target the most vulnerable corridors first. Resources should be directed toward proven hardening strategies such as automated switching systems, strategic undergrounding projects, and other reliability-enhancing technologies. At the same time, Tennessee should aggressively pursue every available federal resilience grant and funding opportunity already allocated through the Tennessee Department of Environment and Conservation.

The Volunteer State is laying the groundwork for a powerful energy future and strengthening its position as a leader in the sector. But expanding generation capacity without reinforcing the network that delivers electricity to end users leaves the job unfinished. A modern energy strategy requires both production and reliability.

By embracing competition, encouraging innovation, and investing in a stronger distribution grid, Tennessee can not only attract greater economic investment but also ensure that more residents remain safe, connected, and protected when the next storm arrives.

IMF OUTLOOK: ASIA GAINS MOMENTUM AS THE WEST LOSES SPEED

The International Monetary Fund’s October 2025 update to its World Economic Outlook may appear cautiously encouraging at first glance. Yet beneath the modest upgrade lies a far more significant story—one of shifting economic power, evolving trade routes, and a gradual redrawing of the global investment map.

Back in July, the IMF projected global growth of 3% for 2025. Its latest forecast nudges that figure up to 3.2%, while 2026 is now expected to deliver growth of 3.1%. On paper, the revision looks minor. In reality, when measured against a global economy worth more than $100 trillion, even a few tenths of a percentage point translate into vast sums of economic activity.

More revealing than the upgrade itself are the forces driving it. According to the Fund, the global economy is being shaped by two competing dynamics: the economic effects of President Donald Trump’s tariff agenda and a powerful wave of private-sector investment centered on artificial intelligence.

The tariff increases promised during Trump’s 2024 campaign—and subsequently implemented—have proven less disruptive than many economists initially anticipated. The IMF highlights several reasons: supply chains have shown greater resilience, businesses have rerouted trade flows with surprising agility, and widespread retaliatory measures have largely failed to materialize. Rather than steering global economic transformation, the United States increasingly appears to be reacting to changes already underway.

Notably, the IMF estimates that the decision by many countries to avoid broad retaliatory tariffs contributed an additional 0.3 to 0.4 percentage points to global output relative to previous forecasts. At the same time, investment linked to artificial intelligence has emerged as a significant short-term growth catalyst, particularly in the United States. However, the Fund cautions that this surge may resemble a speculative investment cycle more than a lasting productivity revolution. As FEE has noted elsewhere, today’s rapidly expanding AI sector could face growing pains—or even a correction—before reaching its full economic potential.

Despite the upgraded outlook, the IMF remains clear on one point: global growth continues to operate below the pace seen in previous decades. The relatively limited impact of tariffs so far offers two important lessons. First, businesses have become increasingly adept at adapting, whether by stockpiling imports ahead of policy changes or relocating suppliers. Second, the economic costs of protectionist policies often emerge gradually rather than immediately.

The Fund warns that the ultimate consequences of current trade barriers “have yet to materialise.” Inflation remains uneven across regions, while risks continue to build within financial markets. Elevated debt levels, rich asset valuations, and growing interconnectedness between traditional financial institutions and non-bank lenders all raise the likelihood of future market disruptions.

As tariffs deliver less damage than expected, businesses and investors are accelerating a broader strategic shift—one that increasingly favors Asia over the traditional economic centers of the West.

Asia’s Rising Influence

Beyond short-term economic cycles, the IMF report highlights a deeper structural transformation. While growth in North America and Europe continues to moderate, emerging economies—particularly those across Southeast Asia—are becoming increasingly attractive destinations for global capital.

The region’s appeal is evident in the scale of investment already flowing into it. More than $100 billion has been committed across Southeast Asia, reflecting growing confidence in its long-term prospects. India remains a standout example, with the IMF projecting growth of 6.6% in 2025, making it one of the few major economies capable of sustaining robust momentum despite mounting global challenges.

The IMF’s latest projections reinforce this trend. With tariff disruptions proving less severe than feared, multinational corporations and institutional investors are increasingly redirecting attention from the mature economies of the West toward the faster-growing markets of Asia.

Manufacturers are relocating supply chains and production facilities to ASEAN nations such as Vietnam, Thailand, and Malaysia, where tariff exposure is lower and supply-chain flexibility is greater. At the same time, investors are targeting infrastructure projects, equity markets, and strategic industries positioned to benefit from favorable demographics and expanding domestic demand.

As economic expectations soften across the United States and Europe, Asia’s resilience becomes increasingly difficult to ignore.

The artificial intelligence boom is also taking on a distinctly international character. Southeast Asian economies are rapidly establishing themselves as important links within the global AI value chain. Their combination of skilled labor, competitive infrastructure costs, and innovation-friendly policies is attracting growing interest from technology firms and investors alike.

The result is a gradual but unmistakable redistribution of economic opportunity. While Western economies wrestle with slower expansion, persistent inflationary pressures, and the lingering effects of trade disputes, Asia is capturing an increasing share of global growth.

This shift extends beyond a temporary economic cycle. It reflects a deeper transformation in the geography of capital and commerce—one that is elevating Southeast Asia from a supporting role to a central position within the global economy.

A More Adaptive Global Economy

Even with the upward revision, the IMF does not portray a world economy enjoying a full-fledged recovery. Growth remains subdued by historical standards, and risks continue to accumulate beneath the surface.

Yet the fact that forecasts have moved higher rather than lower sends an important signal. The global economy has demonstrated a remarkable capacity to adapt. Trade routes are diversifying, technology investment continues to accelerate, and capital is discovering new pathways around traditional constraints.

As IMF Managing Director Kristalina Georgieva observed, the world has displayed “more resilience than expected.”

That resilience, however, is not evenly distributed. The global center of economic gravity is steadily shifting eastward, and among the clearest beneficiaries of this rebalancing are the dynamic economies of Southeast Asia. As investors search for growth and businesses seek new opportunities, the region is increasingly emerging not merely as an alternative—but as a destination at the heart of the next chapter of global economic expansion.

WHY AI TAKING OVER JOBS ISN’T THE THREAT MANY FEAR

I often travel between New Orleans, Louisiana, and Vancouver, British Columbia. Since no direct flight connects the two cities, one of the most common routes takes me through Dallas Fort Worth International Airport. After countless layovers, the airport has begun to feel less like a transit hub and more like a second hometown.

And calling it an airport hardly does it justice. The place resembles a sprawling metropolis, complete with its own transportation network. At the heart of that system is the Skylink—a fully automated train service operating around the clock, every day of the year. Trains arrive roughly every two minutes, a fact confirmed by the digital clocks displayed throughout the stations.

These compact two-car trains are far from a luxury. The terminals are separated by such vast distances that walking between them would feel less like crossing an airport and more like traversing a small city. The journey is measured not in yards, or even football fields, but in miles.

What makes the system particularly remarkable is that no human operators are required. The trains function autonomously, moving passengers safely, efficiently, and reliably. Clear announcements warn travelers when doors are closing, identify upcoming terminals, and remind passengers to allow others to exit before boarding.

Now imagine the opposite arrangement.

Suppose every Skylink train required a conductor. Hundreds—perhaps thousands—of people could be employed to operate the system. Should Dallas therefore abandon automation and hire workers for every train?

The very suggestion reflects a profound misunderstanding of economics.

Automation should not be viewed as a destroyer of jobs but as a liberator of human effort. By allowing machines to handle repetitive transportation tasks, skilled workers become available to create other products, services, and innovations. Those contributions would never materialize if large numbers of people spent their days simply moving travelers between airport terminals.

In other words, society gains twice. Passengers still receive seamless transportation, while the labor that would have been tied up performing that task is redirected toward new forms of production. The result is not loss, but expansion.

The same principle has played out throughout economic history.

Take agriculture. At one point, roughly 98 percent of the workforce labored on farms. Today, that figure has fallen to around 3 percent. A superficial view focuses on the jobs that disappeared. A more insightful perspective recognizes the enormous abundance created when millions of workers were freed to pursue other occupations.

The products, industries, technologies, and services that define modern life became possible precisely because fewer people were required to grow food.

Elevators provide another revealing example.

Many younger readers may never have encountered an elevator operator, but such positions were once commonplace. Entering an elevator often meant sharing the ride with a dedicated employee whose sole responsibility was to operate the controls. You would tell him your destination floor, and he would guide the elevator there manually.

Upon arrival, he might announce “Step up” or “Step down,” depending on whether the elevator stopped slightly above or below the floor level. If necessary, he would carefully adjust the controls to achieve a smoother landing.

Tens of thousands of people earned a living this way.

As technology advanced, those jobs disappeared. Yet our ability to travel vertically did not vanish with them. Elevators became faster, safer, and more precise, while former operators found opportunities elsewhere in the economy.

The pattern repeats itself again and again.

Consider airports today. Anyone who has flown in recent decades is familiar with the armies of Transportation Security Administration employees stationed throughout terminals. They inspect baggage, conduct screenings, confiscate prohibited items, and enforce countless security procedures.

Their existence stems from a specific threat: terrorism.

Before hijackings and aircraft bombings became major concerns, passengers could simply walk onto planes with minimal interference. If terrorists had never targeted aviation, there would be little need for vast airport security operations.

Should society therefore be grateful to terrorists for creating jobs?

Of course not.

Absent such threats, the people currently employed in these roles could be producing countless other goods and services. While it is impossible to identify precisely what those contributions would be, one thing is certain: society would be wealthier overall.

This principle applies far beyond aviation.

Economic progress is filled with occupations that have faded into history. Telephone switchboard operators, workers in the typewriter industry, manufacturers of carbon paper and correction fluid, employees of Kodak’s once-dominant film business, and laborers in the horse-and-buggy trade all experienced technological displacement.

Yet few would argue that society should have halted progress to preserve those jobs indefinitely.

Returning to the Dallas airport example makes the point clear. Eliminating automation simply to create work would sacrifice efficiency while producing no additional value. Machines are not economic enemies; they are tools that allow human beings to accomplish more with less effort.

The latest version of this recurring fear centers on artificial intelligence.

Critics warn that AI will eliminate jobs on an unprecedented scale. Organizations such as the Center for American Progress have argued that governments should adopt what they describe as a “worker-centered” approach to AI development and deployment.

But this concern rests on the same misconception that accompanied every major technological advance.

When AI performs tasks previously handled by humans, it does not automatically impoverish society. On the contrary, it can increase productivity, lower costs, expand output, and free workers to pursue higher-value activities. If the goal is greater prosperity, AI represents an opportunity rather than a threat.

Groups focused on improving workers’ lives should recognize that technological advancement has historically been one of the greatest drivers of rising living standards.

Similarly, the International Labour Organization has emphasized the importance of limiting what it calls “AI-induced technological unemployment.” Yet technological breakthroughs have consistently done far more than eliminate specific jobs. They have expanded wealth, created entirely new industries, and lifted living standards for millions.

Artificial intelligence is unlikely to break that pattern.

Even the famous economist John Maynard Keynes worried about what he termed “technological unemployment,” fearing that innovation might advance faster than society’s ability to find new work for displaced labor.

History has repeatedly challenged that prediction.

For centuries, new technologies have rendered particular occupations obsolete. Yet each wave of innovation has also generated new opportunities, new industries, and new forms of employment that were previously unimaginable.

The lesson remains the same today as it was during the rise of mechanized farming, automated elevators, and countless other innovations: economic progress does not come from preserving every existing job. It comes from freeing human talent to create something better.

And that is precisely why AI should inspire optimism rather than alarm.

Challenges Faced by Nepali Women Entrepreneurs

Through vicarious experiences picked-up from books, mainstream media, and stories of women-counterparts, I thought I was aware of gender-based systematic oppression of our society and how they were preventing women from breaking the glass ceiling. But, only after months of research for a consulting assignment that dealt with devising decent self-employment opportunities for marginalized women of Nepal, I found myself closer to understanding challenges Nepali women entrepreneurs face.

For me, the starting point to understanding these challenges was to unlearn socio-cultural notions I had learnt till now.  To look at the challenges from the vantage point of women who lived very different experiences than I did. I realized, to ensure fair economic participation of Nepalese women; it was vital to understand their delicate circumstances. The way they faced challenges from deep-rooted notions of patriarchy. Their unique socio-cultural and economic position. And, how any efforts made without considering these factors could push them to more vulnerable situations than before.

Understanding Socio-Economic Challenges Faced by Nepalese Women

Access to Finance

Funding is one of the biggest challenges faced by women who aspire to start their businesses. While finding investors to invest in a start-up is a defining challenge for any entrepreneur regardless of their gender. It is particularly tough for women to manage the initial investments to start a business.

For instance: The 2015 Constitution of Nepal has provisions ensuring equal rights to women to parental or inherited property. However, patriarchal practices, or traces of patriarchal traditions in the legal framework make it difficult for women to exercise their rights. Despite her right to property, woman per se still cannot, or would not want to compel her parents or spouse to transfer the property to her name.

Now, if a woman is seeking to innovate through entrepreneurship, without collateral and added social-cultural barriers, it becomes increasingly difficult for her to access loans from formal financial channels.  In turn, she may have to either borrow from micro-finance institutions or informal lenders who charge the highest interest rates.

In our survey which included 112 women, for almost 80% of the women loan from relatives and family members was the only way to manage investments to start their businesses.

Poor Economic Condition and Family Responsibilities

When we imagine family members who are “unsupportive” of women running their own enterprises, we may instinctively think of a person who would prevent women from actively participating in economic activities. But, that is not the case. For many women finding economic independence is a vicious cycle. In our study, women who considered their family members to be unsupportive usually had low economic conditions. It was difficult for them to maintain day-to-day expenses, to pay for skill-development programs that would aid them in starting their own business, or to pay for transportation to attend such programs. Mere 7.27% had some personal savings to invest in starting their business.

On the other hand, women who considered their family members to be supportive, also claimed that busy involvement in household chores and family care prevented them from advancing in their careers. To some extent revealing that, women are so conditioned to societal norms like “they have to be primary caregivers and homemakers”, they find it difficult to recognize the structural challenges. Such socio-cultural mind-blocks prevent women from becoming successful entrepreneurs.

Essentially, challenges faced by women entrepreneurs are complex and require careful analysis and intervention mechanisms. We cannot design effective programs to empower women entrepreneurs without first researching in-depth on the support that would work for them, and the support that they need.

Lack of Exposure and Conventional Orientation

Women are not part of business networks that would assist them to find clients, partners, suppliers, or investors to grow their businesses. While their male-counterparts find it easy to socialize and build their social currency.

This is because women have historically had low exposure to an environment that would contribute to their growth. Firstly, our education system lags to equip students with critical entrepreneurial thinking. Secondly, when women do not get the opportunity to participate in networking events, workshops, and conferences it leads to a lack of practical knowledge and entrepreneurial aptitude required to run a business. While our society has progressed in recent decades where women have become more outgoing and outspoken, the social barriers that challenge women entrepreneurs can still be noticed at large and its impact can be further explored.

Naturally, even in our study, we discovered that women had more conventional orientations where they aspired to run businesses that sustained themselves and provided them with a steady income to support their families. Consciously or unconsciously, they lacked the ambition to scale-up their business and to excel in their careers. Primarily because they lacked confidence and the role models that would aspire them to take risks and to innovate.

Limited Mobility

Many women who wanted to start their own businesses had reservations about traveling for work. For some women, transportation cost was a determining factor that prevented them from traveling. Although, not found in this study, restrictions placed by family members can also lead to limited mobility among women. Family barriers can be hard to explore through survey studies as women are sensitive to responding to questions about their families and personal matters. However, the crux of the matter remains that inability and unwillingness to move limit entrepreneurial ventures that women could otherwise successfully undertake.

The views expressed in this article are personal experience and opinion of the author. The personal opinion and experience should not be considered professional opinion of Biruwa Advisors Pvt. Ltd.

An Entrepreneur’s Guide to Writing a Compelling Business Plan

As a management consulting company in Nepal, we receive a lot of queries regarding business plans. Most of these queries are initiated by entrepreneurs who are applying for a bank loan or are trying to present their business to potential partners. We are publishing this blog to guide entrepreneurs who do not require the extensive level of research and effort that we normally provide as part of our service. We hope this helps you document and present your business to your potential financial and other partners. 

A Business Plan

A Business Plan describes what a business does and what it plans to accomplish in the near future. It communicates the company’s vision, provides an overview of the company’s marketing plan, operations, competitive landscape, as well as contains the company’s financial projection and analysis.  

Most new business ventures use a business plan as a guiding road-map to move an enterprise forward consistently and purposefully. Yet, for many different stakeholders of a business, a business plan may serve many different purposes.   

For instance, founders or entrepreneurs may primarily devise a Business plan to make a logical and objective blueprint of their business and its operations. After all, running a business requires considerable time and effort, and writing a realistic business plan allow founders to build the necessary groundwork to run a viable enterprise.  

On the other hand, a business plan also serves to provide useful insight into business scope and strategies. Most often than not, potential partners, suppliers, and investors will refer to the company’s business plan to evaluate their decisions on whether or not to get on board with the company. 

For example, in the Nepali Business context, for banks, a business plan is a pre-requisite to extend a business loan. Business ventures also follow a working structure when requesting a loan from financing institutions.  

Saying this, as per the company’s requirement and need, a business plan may vary in length, but in principle, it will describe key details of business through combinations of the following six elements.  

Business Overview 

Business Overview gives key insights into a) Business Concept and b) Business’s Product line. The purpose of this section is to translate a business idea into a working concept. It should explain why the idea came into being and what the business intends to achieve and how.  

For example, the founder may have noticed a trend in the market which may have prompted them to realize unrealized potential or need of the market.

The business concept should therefore briefly define the business’ product or service, its target segment, the delivery channel it will follow, and unique selling proposition to fulfill the identified gap in the market.  

The business product line should define the product and to whom the product is being provided. Based on the product’s features, purpose and uniqueness the product can be classified into different categories or “product lines�?.  

Market Analysis 

The market analysis section is composed of three essential elements: Market Overview, Competitive Landscape, and Target Market.  

The market overview section describes the industry that the business will enter. Based on the evidence, the reader should be able to determine types of players, the nature of the competition, barriers to entry, and space to gain a competitive advantage.  

The competitive landscape delves deeper into the pit of the competition. It conducts detailed comparisons between the business venture’s products with its competitors in the industry. The comparisons are generally made in terms of price, packaging, product range, product quantity, marketing tactics, and existing strategic relationship with suppliers or retailers.  

Most new business ventures do not have the means or resources to cater to an entire industry. Target Market slices the industry into a different segments based on say demography or location, and zooms into a particular segment or target market that the business will try to specifically appeal to. The business may also divide the target market into primary and secondary markets and devise strategies to most tactfully grab their attention.  

To write an effective market analysis, founders must know industry trends and consumer behavior. 

Marketing Strategy  

The Marketing Strategy focuses on how a business will market and sell its products or services. The overall marketing strategy comprises of 4P’s: Product, Price, Promotion, and Place.  

Defining 4P’s assists businesses to describe the positioning of their products. Meaning aspects of the promotion mix, pricing, and distribution strategy articulates how the business wants consumers to perceive its products.  

When writing this section of a business plan, all four Ps must be consistent with each other, any inconsistencies can lead to dissonance in consumer’s perception of the brand. For example, if a business wants to sell an expensive international cuisine, the location and pricing strategies should also signal exclusivity.  

Operations Plan 

An Operations plan should provide a picture of how the entrepreneurs plan on running the company and how the product will be produced. While writing this section it is vital to strike a balance between providing adequate information and revealing too many details. To keep the information crisp, the section can be supported with diagrams of the production process or service blueprints. 

Apart from this, the operation plan can briefly touch upon: which raw materials will be used and how they will be sourced, where it plans to establish its production or retail facilities, and identified Human Resource capability that it will need to run a business in full-scale. 

Identifying administrative expenses and projecting target revenue is another crucial element that must be present in an operations plan. It should provide detailed insights into the total fixed cost, overheadexpenses, and the revenue it will need to earn to break-even. Similarly, all contingencies and risk factors must be accounted for before estimating the potential of business to generate profitability.  

Investment Plan 

Closely based on operations plans, the Investment plan quotes the amount that will need to set-up a business at different stages. The Quoted amount must be inclusive of the cost that is incurred in setting up a business facility and to sustain its operations for a certain period. The particulars under which investment will be made must be categorized and represented scientifically. The section should also highlight how the business intends to finance its investment.  

Financial Projection and Analysis 

Lastly, the plans that are developed so far in the above sections are translated and developed into quantitative and financial terms. The final section of a business plan comprises financial projection and analysis. It consists of the projected balance sheet, projected income statement, and projected cash flow statements. The assessment of whether the business is feasible or not as well as identification of the breakeven point and safety margins is covered in this section. 

Writing a proper business plan is the first step to building a successful business. As a part of our Advisory Service, Biruwa Advisors holds a demonstrated expertise in writing a comprehensive business plan for its clients. As per the client’s requirements, we analyze the Business’s core products/activities, marketing, industrial environment, and financial feasibility to devise an appropriate business plan to meet our client’s needs.

Plastic Waste Management: Insights on Challenges of Recycling in Nepal

Fig: Recycled Plastic Value Chain

Notorious for being large scale pollutant, affecting wildlife habitat and human population alike, and plastic waste has become a key global concern in recent years. The critical environmental issue has alarmed multitude of stakeholders and has attracted attention of private enterprises.

Biruwa Advisors recently conducted a Value Chain Analysis on recycled plastic for World Vision International Nepal. In the study, we assessed the feasibility and sustainability of possible investment opportunities for private companies in the plastic waste management sector of Nepal. Part of this study investigated challenges that exists in the value chain of recycled plastic.

To examine the relevant process in the field of plastic waste management, and to gain better understanding on the subject – we interviewed important actors of industry who are trying to contribute to overall value chain.

Major Challenges of Recycling Plastic Waste

While conducting the research we discovered multiple challenges that exist at different stages of recycled plastic value chain. Some of those challenges are shared below:

1. Lack of Source Segregation Process

It is not a standard practice in Nepal to segregate waste at source. Household wastes are manually segregated after collection and before selling to manufacturers, up cyclers and retailers.

Segregating and storing waste after collection is a major challenge

Considering waste aggregators and waste suppliers have limited space, segregating and storing waste after collection becomes a major challenge. Lack of practices to segregate waste at sources adds a burden of additional processing cost to the businesses as well as the whole sector.

2. Dominance of Informal Sector and Informal Commercial Practices

Much of plastic waste recycling industry is dominated by informal sector. Although, few new actors are trying to formalize existing waste recycling industry by introducing globally recognized best practices, their efforts are being challenged by syndicates of informal sectors.

Efforts to introduce globally recognized practices are challenged by Syndicates of informal sector

While Informal sector also enjoy the advantages of not complying with both trade and waste treatment regulations. Formal enterprises have to take more steps to comply with regulations. For instance, formally established enterprises have to ensure fair treatment of collected waste, and adopt commercial trade practices like maintenance of VAT/Tax records. But, informally established enterprises, are not inclined to comply with such standards and practices. This is not only a Nepali reality but also a regional concern. A Strategic Analysis Report on Emerging Criminal Trends in the Global Plastic Waste Market since 2018, released by INTERPOL in 2020, emphasizes on illegal trade and illegal treatment of plastic wastes in Eastern European as well as South and South-East Asian countries.

3. Negative Social Perception towards Waste Management

Waste Management is a stigmatized area. Value chain actors bear the consequence of negative social perception towards waste management in Nepal. Generally, people lack a sense of ownership over waste that they produce, and the attitude impacts operation of overall waste management industry.

“We are facing difficulty in continuing our work since the land allocated for segregation could not be used due to complaints from the neighborhood.” – An interviewer shared.

For instance, value chain actors find it difficult to acquire land to collect and segregate waste. At the same time, the industry which is labor-intensive faces tremendous challenge in finding adequate supply of skilled labor who can implement professional practices in waste management activities.

4. Competition with Virgin Plastic

Recycled plastics are used as substitutes for virgin plastics. However, it is not as easy for suppliers to sell recycled plastics to manufacturers as parameters like pricing and quality influences the buying decision.

Price and Quality of Recycled Plastic influence Manufacturer’s buying decision

Price of plastic is linked to the price of petroleum. Manufacturers are price sensitive and switch to Virgin plastic when its prices are low.

Secondly, Manufacturers who produce plastic items have to adhere to certain quality standards. As it is difficult to provide the required level of quality in recycled plastic, manufacturers opt out to using virgin plastic to meet the quality standards that their company assures its customers of.

Despite seemingly complicated challenges, the value chain actors including suppliers, manufacturers and enablers have taken significant risk in Nepal. Their shared efforts are not only assisting in introducing globally accepted waste treatment and trading practices in Nepal, but is also starting new trends in the overall plastic waste management sector. We thank all of you for helping us during our study and for your contribution in developing the circular economy in Nepal.

Fighting an Infodemic

As the COVID-19 outbreak spreads and most aspects of our daily life come to a halt, organizations are compelled to enforce institutional changes to stay afloat based on the news and information circulating online. But, considering the proliferation of misinformation about COVID-19 – from outlandish remedies to speculation about government plans – decision-makers have a difficult time keeping track of accurate information for rational decisions resulting in an infodemic.

In the wake of this global pandemic, the urgency for organizations to find and communicate timely, factual, and credible information has taken on new resonance and the same is true for businesses and organizations in Nepal as well. Hence, we conducted online research to be aware of measures anyone can take to ascertain a level of reliability in the online information we come across. We are sharing these findings for the benefit of all organizations and team members inside and outside Nepal: 

1. Check the URL Most organizations have their names in URL. To check the primary source, the URL should usually match with the source cited in the information.
2. Check if the title matches the rest of the article.
3. Check the date and double-check the information against other news coverage.
4. Check whether the information comes from the website of a familiar or respected institution that has a proven track record of reliability.
5. Cross-check the organization’s logo used in the article with the logo on the official website.
6. Check  if the author is directly named in the byline and be wary of articles produced by anonymous authors.
7. Check the author’s credentials and affiliations.
8. Check if the information links back to credible sources and provides proof of claims.
9. Look for sites that specialize in the kind of information you are seeking.
10. Be careful if the article over encourages you to share.

At this pivotal time, Biruwa Advisors has been primarily relying on the announcements of international and national health organizations, specifically the World Health Organization and Ministry of Health and Population, coronanepal.org and top media outlets for our information.

As we mentioned earlier, we aggregated these pointers through online research. If you feel that some crucial points are missing or you have any comments, please email it to us at [email protected]. 

Nepal Trade Information Portal

Nepal Trade Information Portal (NTIP): Enhancing Trade Facilitation in Nepal

The Nepal Trade Information Portal (NTIP) was developed to comply with Article 1 of the WTO Trade Facilitation Agreement (TFA), aiming to capture, disseminate, and distribute essential trade information. Inspired by the World Bank Trade Portal Toolkit, NTIP serves as a single platform where a wide range of information related to importing into, exporting from, and transit through Nepal is readily accessible.

Originally piloted in Laos, this toolkit has been successfully implemented in several developing countries. Nepal launched its pilot version of the NTIP in September 2016 as part of efforts to support investment and trade facilitation within the country. The government officially launched the full Trade Information Portal in September 2019.

Funded by the World Bank and operated by the Trade and Export Promotion Centre (TEPC), the NTIP offers traders a user-friendly and comprehensive resource. It provides important regulatory and procedural details needed to navigate the complexities of importing and exporting. The portal’s mission is to enhance the predictability and transparency of Nepal’s trading laws and processes.

What Does the Nepal Trade Information Portal Include?

• An overview of procedures and required documentation for imports and exports
• Regulatory requirements specific to various commodities
• Information on the import-export transit process
• Guidance on obtaining necessary licenses or permits
• Details about government bodies responsible for imports and exports
• Trade data collected from relevant government sources
• Latest news and announcements related to trade

Benefits of the NTIP

By consolidating trade information in one accessible location, the portal offers significant advantages to traders and entrepreneurs. It supports trade promotion and empowers the business community by reducing the time needed for legal document preparation while ensuring compliance through transparent access to all relevant documents.

Moreover, the portal helps entrepreneurs explore new markets and provides practical guidance throughout the trading process. For added convenience, the portal features a frequently asked questions (FAQ) section addressing common queries related to trading with Nepal.

As a comprehensive one-stop window for trade information, the NTIP organizes guidelines and resources by topic, making it easy for users to find exactly what they need.