Black money menace closely associated with growth story in the form of mal-development

blackExcerpts from the Preface to the book “The Black Economy in India: Transition to the Grey Political Economy”, by Prof Kamal Nayan Kabra, published by Aakar Books*

The updated version of “The Black Economy in India: Problems and Policies”, Delhi, (1982), under the title “The Black Economy in India: Transition to the Grey Political Economy”, after over three decades of its publication, non-availability in the market for quite some time and a substantively changed Indian and global context, is expected to hold some relevance for many purposes. This is so because a greatly exacerbated and markedly transformed form and content of the black economy is a part of India’s living reality.

Let us mention a few aspects, such as malfeasance, extortions, corruption, black marketing, smuggling, stashing away of ill-gotten wealth, electoral malpractices by drawing on underhand donations with a tacit understanding of quid pro quo for lax, favourable and partisan state policies and administration, transfers and postings propelled by monetary considerations, extra-legal interference in the work of the judiciary, appointments of favourites and relatives to key positions for illegal collections and amassing of wealth by foul means, interference in policing in favour of criminals, and so on. Indeed, the list can be endless. Hence the phenomenon of the black economy (BE henceforth) calls for systematic, in-depth studies.

Even a systematic review of various enquiry reports and judicial pronouncements regarding some comparatively better known major cases of corruption and illegal economic and political misuse of authority (may be as identified by the official audit reports or parliamentary enquiries concerning amassing of illegal wealth which interferes with normal development and administrative processes) are likely to be mind-boggling and conscience-stirring material. They provide treasure troves for anyone trying to draw the lessons from them for corrective action and policies.

The usual run-of-the-mill studies of the BE are generally not reasonably well-equipped to cope with these complicated, many-hued shenanigans. In fact, they hardly recognize the BE as a critical component of the deep-rooted socio-economic problems. As the situation stands today, we encounter in most socio-economic and political spheres frequent departures from the legal and moral codes by different sections in their respective spheres. It means not so much as special dispensations but as parts of the ‘normal’ run of things, many such departures from the well-established legal-moral and time-honoured upright practices must be identified and examined for their generalities as well as specificities and in terms of their common logic and a series of socio-economic effects.

It must be recognized that most of the above mentioned kind of departures are beyond the levels normally associated with ordinary crime (as amenable to control and possible prevention by the usual law and order machinery, notwithstanding its excruciating lackadaisical and slow pace and inefficiencies, including endemic corruption). Similarly, many minor, even involuntary, wrong doings may be considered in which often enough ordinary citizens get involved. These seem to be based on exogenous factors. Perhaps they involve people belonging to the relatively weaker sections as part of the struggle for living and survival.

After all they and their families live and work in a hostile, exclusionary and discriminatory socio-economic and cultural environment. In other words, such cases have systemic roots and arise from the struggle for survival in an environment of adverse inclusion. One can even encounter many wrong doings by the poor and the weak at the behest, command and as parts of organized rackets run by and/or on behalf of the more affluent sections. These latter, sponsored by the big guns, doings by the rich and powerful come close to what is white-collar crime, as identified by many sociologists. These are the main components of BE, as we understand it. Among these one can cite, drug trafficking or violation of prohibition or human trafficking or arms running or adulteration and dealings in contraband and many others as parts of what we describe as the black economy (BE). Who is ultimately responsible or accountable for such illegalities is hard to determine.

For example, would one consider non-compliance with socio- economic protective/ameliorative legislation a part of the BE? It is an endemic practice followed by many big firms. Such patterns of life and living both at the collective and individual levels seem to have become built-in parts of the Indian economy and society. Given the analysis and conclusions of the 1982 study (though their emphasis was on tax evasion and violation of economic laws), such a perverse pattern of social deformation may not appear to be so totally unexpected.

However it still shocks and surprises those who expect the ruling system as a self-correcting mechanism under India’s by and large still robust democracy, judiciary, public life and a fairly high degree of openness. However what happened is almost the opposite of what one expected from a democratic, accountable and humanistic state and administration, more so when viewed in the context of the ideal arrangements contained in the Indian Constitution. Even the high degree of India’s exposure to the rest of the world could not prevent these unfortunate twists and turns, leading to the BE.

It is in this context that a reproduction of the original 1982 edition with some editorial changes, at the end of the postscript in this volume is being presented. Before these upgraded chapters, we present a longish postscript divided into some short new initial sections. These initial sections intend to carry forward the essentially political economy logic of the 1982 book but as demanded by the new and substantially transformed situation (of course, without being hidebound) to make a better and more nuanced sense of the contemporary reality as it has evolved during the last over three and a half decades or so. Clearly the analysis of the experience of the last thirty-five years or so builds on what we examined by way of the story of the period up to 1980.

Thus the new material is being presented with the hope that its formulations are based on the use of relatively little used analytical systems and framework. Thus they make an attempt to deal with the changed and comparatively better appreciated/documented prevailing situations. We hope these exercises will be able to carry forward the debate on this vexed and highly complex system.

Let us briefly indicate some aspects of the theme and scope covered by the Postscript. Our starting point is the broad understanding of the phenomenon of the BE in what we take to be a relatively comprehensive and integrated political economy framework understood in its historical roots and evolution and its moral- ethical-cultural co-relates. In this process it also tries to take some fleeting note of at least some largely implicit social and personal psychological drives of the major players. Apparently it is a rather onerous and comprehensive task and we would claim only a limited success to be able to have woven so many and diverse threads together.

The only justification one has is that one may well try something appropriate, even though only partly and may be not so effectively rather than be content with some inadequate and misleading approaches and claim validity and relevance.  This position seems relevant in the context of the abstract, ahistorical, a-social and self-justifying analytical assumptions based largely on some varieties of neo-classical approaches.

Among their high points are many quantitative estimates of the BE, presented with reference to a time series and as a proportion of GDP. It is often done even without clarifying whether it is expressed in current or constant prices and the implications of the choice of one or the other index and more seriously a clear description of the underlying phenomenon. Then how one gathers any reliable information about a phenomenon which by its very character remains an underhand, underground and rather carefully and cunningly kept secret in various forms, locations and their participative/collusive relations with those who are entrusted with preventing and punishing such behaviour and the use of its fruits?

In any case one rarely comes across any purposeful utility of such estimates except for indicating the enormous size and rapid growth of the BE, which can be misleading as well. One may in this regard usefully recall what a great ancient Indian scholar and sage, Chanakya, said about keeping track of and preventing the fish from swallowing water.  Hopefully the reasoning presented in the brief indicative chapters included in the postscript proves itself comparatively better equipped to be able to unravel the nature of the emerging issues and challenges. We try to capture these under the title “Transition to the Grey Political Economy of India”.

The approach we consider appropriate to understand in an integral manner concerns, itself with the following three matters: One, the presently quite generalized multifaceted and ubiquitous phenomenon of white-collar crimes by the rich, powerful and famous (extending the concept evolved by Edwin Sutherland in his work White-Collar Crime, 1961, New York, Holt Rinehart and Winston) in their normal businesses on the basis of massive, fairly regularly ongoing misuse of their wealth and clout (both on the scale of the classes and also at group and agency levels); two, applied against not only the rest of society but also their own intra-class relations; and, three, mostly also by means of misuse of fiduciary relations in polity, business and social equations whose victims generally are the weak and poor.

Thus on the broad macro-social terrain the entire system seriously departs from the legal-moral course and evolves its own and often specific, idiosyncratic modes of functioning, violating the trust-based fiduciary relations which may well amount to perfidy. One thing seems to emerge from the above: the BE refers not just to a certain kind of transactions with a certain monetary value involving a certain amount of unaccounted money or contract with a monetary counterpart, but at an operational and deeper level, it involves certain relationships and institutions as well, and without being related to the latter two, the deals referred to above can make only inadequate and misleading sense.

This seems critical to the repeated recurrence of such deals. Thus this type of totality is basic to the BE phenomenon and its underlying processes, network of relationships and the institutionalized and ad hoc devices which combine together to lay the foundation of its further evolution into what we try to capture by the term BE and its counterpart of the grey political economy.  The study faces some obvious handicaps as so many misconceptions as also a fairly prevalent belief as though one knows the phenomenon of corruption and black money daily encountered as the palm of one’s hand.

After all, who is not painfully aware of the essentially ubiquitous, varied, veiled and highly complex current undesirable and intolerable reality concerning black money and economy, corruption and extensive operations of various mafia and lumpenized business, political and variety of other groups and organisations? The emerging social reality and its forays in the country’s politics, economy and social relations (including in personal lives) both within and outside the country in mutually interacting and reinforcing manner have justly attracted widespread attention.

These areas of concern are known variously as black money and black economy issues (we need not mention so many other terms which are used more or less as equivalents of BE) tend to connect with rampant corruption, black marketing, tax evasion, stashing of illegal wealth in global tax havens, theft of public moneys and in general playing foul with a variety of fiduciary relationships which are basic to the modern complex and large-sized systems. These are not once-over relations and behaviour patterns but normally continue endemically and tend to assume varied forms. A special point concerning most of the manifestations of illicit and underground parts of the social reality is their concealed and camouflaged character especially owing to globalisation and the information revolution.

As a consequence the unearthing, investigation and successful prosecution of these activities face many dilemmas: these new technologies and institutions make it easy both to hide as well as to unearth and track these doings as globalisation has made their Diaspora universal. The recently revealed global linkages, divided jurisdictions and changing locations tend to cut in opposite directions as well. Then, on the one hand while the serious dimensions of the scourge invite global cooperation in various ways, the perpetrators of these black deals (being rich and powerful) too tend to operate in close alliance with each other on a global scale.

They also fall back on ever new methods and agencies to advise, protect and promote their doings, say by means of shell companies, accounting and legal, say of the type referred to in the Panama Papers and Paradise Papers. Thus, on the one side we have the positive expected contribution of UN interventions and global legal and administrative cooperation and partnered investigations (such as those seen in the case of the Panama and Paradise papers), and international agreements among sovereign nations and evolution of international accounting and financial standards and norms.

On the opposite side, we have global mafia syndicates and large-sized, well-heeled mafia groups, such as Yakuza, Anand Marg, deras and ashrams of various descriptions and ISIS-related terrorist groups. One is not sure whether one has to consider many actions with possible links with globally operating intelligence and dirty tricks agencies of powerful nations. They may organize covert global operations parallel to and some even linked to those of the syndicates running international black and corrupt operations.

The high point of the BE and grey political economy kind of perversions as parts of the legal systems is the coexistence of massive concentration of open and hidden, mostly unaccounted and, of course, illegitimate wealth and undemocratic power (by resort, inter alia, to no-holds barred corrupt means) in the hands of a tiny number of top corporate families, dynasties and their political ‘high command’ cronies.

This feature is visible, alongside with unprecedented multi-faceted endemic poverty, lack of opportunities of secure and honest means of livelihood and even the bare minimum social public goods and services. Of course the two extreme and closely intertwined manifestations of India’s socio-economic reality seem to blur the line dividing the legal and illegal as the rich, powerful and famous are the main players on both sides. The new material we have added is just a minor and tentative indication of the newer and graver dimensions which call for systematic studies. The present volume may well be taken as a precursor, a small step of such a type.

The present study, particularly the new chapters, among many other studies of Indian development experience and its evolving political economy, highlight the story of the sabotage of even the very minimum of pro-people elements of India’s post-independence development strategy by all-round corruption, its associated flourishing black economy and all 1 that it represents. As one could see, the present study, on the contrary, argues and maintains that corruption and black economy, are in the main the handiwork of the rich, powerful and famous, both in the economy and polity, often with subterranean links. It is these very groups who are under different models of GDP growth strategies the main market-based and state-sponsored entrusted agencies to provide the bulk of savings, investments and innovations and hence tend to assume the lead role as the agencies of economic growth.

However, it is ignored that such growth owing to the involvement to an extent of some qualitatively undesirable socially exclusionary leadership tends to evolve umbilical mutual linkages with adverse social inclusion of the general public at large. Hence corruption and the black money menace are closely associated with the growth story and its perversion in the form of mal-development. This seems an inevitable corollary of the huge concentration of economic, political and underhand powers and resources which gradually do short work of democracy and social cohesion.

* Professor of Economics (1980-2003), Indian Institute of Public Administration, New Delhi; Malcolm Adiseshiah Chair Professor (2010-17), Economic Development & Decentralized Planning Institute of Social Sciences, New Delhi


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