While we stand in queues, world learns free lessons

Corruption will continue albeit with slightly different arrangements: former US treasury secy

GN Bureau | November 22, 2016


#currency   #Lawrence H Summers   #RBI   #Demonetisation   #black money  


By far the most sweeping change in currency policy that has occurred anywhere in the world in decades: that’s what former US treasury secretary and Harvard economist Lawrence H Summers along with PhD candidate Natasha Sarin say in a blog posting analysing the Modi government’s “dramatic action”.

 Their conclusion, in short, is: “Without new measures to combat corruption, we doubt that this currency reform will have lasting benefits. Corruption will continue albeit with slightly different arrangements.”Of course, the authors have not taken note of prime minister Narendra Modi’s hints and remarks about “new measures” including getting tough on benami properties. That, however, is for future.
Summers admits that he has long advocated kill-the abolition of the $100 note in the US context and the 500 euro note (“aka the Bin Laden”) in the European context.  This is the lesson for the world they have drawn from India’s experiment:

“We were not enthusiastic previously about the idea of withdrawing existing notes from circulation because we judged the costs to exceed the benefits. The ongoing chaos in India and the resulting loss of trust in government fortify us in this judgement.”
They also question targeting a currency note so widely circulation: “most Americans in the top 1 percent of the income distribution do not handle $100 bills on even a weekly basis whereas 500 rupee notes are very widely used in India.

Acknowledging the black money angle, they write, “We recognize that many of those who hold large quantities of cash in India have come by their wealth in corrupt or illegal ways. So, the temptation to expropriate is understandable. After all, as the argument goes, anyone who came by their wealth legally has nothing to fear from coming forward and exchanging old notes for new ones.”
However, they succinctly summarise what many people in India are fuming about: “Most free societies would rather let several criminals go free than convict an innocent man. In the same way, for the government to expropriate from even a few innocent victims who, for one reason or another, do not manage to convert their money is highly problematic.  Moreover, the definition of what is illegal or corrupt is open to debate given commercial practices that have prevailed in India for a long time.”
 

Read the full blog post here:Most sweeping change in currency policy in the world in decades

 

Comments

 

Other News

“World headed towards stagflation; India must take care of the poor”

As the post-pandemic fallout and geopolitical uncertainty slows down global economies and sanctions against some nations, energy crisis and inflation are adding to the troubles, India is projected to be decoupled from world economy and fare better. To check if this belief really holds water, in the latest

The changing nature of CSR in India

With the advent of globalization came a new set of challenges for corporations, notably the duty of ensuring the well-being of all stakeholders while also protecting the planet`s natural environment. Although we are dedicated to a faster and more inclusive rate of growth, it is equally imperative that we f

BMC commissioner Chahal conferred with hon. doctorate

BMC commissioner and administrator Iqbal Singh Chahal has been conferred with a Honorary Doctor of Science Degree (honoris causa) by Guru Nanak Dev University in Amritsar, Punjab. Chahal was conferred the degree during the 48th convocation of the University in Amritsar at the hands of Punjab

Sebi to have two-track approach on ESG

Securities and Exchange Board of India (Sebi) aims to use a two-track approach on environmental social and corporate governance (ESG). Addressing a conference on ‘ESG for Atmanirbhar Bharat` in Mumbai, Sebi chairperson Madhabi Puri Buch said that that there should not be a single carbo

Accuracy more important than speed in news: Anurag Thakur

Presenting authentic information is the prime responsibility of media and that facts should be properly checked before they are put in the public domain, union minister of information and broadcasting Anurag Thakur has said. “While speed with which the information is transmitted is imp

FM concludes pre-budget consultations

Union minister for finance and corporate affairs Nirmala Sitharaman has concluded the pre-budget consultation meetings for Budget 2023-24 that were held from November 21 to 28 in the virtual mode. More than 110 invitees representing seven stakeholder groups participated in eight meetings sch

Visionary Talk: Amitabh Gupta, Pune Police Commissioner with Kailashnath Adhikari, MD, Governance Now


Archives

Current Issue

Opinion

Facebook    Twitter    Google Plus    Linkedin    Subscribe Newsletter

Twitter