The decision to demonetize the high denomination currency notes has sharply divided the national opinion which is not quite unexpected. Such is the political climate today that if someone takes a stand against cannibalism, there are bound to be people in support of human beings eating other human beings. Obviously, no one has quite lamented, "Oh! My precious hoard of treasured currency notes, the result of years of dishonest toil."
They foist some public purpose on to their opposition to the move. The poor, as always, come in handy. It has been alleged that it is they who are bearing the brunt. They are indeed but bearing with fortitude. I have been wondering whether to enter the debate after many economists and public figures have proclaimed it's still birth. But such is the overarching nature of the decision that to remain silent would be a failure of civic responsibility.
I must first make clear what is my understanding of the government's decision to outmode the 1000 and 500 rupees notes to curb black money.
I think it is just one measure in a complex array of such measures to be taken up in future.
I do not think that this step will end black money for ever and we will live happily ever after.
It is obvious that this measure will impact only the money hoarded in form of currency notes but its cascading effect would be felt only after a while.
For the impact of any decision to be felt takes time and such drastic measure causes large-scale upheaval. As usual the poor are the worst collateral damage.
It also shows which of the travails of the poor are worth taking notice by the political class and which best ignored.
More than an economic measure I think it is a reminder to our society of the debauched state of our financial system and its universal reach has led people to join the discourse on public morality. Everyone feels compelled to take a stand. Those who have the hoarded cash and their outspoken supporters must now become a matter of public knowledge.
The poor are at the centre stage no matter which way you look at it. Those that are condemning it and those who are approving it are doing it in the name of the poor. In every society there are eternal naysayers, all-knowers, contrarians, prophets of doom, and armchair reformers who want their reforms served up to them in their cozy perch. They will always opt for the other option which is not there.
Economists, and those who know, fear that the move may not only fail to contain black money, it may actually increase the supply. Some of them are already predicting its failure. It will be timely to ask the question of them "How and why has our economy arrived at this state where, it is half black and half white. It is not the case that carpenters, masons and plumbers were advising the government all this while. Despite being under the care of qualified and eminent economists, if the economy has acquired its mulatto character, we know things happen despite the wisdom of economists. Contentious but let us pass for the moment, we can discuss it some other time. Meanwhile the pro government and anti government economists can slug it out.
Let us now address the concern of the political class for the poor. Had the political class in general been concerned about the poor they would have long ago come out of their poverty. After all Garibi Hatao was the most outspoken agenda for very long. For starters, it has been said that the industrialists, capitalists etc are not to be found in the queue; it is the poor who are standing in the queue etc. and they have been harassed (Mr. Kejriwal). As for the poor standing in the queue, it is for the simple reason that their holdings of these big denomination notes can be carried in their pockets or purses and they are unafraid; the ones who have them stacked from the floor to ceiling in stadium size warehouses may have deployed an army of carriers of small portions. They would not have the courage to take them in trucks to the bank. The poor are happy, the poor feel proud and empowered, honest toil over dishonest theft is being vindicated for the first time.
As for wasting of hours – this is ridiculous. Time and human lives are the only two things of which there is a limitless supply and are wasted with great alacrity. It also shows which of the travails of the poor are worth taking notice and which best ignored. Take for instance the Gandhi Setu. In 15 years of its dilapidated existence it has caused a loss of billions upon billions of man hours have been lost and, as in any dislocation, the poor are the least protected against losses. People wasting time in queues has become an issue where the staple of our democratic politics is dharnas, bandhs, and rasta rokos.
To say that the BJP has laundered all its black money in these two and a half years beggars the imagination. I do not know whether some people pretend imbecility or are they God-gifted in this department. Three can keep a secret if two of them are dead, but here we are being asked to believe that any number of BJP fund managers were on the job, without any one coming to know. This reminds me of what Lenin said about that maverick intellectual Dwight Macdonald. "Everybody has a right to be stupid, but comrade Macdonald absolutely abuses the privilege". So many people should abuse their privilege at once is quite amusing. If Mr. Modi had done this for the motive above (absolutely impossible!), I will suggest the best tack. He could be condemned by T.S. Eliot’s line "The last act is the greatest treason. To do the right thing for the wrong reason".
My contention is that instead of being "anti poor" this move has placed the poor man in the centre of the national drama that is being played out.
I do not belong to the academia but I have the experience of combating the menace of Black Money. Black Money considered purely as an economic concept is OK, let the views of Prabhat Patnaiks prevail, but Black Money also carries a huge burden of memories. Black Money not only distorts the economy, it is an ominous presence which distorts our lives as social beings, it denies participative parity to the large public in the economic life.
Why should money which originates in criminal activities and tax evasion, why should money earned through kidnapping, bootlegging, prostitution, corrupt practices of the public servant, command that same respect and same purchasing power as the money earned through honest enterprise? So apart from the economic costs of fighting it, at which some mathematically proficient economists are chuckling, there is an egalitarian obligation on governments to liquidate it.
The popular parlance recognizes the difference between honest enterprise and dishonest theft. Black money, dirty money, hot money etc are certainly not very edifying epithets. But the Banks which are the prime centers of all financial activity and act as a clearinghouse for all money generally do not. (Things have improved considerably all over the world in view of the pervasive terrorist threat).
The enforcement agencies and the hoarder of ill-gotten money have entirely opposite expectations of money; while the former would like his money to be untraceable to its owner, to become pure exchange value, infinitely mobile, nimble enough to be able to disappear from one jurisdiction and materialize in another, without let or hindrance. The enforcement agencies, if they had their way, would like every single bit of money, every paisa, to be legible, to bear its ownership as well as its origin.
What are the options before the hoarders of black money? Not many; either they go to the Bank or forget about their hoarded cash. If they forget about it, it is good riddance to bad rubbish. The money that does not enter the over ground economy decrease the liability of the Reserve Bank to redeem money to that extent. Griping critics have said that it is a clever move by the government to improve the financial health of the banking sector. And why not? If the evader and white collar criminal is not made to pay for it, who will? You pity the poor plumage and forget the dying bird! What many knowledgeable people are saying today that the hoarder of black money will now convert it into denominations of 2000, and live lot happier with less inconvenience and less unwieldy hoard? Indeed it is possible, but for the old money to retain its status as money has to end up in the bank and change into new currency. Therein lays the rub.
The enforcement agencies pursuing the audit trail often run into the formidable wall of Bank secrecy and customer confidentiality norms. Banking regulation in every jurisdiction makes it difficult to obtain information. Section 4 of the Indian Bankers Book Evidence Act 1891 provides for the production of the certified copies of the entries in a bankers book in a legal proceeding. Section 5 of the same Act stipulates that a no officer of a bank shall in any legal proceeding to which the bank is not a party be compelled to produce any bankers books. The standard demand made by the banking agencies for proofs of the criminality of the funds begs the question. The criminality cannot be established without the willing co-operation of the bank authorities if one is looking for suspicious or criminal transactions.
To describe the situation, the word 'Compellence', a word that I came across in the context of strategic debate, would be eminently suited. "Compellence has been described as a set of actions or positions that force an opponent to take some action desired by the initial actor. It is the opposite of deterrence, in which the actions are intended to prevent an opponent from taking some action." Here it is a two way Compellence for both the unwilling parties.
Of course there will be intermediaries, middlemen, third party transactions. But they will be people, identifiable by their Pan Cards. The more the merrier; such a precious hoard of data will keep them busy for long. The connection to real estate and other modes of concealment can be established at leisure by any enforcement agency that knows its marbles.
Way back in the late 90s, I had put across the proposal in my talk to the IAS officers in the National Academy of Administration, Mussoorie. What I had suggested was to make accountable in law, those who were involved with the introduction of money in legal channels. Bankers, tax planners, charter accountants need not be allowed to hide behind customer confidentiality. When statutory authorities place trust on their records etc this privilege must impose a countervailing responsibility. In investigation relating to such financial crimes it should be mandatory for chartered accountants, tax consultants, and real-estate agents to make full disclosures. Those who pollute the economic environment must pay for the clean up by unstinted cooperation. I was invited to the Malimath Committee where also I submitted this proposal.
The US, I believe has put in place something similar known as the Sarbanes Oxley Act which is called Public Company Accounting Reform and Investor Protection Act" (in the Senate) and "Corporate and Auditing Accountability and Responsibility Act". With such a popular upsurge of public opinion against black money it will be worth considering having an Act which should inhibit the colour changers of money.
India Today magazine once referred to Manoje Nath, a 1973-batch IPS officer, as being fiercely independent, honest, and upright. Besides his numerous official reports on various issues exposing corruption in the bureaucracy in Bihar, Nath is also a writer extraordinaire expressing his thoughts on subjects ranging from science fiction to the effects of globalization. His sense of humor was evident through his extremely popular series named "Gulliver in Patiliputra" and "Modest Proposals" that were published in the local newspapers.