Understanding the Govt: Part 18: Black Money and Black markets

“Aunty, what is Black money? What is the black market? I keep hearing so much about it. Why is it said to have been stashed away in Swiss banks?”

“Raju, I am glad you asked! Indeed when I was a child, I thought black money referred to the colour of the note or currency kept in some black box! Ha-ha!

To understand these, let’s assume a village ruled by a good king, with a population of 1000. He has a small army of 50 horsemen, and 50 soldiers and a small government with few officials.

Now, salaries have to be paid to the army and the officers? In addition, there will be other office expenditures too? To maintain all these, the king did what all other kings used to do, that is, collect a share from what the citizens produced. This share collected by the king or his government is generally called as Tax.

This was collected in the village market, when the citizens came to sell their grains or products they manufactured. This was called as ‘sales tax’. The king got Rs. 60,000 in this.

Meanwhile, the king came to know that, there are some items that were not produced in his village, but imported from neighbouring villages that were also sold in the same market. The king imposed a tax on them too. This was called as ‘customs duty’. This gave him Rs. 20,000.

The king also came to know that some items manufactured in his village were not sold in his market, but taken out of the village to be sold to other villages. So, the king taxed them at the place where they were manufactured. This was called as ‘excise duty’. This gave him another Rs. 10,000.

Then the king also taxed the rich people in his kingdom. This was called as ‘Income tax’. This gave him Rs.10, 000. Thus he got a total of Rs.1 lakh, and his revenue and expenditure was thus balanced. He could run his government efficiently and keep people happy.

But, the following year, a problem arose. The income came down to just Rs.70, 000. The worried king tried to find the reason. The reason was simple: his officers showed records where sales in the market had dropped. But, his intelligence department said that, production had actually increased, but it’s not coming for sale to the market!

It meant that some of the products were being sold secretly outside the market. What was sold outside the market was not known to government officers, hence not taxed, and thus the government lost the tax! Besides, absence of correct information about the quantum of produce and sales, led to wrong policies from the govt.

So, the king sent his officers to search and arrest all those who sold products outside the market. It was a difficult task, as people sold it secretly in every place possible, like their own homes, fields, roads etc. All these illegal trades happen in secret and is called as ‘black market trade’.

Thus ‘black market’ is a collective term used to describe any location, where any illegal transaction happens. It could be any place, including   homes, offices, even open roads or cars where such illegal deals are struck and goods exchanged!

The unaccounted money that is earned in such transactions is called as ‘black money’! Black money is nothing but normal money, but is earned by illegal means by cheating government officials and accounts.

The money earned in this manner cannot be deposited in the bank, as the government can verify the bank account and easily identify illegal money! So this black money remains as cash only!

But, soon, the black marketers started sending the money to banks outside the village, which was beyond the control of the king, where no one asked for accounts. One such ‘village’ is Switzerland, where the source of bank accounts are not questioned, and hence many black marketers have deposited their cash there.

A few black marketers, make false entries in their account books, and show black money as legally earned money. This is referred to as ‘money laundering’. If this false accounting is done involving someone from another country, then it is referred to as ‘Hawala transaction’, where our black money is exchanged for currency of another country.

Now you understand ‘black money’ and ‘black market’ issues, Raju?!”

“Very well Aunty! Can government not stop this black marketing and black money?”

“It’s very difficult Raju. Can the government monitor 24x7 what every person is selling or buying? So, as long as people transact without billing or accounting, there will be black money. Therefore, unless people demand a bill for every sale or purchase made, black money can’t be controlled.”

“Does it mean that in any transaction we have, we should insist on bill and not do anything without bills?”

“Yes Raju! Because, every bill generated is a document and it helps government officials calculate taxes due correctly. For every bill not given, some black money is created!

What imposes a danger to the country is that such black money can be used to buy from mercenaries, items  that are banned by government like  guns, illegal drugs etc. Now do you realise the dangers of having black money in the country?

“Oh yes Aunty! I understand. From today onwards I will do my bit to reduce black money. I will insist on being given a bill for every transaction, Aunty!”

Vani aunty smiled at Raju. She wished that every youngster in the country does the same. 

Understanding the Government: Part 17

Aunty, Raju and the Shanbhag settled at the nearest eatery. Aunty started to gently question the Shanbhag. The Shanbhag had become at ease with aunty now.

“Why are you govt servants, always busy? Can't your work be organized?"

“Madam, we are busy because, our priorities are changed daily. There is no set work. We work as per orders from the Tahsildar or the DC sir.”

“Don’t you  have any written down work definition and allocation? Every day you get orders on what you need to do for that day?”

“No! We do have written down work allocation. But, over a period of time, the ad-hoc work given to us from our seniors is double that of the routine work! We always seem to be doing these ad-hoc work rather than our original work!

So, we can’t plan our day. Even though we plan, it will be disturbed by ‘urgent work’ that is imposed on us! So, we do the easiest thing: keep quiet and wait for the day-to-day command from the top!  

Although there are more than 30 or 40 government departments, only five departments have staff at village level. They are the Revenue department, the Forest department, Rural development department, Agriculture department and the Education department.

All other departments’ piggy back on us for anything! May it be census, registration of birth and death, pulse polio, election, you name it and we are part of it!

Over the last 100 years, population has grown almost 5 times, but administrative divisions have not grown in proportion. Going by the ratio that was followed while establishing districts 100 years back, we ought to have five districts in place of one. Bifurcation has happened in case of some large districts only. Thus, we are burdened with so much work, that we end up not doing any work properly!

Indeed madam, most of the public are not aware of these things. They don’t even know their rights, leave alone laws and regulations! When government says that not knowing law is not an excuse, I feel like laughing!

Because, such assumption can be made only in a society where literacy rates are quite high, say above 90%, and people can access information easily. Here, with just 30% of the population seeking and completing college education, and inadequate attempt by governments to educate the public on the rules and laws, how can we make people responsible for everything?

For registration of voters, the public is responsible. For birth and death registration the public is responsible. For everything the public is responsible!

If that is the case, why are governments not spending on educating the public? Where are the innovative mass communication programmes? Why are government systems still old and unable to cope  with the demand? Why are governments not responding to the public? Is it in the governments’ interest to keep the public uneducated? Aren't we a democracy?!”

Shanbhag stopped his long speech! He drank a glass of water.

Raju was dumbstruck. He never knew so much! Suddenly, he seemed to understand how an aged system is struggling to cope up with idealistic expectations of a modern society! It looked like both the government and society wanted to win the race using an old 1947 model car!

“Aunty, why can’t we improve the system? Why can’t we make drastic changes in the administrative set up and modernize it? Why are governments more interested in giving individual benefits to people rather than bringing systematic changes? Is that because such changes won't result in votes in the next elections? ”

“Raju, you are right. Such systematic changes don’t fetch votes in the short period of five years, thereby accorded low priority by the popularly elected governments! The scarce resources are spent largely on popular vote garnering schemes!!"

“But then, who will do this important work? Who will bring in systematic changes? Which government will invest on common infrastructure of education, health, roads etc? And which government will take upon itself to educate and create awareness amongst the vast population of this country? How can anybody continue to run government with an aged and dilapidated system?”

“Raju, it would require statesmen at the top, to go beyond electoral politics. And that would also require the people to appreciate such efforts. May be somebody has to start it somewhere. Else, one fine day the system will collapse! And then it may lead to chaos everywhere or even civil unrest!"

Already we are seeing breakdown of basic services and systems. We hear break-down of law and order, non-functioning hospitals, dysfunctional schools, and unfriendly government offices. What more we are waiting for?

If anti-government movements like Naxalism are spreading fast, one reason is the absence of good and responsive governance.  Indeed the rise of the people against corruption and such other issues in recent days are pointers to the rulers that public won't tolerate things for long. The clock is ticking!"

"But, aunty, why don't such movements last long enough to enforce a change?"

"Good question Raju. That is due to the heterogeneity in our country, where people are divided on all possible lines; race, religion, caste, language and what not! These differences do not allow us to come together so easily! Even if we come together, it doesn't last long! This has come as a blessing in disguise for the leadership in our country to look at short term benefits and get away with it! We need a government who can put national interest above political interests!"

"But, aunty, I guess things can't go on like this forever. We will have leaders who will unite the people. We will demand our rights and get them! We will also have good government!"

Vani aunty smiled. "Yes, Raju, when I see you, I get that hope. The youth in this country have to demolish those walls that separate us, and unite us. Then the force unleashed will demand and get what it deserves, the best!"

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(I must thank Srinand Kaushik for prodding me to continue this series of writing about government and polity in simple language.)

Titing at the windmills of corruption!

"Do you see over yonder, friend Sancho, thirty or forty hulking giants? I intend to do battle with them and slay them. With their spoils we shall begin to be rich for this is a righteous war and the removal of so foul a brood from off the face of the earth is a service God will bless."

Like in Don Quixote, are we tilting at the windmills, when it comes to tackling corruption? Are we having confrontations where adversaries are incorrectly perceived, or courses of action that are based on misinterpreted or misapplied heroic, romantic, or idealistic justifications, like the above?

Yes. It seems so.

It’s nobody’s case that corruption should not be fought against with vigor. Corruption is definitely a curse, and it needs to be exorcised.

But, the issue is, what is the best method to tackle corruption?

Now that the polling is over, and the fate of the political leaders in sealed in the EVMs, we can discuss the issue with much freedom, without the worry of getting political color!

The General Elections 2014 will go down in the history as the election which decided the crucial question of the method the nation wants to choose in tackling corruption.

Consider these facts: Apropos, the internet and mobile revolution in India, as expected, the issue of corruption came to the forefront with Anna Hazare taking up cudgels against corruption. The media almost joined hands with him, and took the message of corruption to the nook and corner of India, as it was never done before.

The movement gave rise to a political party; AAP, who won the Delhi election on the plank of fighting corruption! They also later resigned on the issue of tackling corruption; the Lokpal. Thanks to the omnipresent media, the issue of corruption took the centre stage as never before.

In the midst of this discussion on tackling corruption came the general election! What can the better opportunity for the common man to voice his views on corruption thru the ballot? Will the party which almost stood on the anti -corruption platform, AAP, be the logical choice of the voters? After all, AAP is perceived to be either free from or least afflicted by corruption, among the parties that catch our eyeball in the present times.

But, going by the exit polls, AAP may not win many seats, nor it may get a major chunk of votes. Why? Are we a corrupt society, which is not bothered about corruption, as many of us believe? Or is that there is something which the people don’t agree with AAP?

That seems to be the case! The voter seems to be not enamored with the AAP methods of fighting corruption, which brings us to the topic of ‘best method’ of tackling corruption.

Nobody can say for sure what the best method is. The methods are many; from the ideology of Naxals carrying arms to the peaceful and long drawn process of Right to information and courts. It includes Lokpal, Independent CBI etc. (Interestingly, some methods may even include the Robin Hoods!)

But, the voter seems to have rejected the ‘direct’ methods of tackling corruption, like the Lokpal, more anti-corruption laws etc. Indeed, it’s not surprising that the voter rejected such methods! Such methods, infact, may not work.

Many of AAP’s supporters believe that, strong anti-corruption systems will remove corruption. They even cite examples of Europe where there are strong anti-corruption laws and rules.

No doubt that Lokpal will create some fear in the mind of corrupt officials. But, it will be inadequate to be effective. We have enough draconian laws, like the Prevention of Corruption Act, which if used to the hilt, can eradicate anybody who is even remotely connected with corruption. But, we all know the limitation imposed on law, by those who practice it, from top to bottom. In India anti-corruptions law will not work effectively, as the persons who are running may not have the passion of an anti-corruption activist who designs the law.

For common man, corruption matters as long as it has direct connection with their livelihood. That’s why they get agitated with petty corruption. Every time, we talk of fighting corruption, they expect that there will be a positive change in their daily life. When it does not happen, they get frustrated and agitated, like the Auto rickshaw driver of Delhi.

So, his vote is not for rhetoric. ‘What is the point is voting for anybody else, even if he is an embodiment of honesty. If he can’t do make my life better, how does it matter to me?’ This seems to be question that guided the votes.

This also indirectly supports the other theory, the ‘indirect’ methods which use inclusive development as a weapon to tackle corruption. Real development is empowering the common man. When the common man is empowered, he climbs up the Maslow’s hierarchy. And there he will be equipped to fight corruption. Let’s not forget that corruption needs to be fought by millions of us, at many levels, not by a few enlightened thru law. Countries develop first, and in that journey, shed away corruption. This is what history has taught us.

Every anti-corruption activist must work for an inclusive development first. Lets concentrate on whatever aides inclusive development; a transparent environment, decentralization, education, health, affordable bandwidth etc. Development as a mantra to tackle corruption seems to be the clear message this time.

It's time for working together for an inclusive development! It's time to stop tilting at the windmills!