For richer, for poorer
Growing inequality is one of the biggest social, economic and political challenges of our time. But it is not inevitable, says Zanny Minton Beddoes
Oct 13th 2012 | from the print edition
IN 1889, AT the height of America’s first Gilded Age, George Vanderbilt II, grandson of the original railway magnate, set out to build a country estate in the Blue Ridge mountains of North Carolina. He hired the most prominent architect of the time, toured the chateaux of the Loire for inspiration, laid a railway to bring in limestone from Indiana and employed more than 1,000 labourers. Six years later “Biltmore” was completed. With 250 rooms spread over 175,000 square feet (16,000 square metres), the mansion was 300 times bigger than the average dwelling of its day. It had central heating, an indoor swimming pool, a bowling alley, lifts and an intercom system at a time when most American homes had neither electricity nor indoor plumbing.
A bit over a century later, America’s second Gilded Age has nothing quite like the Vanderbilt extravaganza. Bill Gates’s home near Seattle is full of high-tech gizmos, but, at 66,000 square feet, it is a mere 30 times bigger than the average modern American home. Disparities in wealth are less visible in Americans’ everyday lives today than they were a century ago. Even poor people have televisions, air conditioners and cars.
But appearances deceive. The democratisation of living standards has masked a dramatic concentration of incomes over the past 30 years, on a scale that matches, or even exceeds, the first Gilded Age. Including capital gains, the share of national income going to the richest 1% of Americans has doubled since 1980, from 10% to 20%, roughly where it was a century ago. Even more striking, the share going to the top 0.01%—some 16,000 families with an average income of $24m—has quadrupled, from just over 1% to almost 5%. That is a bigger slice of the national pie than the top 0.01% received 100 years ago.
This is an extraordinary development, and it is not confined to America. Many countries, including Britain, Canada, China, India and even egalitarian Sweden, have seen a rise in the share of national income taken by the top 1%. The numbers of the ultra-wealthy have soared around the globe. According toForbes magazine’s rich list, America has some 421 billionaires, Russia 96, China 95 and India 48. The world’s richest man is a Mexican (Carlos Slim, worth some $69 billion). The world’s largest new house belongs to an Indian. Mukesh Ambani’s 27-storey skyscraper in Mumbai occupies 400,000 square feet, making it 1,300 times bigger than the average shack in the slums that surround it.
The concentration of wealth at the very top is part of a much broader rise in disparities all along the income distribution. The best-known way of measuring inequality is the Gini coefficient, named after an Italian statistician called Corrado Gini. It aggregates the gaps between people’s incomes into a single measure. If everyone in a group has the same income, the Gini coefficient is 0; if all income goes to one person, it is 1.
The level of inequality differs widely around the world. Emerging economies are more unequal than rich ones. Scandinavian countries have the smallest income disparities, with a Gini coefficient for disposable income of around 0.25. At the other end of the spectrum the world’s most unequal, such as South Africa, register Ginis of around 0.6. (Because of the way the scale is constructed, a modest-sounding difference in the Gini ratio implies a big difference in inequality.)
Income gaps have also changed to varying degrees. America’s Gini for disposable income is up by almost 30% since 1980, to 0.39. Sweden’s is up by a quarter, to 0.24. China’s has risen by around 50% to 0.42 (and by some measures to 0.48). The biggest exception to the general upward trend is Latin America, long the world’s most unequal continent, where Gini coefficients have fallen sharply over the past ten years. But the majority of the people on the planet live in countries where income disparities are bigger than they were a generation ago.
That does not mean the world as a whole has become more unequal. Global inequality—the income gaps between all people on the planet—has begun to fall as poorer countries catch up with richer ones. Two French economists, François Bourguignon and Christian Morrisson, have calculated a “global Gini” that measures the scale of income disparities among everyone in the world. Their index shows that global inequality rose in the 19th and 20th centuries because richer economies, on average, grew faster than poorer ones. Recently that pattern has reversed and global inequality has started to fall even as inequality within many countries has risen. By that measure, the planet as a whole is becoming a fairer place. But in a world of nation states it is inequality within countries that has political salience, and this special report will focus on that.
From U to N
The widening of income gaps is a reversal of the pattern in much of the 20th century, when inequality narrowed in many countries. That narrowing seemed so inevitable that Simon Kuznets, a Belarusian-born Harvard economist, in 1955 famously described the relationship between inequality and prosperity as an upside-down U. According to the “Kuznets curve”, inequality rises in the early stages of industrialisation as people leave the land, become more productive and earn more in factories. Once industrialisation is complete and better-educated citizens demand redistribution from their government, it declines again.
Until 1980 this prediction appeared to have been vindicated. But the past 30 years have put paid to the Kuznets curve, at least in advanced economies. These days the inverted U has turned into something closer to an italicised N, with the final stroke pointing menacingly upwards.
Although inequality has been on the rise for three decades, its political prominence is newer. During the go-go years before the financial crisis, growing disparities were hardly at the top of politicians’ to-do list. One reason was that asset bubbles and cheap credit eased life for everyone. Financiers were growing fabulously wealthy in the early 2000s, but others could also borrow ever more against the value of their home.
That changed after the crash. The bank rescues shone a spotlight on the unfairness of a system in which affluent bankers were bailed out whereas ordinary folk lost their houses and jobs. And in today’s sluggish economies, more inequality often means that people at the bottom and even in the middle of the income distribution are falling behind not just in relative but also in absolute terms.
The Occupy Wall Street campaign proved incoherent and ephemeral, but inequality and fairness have moved right up the political agenda. America’s presidential election is largely being fought over questions such as whether taxes should rise at the top, and how big a role government should play in helping the rest. In Europe France’s new president, François Hollande, wants a top income-tax rate of 75%. New surcharges on the richest are part of austerity programmes in Portugal and Spain.
Even in more buoyant emerging economies, inequality is a growing worry. India’s government is under fire for the lack of “inclusive growth” and for cronyism that has enriched insiders, evident from dubious mobile-phone-spectrum auctions and dodgy mining deals. China’s leaders fear that growing disparities will cause social unrest. Wen Jiabao, the outgoing prime minister, has long pushed for a “harmonious society”.
Many economists, too, now worry that widening income disparities may have damaging side-effects. In theory, inequality has an ambiguous relationship with prosperity. It can boost growth, because richer folk save and invest more and because people work harder in response to incentives. But big income gaps can also be inefficient, because they can bar talented poor people from access to education or feed resentment that results in growth-destroying populist policies.
The mainstream consensus has long been that a growing economy raises all boats, to much better effect than incentive-dulling redistribution. Robert Lucas, a Nobel prize-winner, epitomised the orthodoxy when he wrote in 2003 that “of the tendencies that are harmful to sound economics, the most seductive and…poisonous is to focus on questions of distribution.”
But now the economics establishment has become concerned about who gets what. Research by economists at the IMF suggests that income inequality slows growth, causes financial crises and weakens demand. In a recent report the Asian Development Bank argued that if emerging Asia’s income distribution had not worsened over the past 20 years, the region’s rapid growth would have lifted an extra 240m people out of extreme poverty. More controversial studies purport to link widening income gaps with all manner of ills, from obesity to suicide.
The widening gaps within many countries are beginning to worry even the plutocrats. A survey for the World Economic Forum meeting at Davos pointed to inequality as the most pressing problem of the coming decade (alongside fiscal imbalances). In all sections of society, there is growing agreement that the world is becoming more unequal, and that today’s disparities and their likely trajectory are dangerous.
Not so fast
That is too simplistic. Inequality, as measured by Gini coefficients, is simply a snapshot of outcomes. It does not tell you why those gaps have opened up or what the trend is over time. And like any snapshot, the picture can be misleading. Income gaps can arise for good reasons (such as when people are rewarded for productive work) or for bad ones (if poorer children do not get the same opportunities as richer ones). Equally, inequality of outcomes might be acceptable if the gaps are between young people and older folk, so may shrink over time. But in societies without this sort of mobility a high Gini is troubling.
Some societies are more concerned about equality of opportunity, others more about equality of outcome. Europeans tend to be more egalitarian, believing that in a fair society there should be no big income gaps. Americans and Chinese put more emphasis on equality of opportunity. Provided people can move up the social ladder, they believe a society with wide income gaps can still be fair. Whatever people’s preferences, static measures of income gaps tell only half the story.
Despite the lack of nuance, today’s debate over inequality will have important consequences. The unstable history of Latin America, long the continent with the biggest income gaps, suggests that countries run by entrenched wealthy elites do not do very well. Yet the 20th century’s focus on redistribution brought its own problems. Too often high-tax welfare states turned out to be inefficient and unsustainable. Government cures for inequality have sometimes been worse than the disease itself.
This special report will explore how 21st-century capitalism should respond to the present challenge; it will examine the recent history of both inequality and social mobility; and it will offer four contemporary case studies: the United States, emerging Asia, Latin America and Sweden. Based on this evidence it will make three arguments. First, although the modern global economy is leading to wider gaps between the more and the less educated, a big driver of today’s income distributions is government policy. Second, a lot of today’s inequality is inefficient, particularly in the most unequal countries. It reflects market and government failures that also reduce growth. And where this is happening, bigger income gaps themselves are likely to reduce both social mobility and future prosperity.
Third, there is a reform agenda to reduce income disparities that makes sense whatever your attitude towards fairness. It is not about higher taxes and more handouts. Both in rich and emerging economies, it is about attacking cronyism and investing in the young. You could call it a “True Progressivism”.
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As you were
After a period on the wane, inequality is waxing again
Oct 13th 2012 | from the print edition
JANE AUSTEN’S “PRIDE AND PREJUDICE” is a story about love. It is also about inheritance and income gaps. The heroine, Elizabeth Bennet, comes from a well-off family, the second of five daughters. But her financial future is dark because, in the absence of sons, her father’s estate will pass to a cousin. Elizabeth’s suitor, the brooding Mr Darcy, is fabulously wealthy. To her mother’s horror, Elizabeth at first rebuffs him.
All ends happily when Elizabeth decides that Darcy is ravishing after all. But her mother’s reaction is a rational response to the realities of income distribution and social mobility in Austen’s time. In an entertaining analysis of inequality, “The Haves and the Have Nots”, Branko Milanovic works out that by marrying Mr Darcy, Elizabeth would increase her income 100-fold. Without him, she would have the same income as a merchant seaman. With him she would be catapulted into the top 0.1%.
Before the industrial revolution, wealth gaps between countries were modest: income per person in the world’s ten richest countries was only six times higher than that in the ten poorest. But within each country the distribution of income was skewed. In most places a small elite lorded it over a mass of peasants. There was little social mobility except, as Elizabeth found, through marriage. Colonial America was an exception to this feudal sclerosis. Research by Peter Lindert and Jeffrey Williamson shows that on the eve of the American revolution incomes in the 13 colonies that formed the United States were more equal than in virtually “any other place on the planet”.
The industrial revolution widened the gaps both between countries and within them. As incomes accelerated in western Europe and then America, the distance between these countries and others grew. So, too, did internal income disparities. One study suggests that England’s Gini coefficient shot up from 0.4 in 1823 to 0.63 in 1871. Mill workers were more productive and earned more than rural labourers. The great industrialists reaped the rewards of building railways, steel mills and other transformative technologies. Their fortunes were also boosted by monopolistic power and crony capitalism.
The growth of the industrial workforce brought increasing political pressure for redistribution. Communism was the most dramatic result. But capitalist economies changed profoundly too. In response first to the formation of workers’ unions and the rise of socialist parties and then to the Depression, politicians on both sides of the Atlantic introduced progressive taxes, government regulation and social protection. In Germany Bismarck pioneered pensions and unemployment insurance in the 1880s. In America Theodore Roosevelt’s Square Deal broke up monopolies (“trusts”) in the first decade of the 20th century. In the 1930s the New Deal introduced Social Security (pensions), disability and unemployment insurance. In Britain Lloyd George’s People’s Budget of 1909 raised income taxes and inheritance taxes at the top to fund basic pensions as well as unemployment and health insurance for workers. This spartan social safety net was transformed by the Labour government after 1945 with a National Health Service and a system of cradle-to-grave benefits.
Of the three levers used to narrow inequality—taxation, government spending and regulation—the tax system changed the fastest. Until the late 19th century tariffs and excise taxes were the main source of revenue. By the 1930s governments relied heavily on progressive income taxes to fund their (much larger) spending. Britain’s tax take in 1860 was some 8% of GDP; by 1927 it had risen to almost 20%. America changed its constitution to introduce an income tax in 1913. In 1944 the top rate reached a peak of 94%.
Punitive rates of taxation did not, by themselves, transform the income distribution. Many fortunes in the early 20th century were destroyed by wars, hyperinflation and the Depression; France, for instance, lost a third of its capital stock in the first world war and two-thirds in the second. But high tax rates made it much harder for fortunes to be built up again. In most countries the share of the top 1% fell persistently from the 1920s until the late 1970s.
Taxes rose across the advanced world, but the ways that governments spent them varied greatly. In America, whose government was more interested in equality of opportunity than of income, the most transformative shift was to bring in mass education. Starting around 1910, America made huge investments in public high schools in pursuit of universal secondary education. After the second world war the GI bill offered all returning soldiers the chance of higher education.
Claudia Goldin and Larry Katz, two economists at Harvard, see this dramatic boost to education as the main cause of the narrowing of inequality in America in the mid-20th century. It also boosted social mobility. Daniel Aaronson and Bhashkar Mazumder of the Federal Reserve Bank of Chicago found that as college enrolment surged in the 1940s, the relationship between parents’ and their children’s relative earnings notably weakened.
In Europe the emphasis was on ensuring egalitarian outcomes with big government transfers, particularly after the second world war. Governments in Europe were slower than in America to invest in mass education, but many continental countries built even bigger welfare states than Britain, with generous jobless benefits, child subsidies and income support. In virtually all rich countries other than America such benefits (rather than progressive tax systems) became the most important instruments for reducing inequality.
The third leg of the state’s response to inequality was regulation. Roosevelt’s trustbusting weakened America’s robber barons, and other legal changes protected workers’ rights to organise and, especially in Europe, to conclude binding national pay agreements. Union power soared and minimum wages enshrined in law narrowed the gap between workers and managers. Banking, a big source of wealth in the early 20th century, was heavily regulated after the Depression.
The Great Compression
All this meant that for decades incomes at the bottom and in the middle of the distribution grew faster than those at the top. The exact timing and scale differed. In America disparities declined fastest in the 1930s and 1940s, in Europe after the second world war. America’s Gini coefficient reached a low of around 0.3 in the mid-1970s, and Sweden’s hit 0.2 at about the same time. In most advanced economies the gap between rich and poor in the 1970s was a lot narrower than it had been in the 1920s. This was the era now widely known as the “Great Compression”.
Income gaps between countries, however, continued to widen as the advanced industrial economies pulled ever farther ahead of less developed ones (with a few notable exceptions such as post-war Japan and then Taiwan and South Korea). By the 1970s average income per person in the ten richest countries was around 40 times higher than that in the ten poorest. This divergence among countries outweighed the compression within them. As a result, the “global Gini”, as measured by Messrs Bourguignon and Morrisson, rose.
But around 1980 both these trends went into reverse. Globally, poorer countries began to catch up with richer ones, and within countries richer people began to pull ahead. The surge in emerging markets began with Deng Xiaoping’s 1978 reforms in China. By the 2000s the large majority of emerging economies were growing consistently faster than rich countries, so much so that global inequality at last started to fall even as the gaps within many countries increased.
The coincidence of timing suggests that the reversals are related. The huge changes that have swept the world economy since 1980—globalisation, deregulation, the information-technology revolution and the associated expansion of trade, capital flows and global supply chains—narrowed income gaps between countries and widened them within them at the same time. The modern economy’s global reach hugely increased the size of markets and the rewards to the most successful. New technologies pushed up demand for the brainy and well-educated, boosting the incomes of elite workers. The integration of some 1.5 billion emerging-country workers into the global market economy boosted returns to capital, ensuring that the “haves” would have more. It also hit the rich world’s less educated folk with unaccustomed competition.
Politicians in search of a scapegoat find it easier to blame globalisation than technology for the widening wage gaps in rich countries, and some studies of America’s wage dispersion conclude that around 10-15% of the widening wage gap can be explained by trade. One analysis, by David Autor at MIT and colleagues, suggests that in manufacturing the impact of trade with China could be much bigger. But most economists reckon that technological change plays a far bigger role. The OECD, in a big cross-country analysis, concludes that “skill-biased technological change” is one of the main determinants of the rich world’s wage inequality. On average, it finds, globalisation—as measured by a country’s trade exposure and financial openness—has no significant impact.
Whatever the exact breakdown, these two factors are increasingly hard to separate. The IT revolution has allowed more goods and services to be traded across borders, and it has fuelled the integration of the global capital market. At the same time emerging economies are now often the source of innovation. Technology accelerates globalisation, and globalisation accelerates technological progress.
At the same time technology is undermining some of the 20th century’s equalising institutions. Assembly-line manufacturing, for instance, was conducive to union organisation. That is much less true of many of the cognitive jobs of the digital era. Many social transformations are also making inequality worse, particularly the rise of single parenthood and “assortative mating” (the tendency of educated people to marry each other).
Does all this mean that ever widening inequality is inevitable? The history of inequality suggests it need not be, and offers two lessons. The first is that market and social forces do not operate in a vacuum. For good or ill, the mix of tax reforms, welfare programmes and regulatory interventions pursued in the 20th century combined to reduce inequality. Those policy choices matter just as much today. If they did not, changes in income distribution would have been much more uniform across countries. Instead, much like a century ago, sweeping global forces have been muted, or exacerbated, by government policies and social institutions.
The second lesson is that governments can narrow inequality without large-scale redistribution or an ever growing state. The 20th century’s most dramatic reductions in income gaps took place when governments, by and large, were smaller than they are today. Large, rigid welfare states proved unsustainable. But there was also a successful progressive prescription for reducing income gaps and boosting mobility by attacking crony capitalism, investing in the young (especially by broadening access to education) and creating a safety net for the poorest (particularly through unemployment insurance and pension schemes). Worryingly, governments in some of the countries where inequality has risen most seem to have forgotten that.
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Like a piece of string
Sizing the gap
Oct 13th 2012 | from the print edition
ECONOMIC INEQUALITY CAN be measured in many ways—by the distribution of wealth, income or consumption, or between races, sexes, regions or individuals. The resulting picture can vary a lot. In America, for instance, the income gap between blacks and whites, and men and women, has narrowed over the past 30 years, even as that between individuals has widened. Disparities in consumption are always smaller than those in income because people save and borrow to smooth their living standards. The distribution of wealth is usually less equal than that of annual incomes. Gaps in pre-tax income are larger than those in disposable income after taxes and government transfers.
The main measures of economic inequality used in this special report are the Gini coefficients for disposable income and consumption derived from household surveys. These surveys are now conducted in almost all countries. In the rich world and in Latin America, official Gini coefficients are usually based on income. In Asia and Africa consumption-based figures are more common.
Cross-country comparisons can be tricky. Inequality in India, for instance, is often said to be lower than in China. But China’s Gini coefficient of 0.48 measures inequality of income, whereas India’s official Gini of 0.33 measures consumption. Peter Lanjouw and Rinku Murgai of the World Bank calculated an income Gini for India which, at 0.54, is much higher than China’s and close to Brazil’s.
Another problem is that there are several international databases, all slightly different. Nor are household surveys good at capturing inequality at the very top, not least because it is all but impossible to get the ultra-rich to take part in them. The best information on the highest incomes comes from tax returns, thanks to work pioneered by two French economists, Emmanuel Saez and Thomas Piketty, together with a Briton, Anthony Atkinson, and an Argentine, Facundo Alvaredo. These four have built a huge database of top incomes which now includes 26 countries. Their statistics go back much further than household surveys (in America’s case, to 1913).
Gini coefficients and the top income share can paint different pictures. Argentina’s Gini, for instance, has fallen sharply over the past decade even as the share of income going to the top 1% has risen. Germany’s Gini has risen by 32% since the early 1980s, but the share of income going to the very top has barely budged. One reason is that the statistics cover different people; another is arithmetic. The Gini aggregates all disparities, so it is a better summary measure, but it does not tell you where the gaps are growing.
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The United States
The rich and the rest
American inequality is a tale of two countries
Oct 13th 2012 | from the print edition
THE HAMPTONS, A string of small towns on the south shore of Long Island, have long been a playground for America’s affluent. Nowadays the merely rich are being crimped by the ultra-wealthy. In August it can cost $400,000 to rent a fancy house there. The din of helicopters and private jets is omnipresent. The “Quiet Skies Coalition”, formed by a group of angry residents, protests against the noise, particularly of one billionaire’s military-size Chinook. “You can’t even play tennis,” moans an old-timer who stays near the East Hampton airport. “It’s like the third world war with GIV and GV jets.”
Thirty years ago, Loudoun County, just outside Washington, DC, in Northern Virginia, was a rural backwater with a rich history. During the war of 1812 federal documents were kept safe there from the English. Today it is the wealthiest county in America. Rolling pastures have given way to technology firms, swathes of companies that thrive on government contracts and pristine neighbourhoods with large houses. The average household income, at over $130,000, is twice the national level. The county also marks the western tip of the biggest cluster of affluence in the country. Between Loudoun County and north-west Washington, DC, there are over 800,000 people in exclusive postcodes that are home to the best-educated and wealthiest 5% of the population, dubbed “superzips” by Charles Murray, a libertarian social scientist.
The Hamptons and Washington’s chic suburbs offer two snapshots of the most striking characteristic of American inequality: the surge in wealth at the top. Washington’s superzips are full of the rich: people in the top 5% of the income distribution (which means an annual income of at least $150,000) and the top 1% (those earning more than $340,000 a year). The helicopter passengers in the Hamptons epitomise America’s ultra-wealthy, the 0.1% of the population whose annual household income is at least $1.5m, and the top 0.01%, with an annual income of $8m or more. Over the past 30 years incomes have soared both among the wealthy and the ultra-wealthy. The higher up the income ladder, the bigger the rise has been. The result has been a huge, and widening, gap—financially, socially and geographically—between America’s elite and the rest of the country.
How this happened is a story in three acts. During the 1980s the least-educated Americans fell behind those in the middle. As the computer revolution increased the demand for skilled workers and old manufacturing industries crumbled, those with just a high-school degree or less saw their relative earnings sink. Over the past decade the squeeze moved to the middle of the income distribution, to those who attended college but did not earn a degree. Incomes at the top, meanwhile, rose smartly during the whole period.
The result was a dramatic divergence in fortunes. Between 1979 and 2007 (just before the financial crisis) the real disposable income after taxes and transfers of the top 1% of Americans more than quadrupled, a cumulative rise of over 300%. Over the same period the bottom fifth’s income rose by only 40%. The middle class shrank, both as a share of the population and geographically. Only 40% of American neighbourhoods now have an average income within 20% of the national median, compared with 60% in the 1970s.
The recession temporarily upended this trend. America’s wealthiest fared poorly in 2008 and 2009, largely because the tanking stockmarket ravaged their bonuses and share options. The government safety net prevented a collapse at the bottom. But the sluggish recovery has brought back the old pattern. More than 90% of all income gains since the recession ended have gone to the top 1%.
What lies behind these widening gaps? A big reason, particularly in the bottom half, is education, or rather the lack of it. Just as the information-technology revolution demanded more skilled workers, the continuous improvement in Americans’ education stalled. High-school graduation rates stopped climbing in the 1970s, for the first time since 1890. College completion rates also slowed. Many Americans were failing to match the new technologies with better skills. According to Harvard’s Ms Goldin and Mr Katz, this explains 60% of America’s widening wage inequality between 1973 and 2005.
College and/or bust
Both the soaring cost of a college education and the shortcomings of America’s schools system played a part. In the 1970s a year’s tuition at a public university cost 4% of a typical household’s annual income; at a private university it took about 20%. By 2009 tuition fees had jumped to over 10% of median income for a public university and around 45% for a private one. Even with the surge in subsidised student loans, many potential graduates were priced out or dropped out early without a degree.
In primary and secondary schools the problems are partly financial but mainly organisational. America spends a lot on its schools, but that funding comes largely from state and local governments. Richer neighbourhoods can afford better schools, which reinforces the growing geographical gap between different social groups. According to the OECD, America is one of only three advanced countries which spends less on the education of poorer children than richer ones. And unlike most OECD countries, America does not put better teachers in poorly performing schools, where teachers’ unions often obstruct reform efforts.
Not everything can be pinned on schooling. American women (like women almost everywhere) are better educated and earn more than they did 30 years ago. It is less skilled men who have fallen behind. Almost uniquely among rich countries, American men now aged between 25 and 34 are less likely than their fathers to have a college degree. The damage from this has been compounded by institutional changes, such as the weakening of unions and, particularly, the erosion of the minimum wage. But the main culprit is educational slippage.
This poor performance has a racial tinge. High-school dropouts are disproportionately black or Hispanic. America’s habit of locking up large numbers of young black men does not help their employability. But the decline increasingly affects the white working class too. Ever more low-skilled white American men have left the labour force, many moving onto disability rolls. Even before the recession, only around two-thirds of white men with nothing more than a high-school diploma were working.
This decline of work among less skilled white men has had profound social consequences, which in turn have exacerbated income inequality. Marriage rates have fallen, divorce has increased and the share of children born to single mothers has soared. Mr Murray calculates that fewer than 30% of children in the poorest third of white America live with both parents by the time their mother turns 40. Among the most affluent fifth, around 90% of children live in a household with both parents. Marriage has become a fault-line dividing American classes.
Tax and benefit changes have also had an effect, but a subtle one. Most Americans below the median income level pay no federal income tax (and, thanks to the Earned Income Tax Credit, the working poor get substantial rebates). Poorer Americans are hit disproportionately by payroll taxes, which are regressive and have grown in importance. But the biggest hit is on the benefit side. Although America’s social spending has rocketed (it is now worth some 16% of GDP), it is becoming less redistributive as Medicare, the universal health plan for the elderly, swallows up ever more (see article). According to the Congressional Budget Office, in 1979 over half of all federal social spending went to the poorest fifth of households. Now it is only 36%.
Part of the trend at the top of America’s income ladder is simply the mirror image of that at the bottom. The rising skill premium has rewarded those with lots of education, and social shifts have reinforced the income concentration. Not only are the well-off and well-educated far more likely to marry and stay married than poorer folk, they tend to marry each other. In 1960 American couples with two college-educated partners accounted for only 3% of the total. Today that figure is 25% and in the top 5% of the income distribution it is 75%. Apart from the cleaning lady, it is hard to find an adult without a degree (or two or three) in super-zip households.
But if educational differentials and assortative mating lie behind much of the gap between those in Loudoun County and poorer Americans, they do not explain the Hamptons phenomenon. America’s top 0.1% are no better educated than the top 1%. Income gaps at this level have less to do with the skills-bias of the modern economy and more to do with its global reach.
In a classic paper published in 1981, the late Sherwin Rosen of the University of Chicago pointed out that the very best in a field, be they entertainers or textbook authors, earned vastly more than the next best. Modern communications, he mused, would transform the market for superstars. And so they have, as Chrystia Freeland, a journalist, points out in her new book, “Plutocrats”. Moreover, in the past three decades the potential market has become dramatically bigger, whether for Hollywood blockbusters or celebrity dentists.
Celebrities do not account for a large share of America’s ultra-rich. But the same factors—winner-takes-all economics coupled with an incomparably bigger global economy—explain part of the rise in the incomes of the chief executives who make up a bigger share of the very wealthy. During the 1980s CEO pay surged more in America than anywhere else. Until the early 1980s American chief executives, on average, earned 40% more than their next two lieutenants. By 2000 they earned two-and-a-half times as much.
In a global market for the best CEO talent where winner-takes-all economics prevails, the gap between the top and the rest is bound to be vast
This rise is widely put down to failures of corporate governance and a collapse in social norms which once set an informal limit on the earnings gap between bosses and workers. There is truth to both explanations, and it is not hard to find chief executives earning tens of millions of dollars despite lacklustre performance. But these effects should not be exaggerated. In a recent paper Steven Kaplan, of the University of Chicago, finds that CEO pay has fallen in recent years and that, contrary to myth, CEOs who perform badly get paid less and are fired more often than successful ones.
There is also a less bothersome explanation for CEO pay that is based on superstar economics. America is home to a lot of the world’s biggest companies, and globalisation has made many of them a lot bigger. In a global market for the best CEO talent where winner-takes-all economics prevails, the gap between the top and the rest is bound to be vast.
For all the attention focused on CEO pay, the numbers of chief executives among America’s ultra-rich are neither particularly big or growing. The very richest Americans—those who feature in the Forbes list of billionaires—tend to be entrepreneurs, from the icons of the tech era (Bill Gates, Mark Zuckerberg) to many whose money has more prosaic roots (Sara Blakely, America’s youngest female billionaire, made her fortune from women’s underwear).
A disproportionate, and growing, chunk of the very rich, however, have made their money in Wall Street rather than Main Street. An analysis by Mr Kaplan and Joshua Rauh, now of Stanford University, shows that the share of investment bankers among the top 0.1% is larger than the share of senior executives. America’s top 25 hedge-fund managers make more than all the CEOs of the S&P 500 combined. The financial industry’s outsize pay partly reflects its growth. For good or ill, finance’s share of American GDP soared between 1980 and 2007. Capital markets have globalised faster and more comprehensively than any other part of the economy, enabling hedge funds and other asset managers to deploy ever bigger pools of funds. According to Thomas Philippon of New York University and Ariell Reshef of the University of Virginia, financiers also have higher skill levels than they did a generation ago.
These fundamental economic shifts explain part of the rise in Wall Street incomes, but not all of it. Messrs Philippon and Reshef argue that between a third and half of Wall Street’s higher pay is unjustified, deriving from rents rather than productivity. But what explains these rents? Luigi Zingales of the University of Chicago points out that one source is the implicit subsidy (through lower borrowing costs) that banks enjoy by being too big to fail. He reckons this subsidy is worth some $30 billion a year, enough to fund a fair few bonuses. Others point to a broader cronyism between Wall Street and Washington over the past 30 years which has allowed financiers to tilt rules in their favour. The finance industry (along with property and insurance) employs more lobbyists than virtually any other industry, around four per Congressman.
Financiers have also been among the biggest winners from changes to America’s tax code. The country’s top rate of income tax has been repeatedly slashed since 1980, from 70% to 35%. By itself, that reduction has not greatly affected average tax burdens at the top (since there have been enough loopholes to ensure that few people paid the top rate). America’s richest have gained more from reductions in the capital-gains tax, which is now only 15%. Private-equity moguls have done particularly well, since the tax code allows them to classify their income as capital gains.
Scratching each other’s backs
The combination of tax loopholes, bank bail-outs and massive lobbying has led many observers to conclude that America’s growing inequality has political roots. The wealthy, in this logic, control the political system and rig it to their advantage. In an influential book, “Unequal Democracy: The Political Economy of the New Gilded Age”, Larry Bartels of Vanderbilt University showed that senators’ votes are influenced by the preferences of their rich citizens but not their poor ones. As money plays an ever bigger role in politics, goes the argument, so the clout of the ultra-wealthy grows, particularly to block things they don’t like.
This claim is hard to prove, but circumstantial evidence for it seems to be mounting, particularly since the Supreme Court’s 2010 “Citizens United” decision lifted any restrictions on political spending by individuals or firms. That opened the way for the rise of “super-PACs”, privately funded organisations set up to influence election outcomes. These have now raised hundreds of millions of dollars. The sources of this money are highly concentrated: one analysis suggests that 80% of the total comes from fewer than 200 donors. America is still a long way from the first Gilded Age, when the robber barons openly bought unelected senators’ loyalty by giving them shares in their companies. But it is hard to believe that this surge of cash from the richest will have no impact at all.
Whatever its causes, the stratification of American society is having profound consequences. A country that prides itself on its social mobility is already less mobile than most people think and is almost certainly becoming even less so. As the box with the previous article showed, standard measures of inter-generational mobility in America are lower than in Canada and much of Europe. Most of this has to do with the difficulty of escaping from the bottom rungs of America’s income ladder. According to Markus Jantti, a Finnish economist who has studied mobility across countries, more than 40% of the sons of the poorest 20% of Americans stay in that quintile, compared with around 25% in Nordic countries. The evidence is mixed on whether social mobility has lessened or simply stayed the same over the past 30 years. But it is clear that there has been no improvement in mobility to compensate for widening inequality.
And even the most recent studies of social mobility look at the earnings of people who were children over two decades ago. Since disparities in income, education and social behaviour now strongly reinforce each other, future mobility might be a lot lower still. A study by Sean Reardon of Stanford University suggests that the gap in standardised test scores between schoolchildren from high- and low-income families is roughly 30-40% bigger today than it was 25 years ago. Bob Putnam, of Harvard University, puts it starkly. Put away the rear-view mirror and look at future social mobility, he says, and “we’re about to go over a cliff.”
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Crony tigers, divided
dragons
Why Asia, too, is becoming increasingly unequal
Oct 13th 2012 | from the print edition
THE SUMMIT OF Songshan mountain, some 60 miles (100km) from China’s capital, marks the boundary between Beijing municipality and the neighbouring province of Hebei. It is also a study in contrasts. On the Beijing side the mountain road is wide, freshly surfaced and flanked by a solid safety wall. A Lycra-clad cyclist sweats his way up on a fancy mountain bike. A large car park is under construction for visitors to hot springs in the nearby village of Bangongqu. Enterprising local families can make 100,000 yuan ($16,000) a year catering to Beijing tourists, not far off the city’s average white-collar wage. The Beijing provincial government provides pensions and other social benefits.
Hebei is a much poorer province. On its side of the mountain the road narrows and the tarmac deteriorates. Half a mile from the summit is the village of Yanjiaping, where some 50 families scrape a living growing cabbages. No one has a car, no one gets a pension, and the nearest primary school is 12 miles away. Farmers are barred from grazing cows on the mountainside so that trees can grow to stem sand storms from Inner Mongolia. Shen Zhiyun, a gnarled man in fake US army fatigues, says a village family makes 4,000-5,000 yuan a year, nowhere near Indian levels of poverty, but a far cry from the living standards only a few miles away. “We live in a different country,” he says.
The transformation of China’s economy over the past 30 years is the most spectacular growth story in history. Less noticed, China has also seen the world’s biggest and fastest rise in inequality. China has not officially published a Gini coefficient since 2000, but a study by the China Development Research Foundation suggests that it has surged from less than 0.3 in 1978 to more than 0.48. In little more than a generation Mao’s egalitarian dystopia has become a country with an income distribution more skewed than America’s. Asia’s two other giants, India and Indonesia, have also seen disparities rise sharply, though less dramatically than China. Indonesia’s Gini is up by an eighth, to 0.34.
Part of this rise was both inevitable and welcome, a natural consequence of the end of Maoist communism in China and Fabian socialism in India. The three economies, particularly China’s, are far richer and more dynamic than they were 30 years ago. Just as Kuznets suggested, urbanisation and industrialisation have brought widening gaps. As people have left subsistence agriculture for more productive work in cities, inequality has risen along with prosperity.
But that cannot be the whole explanation, if only because the experience of today’s Asian tigers is in striking contrast to that of an earlier pack. In Japan, Hong Kong, South Korea and Taiwan growth rates soared in the 1960s and 1970s and prosperity increased rapidly but income gaps shrank. Japan’s Gini coefficient fell from 0.45 in the early 1960s to 0.34 in 1982; Taiwan’s from 0.5 in 1961 to below 0.3 by the mid-1970s. That experience launched the idea of an “Asian growth model”, one that combined prosperity with equity.
Education, again
Today’s Asian growth model does the opposite. One explanation is that the big forces driving modern economies—technological innovation and globalisation—benefit the skilled and educated in emerging markets much as they do in the rich world. Narayana Murthy, the billionaire co-founder of Infosys, an Indian software giant, or Robin Li, the creator of Baidu, China’s most popular search engine, have harnessed technology much like Bill Gates has done. Senior lawyers and bankers in Mumbai or Shanghai are part of a global winner-takes-all market, able to command salaries similar to those of their colleagues in New York or London. And as Ravi Kanbur of Cornell University points out, the offshoring of tasks that has hit mid-level workers in America and Europe often benefits people higher up the skills ladder in recipient countries. Call centres in Bangalore are manned by well-educated Indians.
As in the rich world, these fundamental economic forces are not the only drivers of income distribution. Government policy has also played a big role. One problem is cronyism. As in the Gilded Age in America, capitalism in today’s emerging markets involves close links between politicians and plutocrats. India is a case in point. From spectrum licences to coal deposits, large assets have been transferred from the state to favoured insiders in the past few years. Many politicians have business empires of one kind or another. Rich businessmen often become politicians, particularly at the state level. Raghuram Rajan, an Indian-born economist at the University of Chicago who recently became chief economic adviser to India’s government, has pointed out that India has the second-largest number of billionaires relative to the size of its economy after Russia, mainly thanks to insider access to land, natural resources and government contracts. He worries that India could be becoming “an unequal oligarchy or worse”.
In China cronyism is even more ingrained. The state still has huge control over resources, whether directly through state-owned enterprises, monopoly control of industries from railways to mining or the distorted financial system, where interest rates are artificially depressed and access to credit is influenced by politics. The importance of the state means that the beneficiaries tend to be close to state power.
Moreover, inequality in China could be higher than the official statistics suggest because rich people often understate their income and hide it from the taxman. A lot of money is invested in property, where soaring prices have reinforced inequality. Wang Xiaolu, of the China Reform Foundation, caused a stir a couple of years ago with a study that tried to measure this “grey” income. His results suggest that the income of the richest 10% of urban Chinese is some 23 times that of the poorest 10%. Official statistics say the multiple is nine.
Cronyism is the most obvious way in which Asian governments make inequality worse, but it is not the only one. Broader government strategies have distorted countries’ growth paths in a manner that increased income gaps. In India a big problem is the lack of job creation. Unlike China, where the surge in factories assembling goods for export brought millions of migrant workers into the formal urban labour force, India’s formal workforce has barely grown since 1991. More than 90% of Indians are still employed in the informal sector. Even in manufacturing, most people toil in one-room workshops rather than big factories. Productivity is lower, workers find it hard to improve their skills and their incomes rise more slowly.
India’s failure to become a powerhouse of labour-intensive manufacturing owes much to its appalling infrastructure. Just-in-time delivery is hard to achieve when power supplies are so precarious. Another reason is the country’s rigid labour laws, which discourage the formation of big firms. Between the federal government and the states, India has around 200 different laws, all setting detailed rules and making it virtually impossible to fire people. That deters employers from hiring workers and widens the gap between the lucky educated few and the rest.
We know where you live
In China the regulations that contribute most to inequality are the remnants of the country’s hukou system of household registration. This hails from Mao’s era, when China’s rural sector was punitively taxed to finance the development of heavy industry. To ensure a stable supply of workers in agriculture despite the appalling conditions, people were barred from leaving their province of origin. The restrictions on mobility were dismantled in the 1980s, permitting millions to become migrant workers. But they still retain the rural hukouof their birth, as do their children. From housing to schooling, this puts them at a big disadvantage compared with holders of urban hukou.
Migrants’ children must take the gaokao (the all-important state college-entrance exam) in their place of origin, not where they and their parents might be living at the time, so lots of migrants send their children home for schooling. Since education is financed largely by local governments, these schools tend to be less well-funded and of lower quality. Hebei has far worse schools than Beijing. In Shanghai municipality, spending per student in rural areas is only 50-60% that of urban areas. As a result, the education system reinforces income disparities rather than mitigating them.
Along with disparities in infrastructure, the hukou system is a big reason for China’s vast urban-rural gaps, which explain about 45% of the country’s overall inequality. Other Asian economies do not suffer from a hukou problem, but there, too, government social policies have often made inequality worse because most social spending, from public housing to health insurance, has traditionally been confined to the formal, urban workforce. Moreover, many Asian governments spend a lot on universal subsidies, especially for energy. These are highly regressive. Indonesia, for instance, lavished 3.4% of GDP on fuel and electricity subsidies last year, more than it spent on infrastructure. According to the Asian Development Bank, 40% of that largesse flowed to the richest 10% of Indonesian households and as much as 84% to the top half.
Across emerging Asia political concerns about rising inequality are prompting reform
Things are beginning to change. Across emerging Asia political concerns about rising inequality are prompting reform, often in ways that echo the changes of the Progressive Era a century ago. In China the “Great Western Development Strategy” has poured vast sums into infrastructure in the western provinces. More recently the government has made a big effort to improve rural social services. Almost 100% of China’s rural population now have basic health insurance (including the villagers of Yianjiaping), and a majority have basic pensions. Inequality between urban and rural areas has recently stabilised and that between regions has begun to fall slightly, but from an extraordinarily high level.
In the past couple of years several Asian economies, from Thailand to Vietnam, have introduced, or expanded the reach of, minimum wages. China’s minimum wage, which is set at the provincial level, rose by an average of 17% last year. Some countries have introduced public-work schemes for the poorest. India’s NREGA scheme, for instance, guarantees 100 days’ work a year to the country’s rural households and now covers 41m people. Others have experimented with targeted subsidies to the very poorest that have helped reduce inequality in Latin America (see article).
By introducing a more efficient, and progressive, social safety net, Asia’s governments will go some way towards mitigating their growing income gaps. But there will be no big breakthroughs until the bigger problems of informality (in India), discrimination against migrants (China) and cronyism (everywhere) are dealt with. And the longer that takes, the greater the danger that today’s disparities will become entrenched.
Thanks to remarkable economic growth, almost all Asians are rapidly becoming better off. In India, old caste rigidities are being broken down (see article). But widening income gaps threaten to harm future social mobility. Using a methodology developed at the World Bank, a study by Zhang Yingqiang and Tor Eriksson found that the rise in China’s income inequality is mirrored by a rise in its inequality of opportunity. Parents’ income and their type of employer explain about two-thirds of China’s inequality of opportunity, a much bigger share than is explained by parental education.
The stakes are high. Yu Jiantuo of the China Development Research Foundation argues that China’s inequality is now hurting its growth prospects. Sustained cronyism could turn Asia’s big economies into entrenched oligarchies rather than dynamic meritocracies. Ironically, in that sense they might become more like Latin America just as that continent appears to be moving in the opposite direction.
__________________________
Published: May 26, 2012 00:52
This White Paper on black money is blank
Arun Kumar
Any discussion on the parallel economy will be incomplete until it accounts
for the nexus that drives it
A White Paper on a subject is issued by the government presumably
to give a definitive view on it and inform the public of an important issue. The
White Paper on black money does nothing of the sort. The Opposition had made a
demand for it given the large number of scams that have been in the news. But
the paper hardly deals with any of them.
The Finance Minister in his preface admits that he is presenting
“… this document now in response to an assurance given to the Parliament.” The
implication is that he is not giving anything definitive. He also says that he
would have been happier if he “… could have included the conclusions of reports
of three premier institutions that have been tasked to quantify the magnitude of
black money.” It is surprising that these three institutions are only looking at
the magnitude rather than the gamut of issues surrounding the black economy.
Thus, even after these reports are presented, we may not have a better
understanding of the problem. After all, knowing the quantum of black money in
the country is not the same thing as analysing how to deal with the problem.
Quotes old data
The White Paper consists of five chapters and several appendices
spread over about 100 pages. This seems like a lot. It lifts many arguments from
this author's book on the subject and from these columns in the last year and a
quarter. But it flatters to deceive.
The title itself is incorrect. What is estimated is the annual
generation of black incomes in an economy and not how much black money there is
in the economy. The various estimates mentioned are of black income and not
black money. The definition of “black money” given is itself erroneous, with
money confused for assets. Even an elementary economics or commerce textbook
suggests that money is only one part of the portfolio of assets that an economic
agent may own. Hence referring to the whole by a part is not appropriate. The
definitional confusion is made worse when it is stated that “the term black
money would also include income that is concealed from public authorities.”
Even then, the report does not give an estimate but simply quotes
estimates from reports that were written more than 25 years ago, ignoring later
literature that has also brought about greater clarity in the matter. The first
chapter ends with the title, “Need for more research.” Why state the obvious?
The earlier reports that this Paper relies upon had pointed to how big the
problem already was. So why has the government not studied it since then?
It quotes the Global Financial Integrity (GFI) report of 2010 on
how much illicit flow has taken place from India since independence. That report
mentions that its figure is a gross underestimate. It is convenient to quote
from the GFI report because it gives a low figure but why has the government not
made the effort in the last year-and-a-half to remove deficiencies in the GFI
methodology and use the data collected by its intelligence agencies and other
departments to arrive at a better estimate?
One service the Paper does is to list the many agencies involved
in dealing with the problem. So far so good, but why have these agencies failed
in the task they should have been performing, namely, checking the growth of the
black economy? What are the problems they have faced? Why does prosecution fail
most of the time whether it relates to the income tax department, or the police
or the Central Bureau of Investigation (CBI)? Is that the reason why the
powerful have treated the law with contempt, and for the increase in the number
of people resorting to illegality resulting in the growth of the black
economy?
Functioning of judiciary
A large number of laws to check the black economy are mentioned
but there is no analysis of why they have been ineffective in controlling the
problem. A law on paper differs substantially from its practice. Much space is
devoted in the Paper to international treaties and efforts at the global level.
This is convenient since the black wealth held outside is small compared to what
is held in the country. Further, it is far more difficult to get at the black
wealth held abroad compared to tackling what is held in the country. Thus, it
becomes convenient to discuss the former rather than the latter.
Most of the wealth held abroad illegally would not be in the names
of the actual beneficiaries but in the names of shell companies, and most of it
cannot be tracked to an Indian entity.
No wonder the data on deposits in Swiss Banks given in the Paper
indicates that Indians have only between 0.13 and 0.29 per cent of the deposits.
There is no analysis of this problem or of how money is transferred out of the
country. We could have been enlightened if information with the intelligence
agencies about tax havens and the modus operandi of taking funds out of the
country or of generating incomes outside India were revealed.
Vulnerable sectors
The interface between the judiciary and the investigative agencies
is an important aspect of non-implementation of the laws of the land and the
contempt they have come to be held in by the public. That is the cause of the
judicial delays with four crore cases pending. Even routine matters that should
be decided in a few months drag on for years. This encourages perpetrators of
the black economy. The functioning of the judiciary needed to be dissected.
The paper lists the real estate, bullion and jewellery sectors as
vulnerable to black money generation. This again reflects a definitional
confusion. Activities in these sectors constitute transfers of black savings
from one individual to another, and as such circulate black incomes but do not
generate them.
In the chapter “Way Forward,” strategies are listed but again no
new ground is broken. As has been pointed out earlier in these columns, the
Double Taxation Avoidance Agreement (DTAA) and the Tax Information Exchange
Agreement (TIEA) are about declared incomes abroad and not black savings held
abroad. Similarly, voluntary disclosure schemes have been discredited in the
past. The Comptroller and Auditor General (CAG) of India has said the scheme
turns people into habitual tax offenders.
Nexus and political questions
The paper skirts the most important question, namely, why laws do
not get implemented. It avoids mentioning the nexus between politicians,
officials and businessmen that drives the black economy, and how criminals have
entered this nexus. Why have steps taken in the past to control the black
economy not worked?
The answer to why there are so many omissions in the Paper lies in
the fact that the existence and the control of the black economy are political
questions. Dealing with the black economy is not a narrow technical question
that can be tackled by a few more laws or a few steps here and there, or
strengthening of a few provisions of the law or through computerisation. Whether
it is the ruling party or the opposition, national or regional parties, all of
them have been mired in the black economy. The question is one of political
will. Should the Paper not have called a spade a spade rather than avoiding the
difficult question all together?
But then a White Paper is a political document and not a technical
one. It helps the government whitewash its image and diverts attention from the
difficult questions. It is not an instrument that can generate the political
will to action — a task that only movements and the political process can
accomplish.
___________________
Left wants “serious effort” on black money
CPI(M) wants all undisclosed assets abroad to be confiscated
The Communist Party of India (Marxist) has demanded that the government make “a serious effort” to quantify the illicit funds stashed away abroad by Indians and identify the culprits.
In a statement issued on Tuesday, the CPI(M) Polit Bureau has said undisclosed assets of Indians located abroad should be confiscated by the government as per the provisions of the Income Tax Act.
‘No political will’
Reacting to the Finance Ministry's white paper on black money presented in Parliament on Monday, the party said the documents reflected a “trite exercise devoid of any political will.”
“Neither has any credible estimate of black money stashed [away] abroad been provided by the white paper nor have any concrete measures been suggested to retrieve the illicit funds,” it said.
The white paper states that the total amount of Indian deposits in Swiss banks fell from Rs. 23,373 crore in 2006 to Rs. 9,295 crore in 2010. The government seems to have no clue as to where this amount has gone. There is no assessment of Indian deposits in other offshore financial centres. The paper suggests that much of illicit financial outflows are round-tripped into India through Foreign Direct Investment via the Mauritius route or via FII investments through Participatory Notes. Yet, there is no specific recommendation to ban Participatory Notes or to scrap the Double Taxation Avoidance Agreement with Mauritius, the statement said.
Talking to reporters here, CPI(M) leader Sitaram Yechury assailed the United Progressive Alliance-II government for “failing on all fronts,” saying it has not fulfilled any promise to bring succour to the people reeling under price rise, unemployment and corruption.
“In the three years of UPA-II rule, not a single step has been taken on any front to alleviate the burden of the people. The government is in a state of drift,” he said.
It said the amount of undisclosed income of Indians who figure in the lists of secret-bank-accountholders received from the German and French governments respectively, were Rs. 40 crore and Rs. 565 crore only.
“These are minor parties. The Indian individuals and entities who are holding a bulk of the illicit wealth in offshore accounts are yet to be identified. The white paper, disappointingly, [simply] reiterates the myriad technical difficulties involved in retrieving these huge amounts stashed abroad.”
Doubts sincerity
The CPI(M) said “lack of progress” in getting information or taking action “raises doubts over the sincerity of the UPA government on this crucial issue” and demanded “serious effort” to quantify the illicit funds and identify the culprits.
Meanwhile, the Communist Party of India has said it finds the white paper a futile exercise without any clear-cut directions for action to unearth the black money.
“It smacks of hidden attempts to protect the offenders and does not come out with figures quantifying the extent of black money. It seems to be an exercise done in a hurry to save the falling face of UPA-II and divert the attention of the public from the notoriety that it has earned through numerous scams worth unheard[of] sums of money,” the CPI said in a statement.
The statement pointed out that rather than coming out with concrete steps to unearth the illegally-begotten money, the white paper gives further time to the offenders by announcing to set up a Lokpal to deal with the same.
Left wants “serious effort” on black money
CPI(M) wants all undisclosed assets abroad to be confiscated
The Communist Party of India (Marxist) has demanded that the government make “a serious effort” to quantify the illicit funds stashed away abroad by Indians and identify the culprits.
In a statement issued on Tuesday, the CPI(M) Polit Bureau has said undisclosed assets of Indians located abroad should be confiscated by the government as per the provisions of the Income Tax Act.
‘No political will’
Reacting to the Finance Ministry's white paper on black money presented in Parliament on Monday, the party said the documents reflected a “trite exercise devoid of any political will.”
“Neither has any credible estimate of black money stashed [away] abroad been provided by the white paper nor have any concrete measures been suggested to retrieve the illicit funds,” it said.
The white paper states that the total amount of Indian deposits in Swiss banks fell from Rs. 23,373 crore in 2006 to Rs. 9,295 crore in 2010. The government seems to have no clue as to where this amount has gone. There is no assessment of Indian deposits in other offshore financial centres. The paper suggests that much of illicit financial outflows are round-tripped into India through Foreign Direct Investment via the Mauritius route or via FII investments through Participatory Notes. Yet, there is no specific recommendation to ban Participatory Notes or to scrap the Double Taxation Avoidance Agreement with Mauritius, the statement said.
Talking to reporters here, CPI(M) leader Sitaram Yechury assailed the United Progressive Alliance-II government for “failing on all fronts,” saying it has not fulfilled any promise to bring succour to the people reeling under price rise, unemployment and corruption.
“In the three years of UPA-II rule, not a single step has been taken on any front to alleviate the burden of the people. The government is in a state of drift,” he said.
It said the amount of undisclosed income of Indians who figure in the lists of secret-bank-accountholders received from the German and French governments respectively, were Rs. 40 crore and Rs. 565 crore only.
“These are minor parties. The Indian individuals and entities who are holding a bulk of the illicit wealth in offshore accounts are yet to be identified. The white paper, disappointingly, [simply] reiterates the myriad technical difficulties involved in retrieving these huge amounts stashed abroad.”
Doubts sincerity
The CPI(M) said “lack of progress” in getting information or taking action “raises doubts over the sincerity of the UPA government on this crucial issue” and demanded “serious effort” to quantify the illicit funds and identify the culprits.
Meanwhile, the Communist Party of India has said it finds the white paper a futile exercise without any clear-cut directions for action to unearth the black money.
“It smacks of hidden attempts to protect the offenders and does not come out with figures quantifying the extent of black money. It seems to be an exercise done in a hurry to save the falling face of UPA-II and divert the attention of the public from the notoriety that it has earned through numerous scams worth unheard[of] sums of money,” the CPI said in a statement.
The statement pointed out that rather than coming out with concrete steps to unearth the illegally-begotten money, the white paper gives further time to the offenders by announcing to set up a Lokpal to deal with the same.
______________________
THE WORLD OF: TOP FIVE COUNTRIES WITH BLACK MONEY ...
http://poweraccess.blogspot.in/2009/04/top-five-countries-with-black-money.html
______________________________
http://www.theglobeandmail.com/news/opinions/opinion/indias-culture-of-black-money/article2134566/print/
Indian children supporting anti-corruption activist Anna Hazare
wear his mask at a rally in Agartala, India, Aug. 18, 2011.
AP
GURMUKH SINGH
India’s culture of black money
GURMUKH SINGH
India has turned Mahatma Gandhi’s ideal of honesty in public life on its
head, and the maelstrom ignited by anti-corruption crusader Anna Hazare is
symptomatic of this malaise.
The country’s political leadership, whom the great man once inspired to
higher purpose, has fallen into the hands of crooks and self-promoters, and they
have spawned a culture of rampant corruption and self-aggrandizement.
Why is India so corrupt? Because the country’s politics have become a passage
to quick riches and influence-peddling. Those who are good at nothing float
regional caste-based parties just as entrepreneurs float ventures in the West to
gain positions of power.
Not surprisingly, nearly 30 per cent of the MPs in India’s Parliament have a
criminal record or charges pending against them – from murder to kidnapping to
forgery to theft. There’s no way to throw them out because the overburdened
legal system – where more than 30 million cases are pending – takes decades to
produce verdicts.
So why do Indians vote for these people? Well, the culture is characterized
by collectivism – not individualism – where the head of a family, clan, caste or
group decides on the candidate. They will vote for someone of their own caste or
group even if he’s a criminal.
Consequently, many regional political parties have sprung up around corrupt
caste/clan leaders. Having entrenched themselves in their positions, these
leaders run their parties as family fiefdoms, appointing only family members to
senior positions. In fact, all political leaders – including the Italian-born
Sonia Gandhi, who heads the ruling Congress Party – groom their sons and
daughters to take over from them to keep power in the family.
Shockingly in a poor country such as India, many of these political elites
flaunt a lifestyle so rich and luxurious that it could be the envy of any
Hollywood star. Only in India do political leaders live free in
multimillion-dollar government-owned palatial bungalows spread over two to eight
acres in New Delhi.
The corrupt political elites have also made the Indian bureaucracy their
partners in crime. And the politician-bureaucrat nexus has been extended to the
business world. If corporate efficiency has propelled India to become one of the
world’s fastest growing economies, then inefficient governance thanks to the
politician-bureaucrat-business nexus has turned it into one of the world’s most
corrupt nations.
Were India’s first prime minister, Jawaharlal Nehru, who promised to “hang
the corrupt from the nearest lamppost,” to return today, he would commit suicide
after seeing that “black money” (income from illegal activities) accounts for
almost half of the country’s GDP. Another $1.7-trillion is hidden abroad. Only
32 million out of more than a billion Indians pay taxes, and most transactions
are carried out in cash.
Those who suffer the most in this booming black money industry are the masses
of Indians forced to pay bribes to get a job or a driver’s licence or a passport
or their kids admitted to school. So it’s no surprise that, in anti-corruption
activist Anna Hazare, the frustrated masses have found a new-age Gandhi – and
they’ve taken to the streets seeking justice.
Gurmukh Singh is the Canada correspondent for India's Indo-Asian News
Service.
Indian Black Money in Swiss Bank List
WikiLeaks posted in the website that – Indian money in Swiss Banks than any other nationality. We have proof regarding their names, amount and name of bank which we got from Rudolf Elmer. We have 2000 names in two discs, the major share is from India Pakistan
Indian Black Money in Swiss Bank List by Wiki Leaks
This site is not responsible for the truthfulness of this report. Because we got the news that WikiLeaks yet not published the report, but confirmed that there are more indian accounts in Swiss Bank than any other country.
http://www.supersystems.in/economy/economy3.htm
| White paper on black money in this Parliament session As part of his union budget 2012, Finance Minister Pranab Mukherjee has committed to tabling a white paper on black money in this session of Parliament. The document will share information on undeclared income held by Indians in foreign bank accounts to avoid taxes. A white paper explains the government policy on a particular subject, and allows the government to collect feedback before a Bill is prepared. CBI Director A P Singh whipped up a storm last month when he said that 500 billion dollars or nearly 25 lakhs crores has been moved illegally by However, the government has denied this. Minister of State for Finance SS Palanimanickam told the Rajya Sabha this week, "There is no authentic estimate of quantum of Indian money stashed in foreign banks". The BJP and its leader LK Advani have attacked the government recently for shielding those whose foreign bank account details have been shared by other countries. The government can't touch those who have managed to close their accounts and transfer assets before January 1, 2012 when the treaty between Some persons having A/c in Swiss banks paid Rs 180cr as tax Some persons with accounts in a Swiss bank have paid taxes amounting to about Rs 180 crore so far, Finance Minister Pranab Mukherjee has said in Parliament on March 26, 2012 . He did not disclose any name. Mukherjee said the government has received information from Denmark and Finland passed information on 2,000 bank accounts to Even as the details given by Bank of Liechtenstein and Geneva-based HSBC had shared the details of Indian accountholders. Another trenches of information is on its way from Second list of Indian Swiss accounts to be shared A second list containing names of Indians, who have stashed black money in Swiss banks, will be shared by the Germans, Times Now reported on September 14, 2011. Sources said that the list has 100 plus Indian names - most of whom have accounts in the Julius Baer bank - the same bank which has launched a witch-hunt against its former employee and 'whistleblower' Rudolph Elmer. Names of 18 Indians, who had stashed away nearly Rs 40 crore in tax havens, were revealed early this year. The   However, now a second revelation is in the offing. Sources have told Times Now, that a second list will soon be released to the Indian government. The list contains names of a 100 plus Indians who have stashed away black money in leading Swiss banks. Among them is also - Julius Baer - the same Swiss bank which is now trying all legal means to retrieve information handed over by 'whistleblower' and sacked employee Rudolph Elmer to WikiLeaks founder Julian Assange . Some of the names that the WikiLeaks founder is privy to are likely to figure in this highly anticipated 2nd list of Indian tax evaders. The German ambassador confirmed to Times Now that a announcement was in the pipeline. Sources said that tax authorities have already begun the process of collecting nearly Rs 25 crore in penalty from the 18 tax evaders, who figure in the |
 Recently, the Swiss Bankers Association, under pressure from the Swiss Government, has revealed information on black money of several nations deposited with it. However, the details of the depositors have not been disclosed. Thus a whopping Rs 65,223 trillion of Indians is deposited in the Swiss banks. According to the Swiss banks, According to the Swiss Bank Association, Indians have topped the list of black money depositors at the famous Union Bank of Switzerland (UBS). Indians have deposited 65 thousand 223 billion amount in the Swiss Bank. It is the first time when the exact amount has been revealed by the Swiss Bank Association. After the disclosure, it will be interesting to see what action will be taken by the Indian government in this regard. Supreme Court probe Black money issue The Supreme Court on July 4, 2011 appointed Special Investigation Team (SIT) headed by a former SC judge to probe black money issue. Former SC judges - Justice B P Jeevan Reddy and Justice M B Shah - will be the chairman and vice-chairman of the SIT. The team will also include chiefs of the Intelligence Bureau (IB) and Research and Analysis Wing (RAW). The SIT will file first status report in the third week of August 2011. The apex court slammed the government for its lethargy in getting the black money back. The court asked the government to disclose names of foreign bank holders against whom I-T proceedings have been concluded. It also told the government that it could not have agreed with other countries under double taxation avoidance treaty not to disclose names of foreign bank account holders who have deposited illicit money abroad. The Supreme Court also severely criticized the government's delay in probing black money, Hasan Ali Khan and others and said this was not only against the constitutional mandate but also akin to putting national security in danger. The Supreme Court has criticized the government for its handling of black money planted by industrialists and others in foreign bank accounts on January 19, 2011. "It is a pure and simple theft of the national money. We are talking about mind-boggling crime...it's not about treaties," said the court. The case is based on a petition filed by former Law Minister Ram Jethmalani and others to retrieve black money being held in foreign banks. The government has submitted to the Supreme Court a list of 26 Indians who have accounts in tax haven Efforts to bring back black money Efforts to bring back black money stashed in Swiss banks, In August this year, The Swiss parliament on June 22, 2011 gave approval to amendments to tax treaties with countries, including Yoga Guru Baba Ramdev launched a Satyagraha movement to bring back black money stashed in Swiss banks. Baba's fast has created quite a stir. He coerced the UPA government into giving written assurances about the latter's commitment to bring black money back into the country and to clamp down on corruption. |
 It saw the government coming down hard on him and his followers and break up the fast in a midnight clampdown. Rights activists have rightly pointed out the high-handed manner in which the government dealt with Baba and his fasting followers. They have also justifiably criticised imposition of Article 144 at the Ramlila Maidan as Baba's agitation was completely peaceful and never threatened the law and order situation. Indians, cutting across caste, class, religion and social standing, are unitedly voicing a demand for the black money to be brought back. But how would the money be used in case the UPA government, reeling under multiple exposes of scams and financial irregularities, balks under popular pressure and manages to bring it back? "We now have an agreement with the Government of India. Under it if the government sends us a request, we will comply and provide the necessary information, which is asked of us," Welti told IANS in an interview. Finance Minister Pranab Mukherjee had said last month that secrecy clauses in  Finance Minister Pranab Mukherjee The government, he said, had also submitted the names of some suspected offenders in a sealed cover to the Supreme Court, which had asked the executive to be more serious on black money, as it constituted a "plunder" of the nation's wealth. Mukherjee also said notices were served on 17 Indians suspected of having black money abroad, but ruled out revealing their names. He said their names will be out only when prosecution starts. Indian cricketers, filmstars have black money in Swiss banks: Whistleblower Whistleblower Rudolph Elmer has said on September 12, 2011 Indian cricketers and film stars hold secret accounts in Swiss banks. While refusing to give out the names of the evaders, Elmer accused the Indian government of not doing enough on the black money front. "There is a need for global commitment and action," Headlines Today news channel quoted Elmer, who was released from jail on July 25, 2011, as saying on September 12, 2011. In his first interview after being released from jail, Elmer told the channel that there is a need for global commitment towards tightening noose around tax evaders, who he said are criminals. Fearing reprisals, Elmer declined to reveal the names of the "politicians, cricketers and filmstars". He said it's "all about approach", saying if the Indian government was at all serious about bringing back black money it could. "The government is not committed. I think society has to put pressure on the Indian government to act. He shook the world in January this year when he handed over to WikiLeaks a CD containing 2000 names of tax evaders. In that list figured the names of several Indians. (Source: DNA - Sep 12, 2011) Income-Tax sleuths to be posted in offshore havens Tax officers will be posted in offshore havens and various countries to spot suspicious transactions by Indian residents who use these jurisdictions to escape tax and launder money. The Income Tax department has picked 22 senior officers for the job. The decision coincides with the government's proposal to make it mandatory for tax payers to declare their offshore bank accounts and other assets held overseas. For this a separate column in tax return forms will be introduced. Once this proposal, now a part of the Finance Bill, becomes law, prosecution proceedings can be initiated against tax payers for suppressing such information. They will be tried in a special court to be set up exclusively for hearing income tax related cases. Black money issue in general election 2009 In the general election 2009, BJP leader LK Advani and yoga guru Baba Ramdev had raised the issue of black money deposited in Swiss bank. The claim made by L.K. Advani on the campaign trail in 2009 that up to $1.4 trillion has been squirrelled away in Swiss banks. Indian Government to seek recall of SC black money verdict The Union government on July 15, 2011 decided to move Supreme Court seeking total recall of its stinging judgment taking over the probe into black money while accusing the government of probing the sensitive economic issue laggardly. Riled by the appointment of a Special Investigation Team (SIT) headed by a retired judge of the apex court, the Centre will on Friday file an application faulting the judgment on the ground that it amounted to the judiciary taking over the executive's statutory functions and that the entire order be scrapped. The application drafted by the finance ministry traces case laws to drive home the sanctity of separation of powers under the constitutional scheme and says the July 4 judgment by Justices B Sudershan Reddy and S S Nijjar violated the cardinal principle. The SC had on July 4, 2011 stunned the Centre by slamming it for lacking in vigour to probe black money and took over the probe by setting up multi-discipline SIT to investigate the crime in In A new report A new report by Global Financial Integrity estimates that some Rs 20,79,000 crore was was illicitly taken out of According to several economists and financial experts, bank deposits in the The British example tackling black money Secret accounts in tax havens happen to be a chronic problem with several Western nations also. In October, 2010, the British and Swiss Governments signed a joint declaration to work towards taxing Swiss bank accounts owned by British citizens. Swiss banks will be obliged to tax interest payments to British Bank holders probably at a rate of 50 per cent on income from Swiss bank accounts. Such taxes collected by Swiss banks will be remitted anonymously to the British Treasury authorities. Apart from this withholding tax, investors will also have to pay a separate levy towards unpaid taxes in the past. Swiss bank will also require their British clients to show that they have complied with British tax laws. The names of account holder will be kept secret but taxes due thereon would have been collected and remitted to the U.K treasury. According to one estimate, the amount of income and wealth belonging to SIT in black money can't act as "super power" Centre tells Supreme Court The Centre on Wednesday the 24th August 2011 told the Supreme Court that the SIT appointed by it to probe and unearth the black money stashed abroad needs to be scrapped as the investigating agency cannot function like a "super power." Attorney General G E Vahanvati making a plea for recall of the apex court's July 4, 2011 order on the SIT said the Government had "very serious" reservations on the directions which had also cast aspersions on sincerity of the Government in tackling the black money menace. "It (SIT) can't act as a super power or you forget Parliament. If the SIT has to function it needs funds. But it is finally Parliament which has to approve it," Vahanvati told a bench of justices Altamas Kabir and S S Nijjar. He alleged that the earlier bench headed by Justice B Sudershan Reddy(since retd) of which Justice Nijjar was a member had passed an erroneous judgement in which it was commented that the Government was weak, soft and hand-in-glove with mafia elements. "We had passed the orders after going through the proceedings. The team is the same except the two judges," the bench remarked pointing out that the SIT was initially constituted by the Centre and the apex court had incorporated the names of retired SC judges justices B P Jeevan Reddy and M B Shah. |
http://www.iretireearly.com/1-4-trillion-indias-black-money-stashed-in-swiss-banks.html
http://www.rediff.com/money/2009/apr/22guest-how-real-are-figures-on-black-money.htm
Black market
From Wikipedia, the free encyclopedia
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"Black economics" redirects here. For the economic empowerment of black Africans in South Africa
"Black Market" redirects here. For other uses, see Black Market (disambiguation).
Part of a series on
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Systems
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Sectors
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Transition
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Coordination
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Other types of economies
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Black market on graffiti. Kharkov
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It has been suggested that Informal sector be merged into this article or section. (Discuss) Proposed since February 2012.
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It is distinct from the grey market, in which commodities are distributed through channels which, while legal, are unofficial, unauthorized, or unintended by the original manufacturer, and the white market, the legal market for goods and services.
Worldwide, the underground economy is estimated to provide 1.8 billion jobs.[1]
[edit] Background
The literature on the black market has avoided a common usage and has instead offered a plethora of appellations including: subterranean; hidden; grey; shadow; informal; clandestine; illegal; unobserved; unreported; unrecorded; second; parallel and black.[2] This profusion of vague labels attests to the confusion of a literature attempting to explore a largely uncharted area of economic activity.There is no single underground economy; there are many. These underground economies are omnipresent, existing in market oriented as well as in centrally planned nations, be they developed or developing. Those engaged in underground activities circumvent, escape or are excluded from the institutional system of rules, rights, regulations and enforcement penalties that govern formal agents engaged in production and exchange. Different types of underground activities are distinguished according to the particular institutional rules that they violate. Four specific underground economies can be identified:
- the illegal economy
- the unreported economy
- the unrecorded economy
- the informal economy
The "unreported economy" consists of those economic activities that circumvent or evade the institutionally established fiscal rules as codified in the tax code. A summary measure of the unreported economy is the amount of income that should be reported to the tax authority but is not so reported. A complementary measure of the unreported economy is the "tax gap", namely the difference between the amount of tax revenues due the fiscal authority and the amount of tax revenue actually collected. In the
The "unrecorded economy" consists of those economic activities that circumvent the institutional rules that define the reporting requirements of government statistical agencies. A summary measure of the unrecorded economy is the amount of unrecorded income, namely the amount of income that should (under existing rules and conventions) be recorded in national accounting systems (e.g. National Income and Product Accounts) but is not. Unrecorded income is a particular problem in transition countries that switched from a socialist accounting system to UN standard national accounting. New methods have been proposed for estimating the size of the unrecorded (non-observed) economy.[5] But there is still little consensus concerning the size of the unreported economies of transition countries.[6]
The "informal economy" comprises those economic activities that circumvent the costs and are excluded from the benefits and rights incorporated in the laws and administrative rules covering property relationships, commercial licensing, labor contracts, torts, financial credit and social security systems. A summary measure of the informal economy is the income generated by economic agents that operate informally.[7][8] The informal sector is defined as the part of an economy that is not taxed, monitored by any form of government, or included in any gross national product (GNP), unlike the formal economy. In developed countries the informal sector is characterized by unreported employment. This is hidden from the state for tax, social security or labour law purposes but is legal in all other aspects.[9] On the other hand, the term black market can be used in reference to a specific part of the economy in which contraband is traded.
[edit] Pricing
Goods acquired illegally take one of two price levels:- They may be cheaper than legal market prices. The supplier does not have to pay for production costs or taxes. This is usually the case in the underground economy. Criminals steal goods and sell them below the legal market price, but there is no receipt, guarantee, and so forth.
- They may be more expensive than legal market prices. The product is difficult to acquire or produce, dangerous to handle or not easily available legally, if at all. If goods are illegal, such as some drugs, their prices can be vastly inflated over the costs of production.
[edit] Consumer issues
No government, no global nonprofit, no multinational enterprise can seriously claim to be able to replace the 1.8 billion jobs created by the economic underground. In truth, the best hope for growth in most emerging economies lies in the shadows.
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—Global Bazaar, Scientific American[1]
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- They may prefer legal suppliers, as they are easier to contact and can be held accountable for faults;
- In some[10] jurisdictions, customers may be charged with a criminal offense if they knowingly participate in the black economy, even as a consumer;
- They may feel in danger of being hurt while making the deal;
- They may have a moral dislike of black marketing;
- In some jurisdictions (such as England and Wales), consumers in possession of stolen goods will have them taken away if they are traced, even if they did not know they were stolen. Though they themselves commit no offense, they are still left with no goods and no money back. This risk makes some averse to buying goods that they think may be from the underground market, even if in fact they are legitimate (for example, items sold at a car boot sale).
- Unlicensed taxicabs. In Baltimore, it has been reported that many consumers actively prefer illegal taxis, citing that they are more available, convenient, and priced fairly.[11]
[edit] Traded goods and services
Largest black markets
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Total
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796[12]
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142[12]
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108[12]
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Counterfeit technology products
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100[12]
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Counterfeit pharmaceutical drugs
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75[12]
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Prescription drugs
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73[12]
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Cocaine
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70[12]
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65[12]
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Web Video piracy
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60[12]
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Software piracy
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53[12]
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Cigarette smuggling
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50[12]
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[edit] Biological organs
Main article: Organ trade
[edit] Transportation providers
Where taxicabs, buses, and other transportation providers are strictly regulated or monopolized by government, a black market typically flourishes to provide transportation to poorly served or overpriced communities. In the
[edit] Illegal drugs
Main article: Illegal drug trade
From the late 19th and early 20th centuries, many countries began to ban the keeping or using of some recreational drugs, such as the Although law enforcement officers do capture a small proportion of the illegal drugs, the high and very stable demand for such drugs ensures that black market prices will simply rise in response to the decrease in supply—encouraging new distributors to enter the market. Many drug legalization activists draw parallels between the illegal drug trade and the Prohibition of alcohol in the
In the
[edit] Prostitution
Prostitution is illegal or highly regulated in most countries across the world. These places form a classic study of the underground economy, because of consistent high demand from customers, relatively high pay, but labor intensive and low skilled work, which attracts a continual supply of workers. While prostitution exists in almost every country, studies show that it tends to flourish more in poorer countries, and in areas with large numbers of unattached men, such as around military bases.[14]Prostitutes in the black market generally operate with some degree of secrecy, sometimes negotiating prices and activities through codewords and subtle gestures. In countries such as the Netherlands, where prostitution is legal but regulated, illegal prostitutes exist whose services are offered cheaper without regard for the legal requirements or procedures— health checks, standards of accommodation, and so on.
In other countries such as Nicaragua where legal prostitution is regulated, hotels may require both parties to identify themselves, to prevent the rise of child prostitution.
[edit] Weaponry
Main article: Arms trafficking
The legislatures of many countries forbid or restrict the personal ownership of weapons. These restrictions can range from small knives to firearms, either altogether or by classification (e.g. caliber, automation, etc.), and explosives. The black market supplies the demands for weaponry that can not be obtained legally, or may only be obtained legally after obtaining permits and paying fees. This may be by smuggling the arms from countries where they were bought legally or stolen, or by stealing from arms manufacturers within the country itself, using insiders. In cases where the underground economy is unable to smuggle firearms, they can also satisfy requests by gunsmithing their own firearms. Those who may buy this way include criminals, those who wish to use them for illegal activities, and collectors.In
In some jurisdictions, collectors may legally keep antique weapons. Sometimes they must be disarmed (incapable of being fired); but sometimes they are so ineffective by modern standards that they are allowed to be kept intact. For example a blunderbuss or cannon is hardly likely to be used for a drive-by shooting.
[edit] Alcohol and tobacco
It has been reported that smuggling one truckload of cigarettes from a low-tax US state to a high-tax state can lead to a profit of up to $2 million.[15] The low-tax states are generally the major tobacco producers, and have come under enormous criticism for their reluctance to increase taxes. North Carolina eventually agreed to raise its taxes from 5 cents to 35 cents per pack of 20 cigarettes, although this remains far below the national average.[16] But South Carolina has so far refused to follow suit and raise taxes from seven cents per pack (the lowest in the In the
[edit] Booze cruise
Main article: Booze cruise
In the UK, the booze cruise — a day-trip ferry to continental Europe simply to get alcohol and tobacco at lower tax rates— is still very popular. Its popularity varies on the Euro to Providing the goods are for personal consumption, "booze cruises" are entirely legal. Because there are no customs restrictions between European Union countries it is not strictly a black market, but closer to a grey market. The
There is however a thriving black market in goods, rubbing tobacco in particular, which have avoided the payment of excise duty. This is partly supplied by "booze cruises".
[edit] Copyrighted media
Street vendors in countries where there is scant enforcement of copyright law, particularly in Asia and Latin America, often sell deeply discounted copies of films, music CDs, and computer software such as video games, sometimes even before the official release of the title. A determined counterfeiter with a few hundred dollars can make copies that are digitally identical to an original and suffer no loss in quality; innovations in consumer DVD and CD writers and the widespread availability of cracks on the Internet for most forms of copy protection technology make this cheap and easy to do.This has proved very difficult for copyright holders to combat through the law courts, because the operations are distributed and widespread— there is no "Mr. Big".[citation needed] Since digital information can be duplicated repeatedly with no loss of quality, and distributed electronically at little to no cost, the effective underground market value of media is zero, differentiating it from nearly all other forms of underground economic activity. The issue is compounded by widespread indifference to enforcing copyright law, both with governments and the public at large. To steal a car is seen as a crime in most people's eyes, but to obtain illicit copies of music or a game is not.[19]
See also: Copyright infringement
Yet, the preceding comparison, although common, is not truly analogous. Automobile theft results in an item being removed from the owner with the ownership transferred to a second party. Media piracy is a crime of duplication, with no physical property being stolen. Copyright infringement law goes as far as to deem illegal "mix-tapes" and other such material copied to tape or disk. Copyright holders typically attest the act of theft to be in the profits forgone to the pirates. However, this makes the unsubstantiated assumption that the pirates would have bought the copyrighted material if it had not been available through file sharing or other means. Many artists and film producers have accepted the role of piracy in media distribution.[20] The spread of material through file sharing is a major source of publicity for artists and has been shown to build fan bases that may be more inclined to see the performer live[21] (live performances make up the bulk of successful artists' revenues[22]).
[edit] Currency
Main article: Fixed exchange rate
Money itself is traded on the black market. This may happen for one or more of several reasons:- The government sets ("pegs") the local currency at some arbitrary level to another currency that does not reflect its true market value.
- A government makes it difficult or illegal for its citizens to own much or any foreign currency.
- The government taxes exchanging the local currency with other currencies, either in one direction or both (e.g. foreigners are taxed to buy local currency, or residents are taxed to buy foreign currency).
- The currency is counterfeit.
- The currency has been acquired illegally and needs to be laundered before the money can be used.[23]
In situations of financial instability and inflation, citizens may substitute a foreign currency for the local currency. The U.S. dollar is viewed as a relatively stable and safe currency and is often used abroad as a second currency. At the present time, $340 billion dollars, roughly 37 percent[24] of all
If foreign currency is difficult or illegal for local citizens to acquire, they will pay a premium to acquire it. U.S. currency is viewed as a relatively stable store of value and since it does not leave a paper trail,[dubious ] it is also a convenient medium of exchange for both illegal transactions and for unreported income (tax evasion) both in the U.S and abroad.[3]
[edit] Fuel
In the EU it is not illegal for a person or business to buy fuel in one EU state for their own use in another, but as with other goods the tax will generally be payable by the final customer at the physical place of making the purchase.Between the Republic of Ireland and Northern Ireland there has often been a black market in petrol and diesel.[28][29] The direction of smuggling can change depending on the variation of the taxes and the exchange rate between the Euro and Pound Sterling; indeed sometimes diesel will be smuggled in one direction and petrol the other.
In some countries diesel fuel for agricultural vehicles or domestic use is taxed at a much lower rate than that for other vehicles. This is known as dyed fuel, because a coloured dye is added so it can be detected if used in other vehicles (e.g. a red dye in the
[edit] Appearance and disappearance
If an economic good is illegal but not seen by many in society as particularly harmful, such as alcohol under prohibition in the United States, the black market prospers. Black marketeers can reinvest profits in diverse legal or illegal activities, well beyond the original source of profit.Some, for example in the marijuana-trade debate, argue for removing the underground markets by making illegal products legal. This would, in their view:
- decrease the illegal cashflow, thus making the performance of other, potentially more harmful, activities financially harder
- allow quality and safety controls on the traded goods, thus reducing harm to consumers
- let the goods be taxed, providing a source of revenue
- free up court time and prison space and save taxpayer money.
[edit] Modern examples
[edit] Wars
Black markets flourish in most countries during wartime. States that are engaged in total war or other large-scale, extended wars must necessarily impose restrictions on home use of critical resources that are needed for the war effort, such as food, gasoline, rubber, metal, etc., typically through rationing. In most cases, a black market develops to supply rationed goods at exorbitant prices. The rationing and price controls enforced in many countries during World War II encouraged widespread black market activity.[31] One source of black-market meat under wartime rationing was by farmers declaring fewer domestic animal births to the Ministry of Food than actually happened. Another in During the Vietnam war, soldiers would spend Military Payment Certificates on maid service and sexual entertainment,[citation needed] thus supporting their partners and their families. If the Vietnamese civilian wanted something that was hard to get, he would buy it at double the price from one of the soldiers, who had a monthly ration card and thus had access to the military stores.[citation needed] The transactions ran through the on-base maids to the local populace. Although these activities were illegal, only flagrant or large-scale black-marketeers were prosecuted by the military.[citation needed]
[edit] Indian black-money
Further information: Indian black money, Indian Economy#Corruption, and Corruption in India
The black money market situation in India is epidemical. India currently tops the list for illegal monies in the entire world, estimated to be almost US$1,456 billion stored in Swiss banks (USD 1.4 trillion approximately) in the form of unaccounted money.[32] According to the data provided by the Swiss Banking Association,
[edit] Prohibition in the United States
Main article: Prohibition in the United States
[edit] Alcohol
See also: Legal drinking age
A classic example of creating a black market is the Prohibition of alcohol during the 1920s in the Although Prohibition ended in 1933, there are still some parallels today with evasion of the drinking age of 21 in the
[edit] Smoking
This effect is seen similarly today, when jurisdictions pass bans on smoking in bars and restaurants. In these jurisdictions, smokeasies arise which allow smoking despite the legal prohibition. In a sense the owner is not a black marketeer since he is not necessarily selling tobacco, but he profits by the sale of other goods on his premises (typically alcohol).This phenomenon is very prevalent in many US state jurisdictions with smoking bans, including California,[36][37] Philadelphia,[38][39] Utah,[40] Seattle,[41] Ohio,[42] and Washington, D.C..[43]
---------------------------------------------------
INDIA`S BLACK MONEY IN SWISS BANK
This is not so
surprising .India is the world`s most corrupt country.Corruption is not new in
India.Recently due to international pressure, Swiss government agreed to
disclose the names of the account holders only if the respective government
formally asked for it.
Black money in
Swiss banks — Swiss Banking
Association report, 2006
details bank deposits in the territory of Switzerland by nationals of following
countries:
Top five
India—- $1,456
billion
Russia —$ 470 billion
UK
——-$390 billion
Ukraine – $100
billion
China —–$ 96 billion
India has more money in
Swiss
bank than all
the other countries combined.Second best Russia has 4 times lesser deposit. US
is not even there in the counting in top five.
609 people
in India having legal property more than Rs- 100 crores (Rs- 10 Million). Indian
President one day living cost is Rs-8 crore, living in a place where 350
flats.One day Indian Parliament running cost is around 9 crore Rupees.Britishers
looted 350 Lakh Crore in 250 years whereas Indian himself looted 330 crore. 70
Lakh crore only deposited in swiss bank. 84000 corrupt people in India.India has
around 450 Billion dollar of coal deposit & 170 billion of iron ore
deposit,looted by state politicians .According to Indian Government around 1
Lakh place in India where people doing illegal mining.
Dishonest persons,
scandalous politicians and corrupt IAS,
IPS officers have
deposited in foreign banks in their illegal personal accounts a sum of about $
1500 billion, which have been misappropriated by them. From 2003 to 2010 out of
5,635 IPS officers fifty(50) IPS officers were
resigned and joined private company.
This amount
is about 13 times larger than the country’s foreign debt. With this amount 45 crore poor people can get Rs 1,00,000 each. This
huge amount has been appropriated from the people of India by exploiting and
betraying them.
Some 80,000
people travel to Switzerland every year, of whom 25,000 travel very
frequently.“Obviously, these people won’t be
tourists.
Why our Indian Government is not asking to swiss Bank?
Well the answer is simple , our Government is working under the influence of
those politicians & industrialists who have huge deposit in Swiss bank.They
cann`t expose their own people.
USA have
settled their Swiss bank Account & their top Billionares in their countries
paid to their country 50% of their Money which includes Gates &
Bloomberg.Italy got 6.4 Billion dollar from swiss Bank,Germany got 5.7 Billion
dollar from swiss Bank & France got 1.7 Billion dollar from swiss
Bank.
Schweitzer Illustrierte, a Swiss news magazine,published on 19th
November 1991, has alleged in an old issue that the Soviet intelligence
agency KGB had deposited US $2.2 billion in a Swiss bank account in 1985
in the “minor” account of Rahul Gandhi managed by his mother
Sonia Gandhi . Janata Party President Dr Subramanian
Swamy, who had secured an order from the Delhi High Court to the CBI to
investigate alleged receipt of slush money by late former Prime Minister Rajiv
Gandhi’s family, has cited a November 1991 issue of the Swiss
magazine in support of his charge.He has further claimed that the
payments were authorized by CPSU by a resolution CPSU/CC/No 11228/3
dated 20/12/1985 and the same was also endorsed by the USSR Council of
Ministers in Directive No 2633/Rs dated 20/12/1985. He also claimed that these
payments had been coming since 1971 as the payments received by Sonia Gandhi’s
family “have been audited in CPSU/CC resolution No 11187/22 OP dated
10/12/1984. Reference:–
http://swissprivacy.tripod.com/id8.html
Why Government is
not taking action on corrupt peoples ? Why CBI is not independently
working? well answer is simple ,Government is taking lots of money in
the name of party fund and also taking help from those politicians who are
involved in
criminal charges.Whole police in India is working under
politicians. According to RBI(Reserve Bank Of India ) Rupees
17,18,826 crore notes print in India between year 2000-2010. Rupees 10 Lakh
Crore money incirculation in India . Generally 2-3 % of GDP money circulation
in other countries. But Indian Government has allowed four Swiss bank &
Eight Bank of Italy in India .
swiss bank(ubs)
revealed 6000 USA people names . In may 2008 Germany bank revealed 28 people
names but government is still hiding their names. Even the Supreme court of
India asked for names three times. But Government only make deal with 23 countries of
Double Taxation.
USA got his money,
France , Italy , countries like Singapore fought and get their money.India has
more than 3.5 crore taxpayers. Black Money can be used by terrorists. Probably
they are trying to move money to other countries or will invest in real-estate
like in dubai or arab countries.After huge pressure from media & civil
society Government has joined FATA (Financial Action Task Force) group only to
delay issue.
In the data shared by Ex-Swiss banker
Rudolf Elmer, there are at least three companies that go by the
name of Annapurna . These accounts have been opened in the New
York branch of the Swiss Bank Julius Baer.These accounts are Annapurna
Convertible Ltd, account number 420331. Annapurna Leverage Ltd, account
number 427039 .Annapurna Convertible USD, account number 431916.Money running
into crores of rupees has been stashed away in these accounts.57 million dollars
or Rs 259 crore have been stashed away in Annapurna Convertible ltd. 18.6
million dollars or Rs 84 crore are lying in Annapurna Leverage Limited.And 10.3
million dollars or Rs 45 crore are hidden away in the account of Annapurna
Convertible.Interestingly, the documents list the same company and same person
as managing all the Annapurna accounts.Annapurna Convertible, Annapurna Leverage
and Annapurna Convertible USD are all managed by Pius Fisch of Fisch
Asset Management.The other name to come out was that of Asad
Ali Khan and his wife Zahida, who was a co-account
holder. Headlines Today scoured through the records sent to us by Rudolf Elmer
and found out how Asad Ali Khan had siphoned off a huge amount of money to the
Julius Baer Bank in Cayman Islands.A company in the name of Unicorp Services was
incorporated in Cayman Islands.Its registered address is Post Box 1100, Kirk
House, Grand Cayman Island, BWI.According to Elmer’s documents, the registration
number of the company is 00233755.In the year 1999, Asad Ali Khan and Zahida
were present for the dissolution of this company as directors of Unicorp
Services in Cayman Islands.Elmer’s data also shows that the account was being
managed by J.M.I. Gillani.The official address is: Banque Julius Baer, 2
Boulevard du Theatre, Case Postale, CH 1211, Geneva 11,
Switzerland.
Where Black
money is being used? Election, Air travel , Tour,
Restaurants, Land, Jewelery.
Who is
involved in Black Money? Senior bureaucrats
(IAS,IPS officers), Ministers of Export-Import,Comerce, Chief Ministers, Top
Industrialists , Horse Trader, Liquor Trader.
144
nations signed UNCAC (United Nation Convention Against Corruption) but India
is not signing because Indian Government is engaged in corruption.
UNCAC Opened for signature from 9 December 2003 by the UN
General Assembly & last date was 14 December
2005.
Highly placed
sources in New Delhi and Mumbai say much of the money held in Swiss banks, and
other tax havens like the Bahamas , have been routed into the Indian stock
exchanges through Participatory Note (PN) bought in
Mauritius through front companies. Since these instruments are
not registered to trade in Indian domestic capital markets, the investors’ names
remain undisclosed. “The route to take out the money is hawala and to bring it
back is Participatory Note ,” says Hemen Kapadia, one of Mumbai’s top stock
market analysts. Roughly 50-60 percent of FII investments, aggregating $85
billion till late 2009, were made through the Participatory Note route. And
according to Kapadia, this route saw 75 percent traffic in the last few months.
A worried market regulator, the Securities and Exchange Board of India (SEBI) is
now learnt to have asked several FIIs to furnish details of the Participatory
Note issued to their clients, but it has been consistently stonewalled. “They
will always win by citing client confidentiality agreements, and I doubt whether
SEBI has the necessary legal teeth to probe further,” Kapadia points
out.
India`s economic
debt—http://www.indiabudget.nic.in/es2009-10/chapt2010/tab84.pdf
FII investment in
Indian stocks this year touched a record $18.13 billion ( Rs.82,360
crore), according to the SEBI website. In dollar terms the previous
high was in 2007 ($17.65 billion) and in rupee terms in 2009.
Stock market analysts say FII investment in rupee terms is lower because of
appreciation in the Indian currency against the dollar. The Sensex last
year gained over 80 percent — a figure it is likely to surpass this
year.
Not taking
into account the recently concluded Coal India IPO, the FII bids amounted to Rs.
1.20 lakh crore. Some foreign entities that have
placed large bids for Coal India through PNs include Citibank ($1 billion),
Merrill Lynch ($2 billion) and Deutsche Bank ($3 billion). The Qualified
Institutional Buyer (QIB) quota in the Coal India IPO that was oversubscribed 24
times was primarily due to intense FII interest.
In fact, in
2007, when the then National Security Adviser MK Narayanan had spoken of terror
funds routinely penetrating and manipulating the markets, he was hinting at PNs.
Earlier, the RBI too had come out with a report expressing concern over the
illegal traffic. At that time 89 percent of the funds invested by FIIs had come
through the PN route, RBI data showed.According to recent estimates, roughly
$200 billion — four times the external debt of Pakistan — is stashed away in
Swiss banks and is now being withdrawn.
“A major area of
vulnerability for us is the high consolidated public-debt to GDP ratio of over
70 percent … (and) consolidated fiscal deficit,” says the Governor of Reserve
Bank of India (RBI), Mr. Yaga Venugopal Reddy.
According to CIA
world fact book, the Current account balance of India is MINUS
-37,510,000,000 (minus) while China is the wealthiest country in the
world with $ 426,100,000,000 (Plus) . India listed as 182 and China as no.1 .
Money inflow in India is currently Rs 7,000
crore.
Total number
of registered corruption cases was 64,00,000 in 1989 , now in year 2010 is
1,64,00,000 .
Hasan Ali 6 Billion Dollar swiss Bank
account—-
http://timesofindia.indiatimes.com/india/Hasan-Alis-6bn-in-Swiss-accounts-missing/articleshow/7365076.cms
Surely it`s time
to Ban 1000 rupee note—-
Sources say that
NGO is the main source of Black Money in India .
The GFI
report says, “From 1948 through 2008, India lost a total of $213 billion in
illicit financial flows (or illegal capital flight). These illicit financial flows were generally the product of corruption,
bribery and kickbacks, and criminal activities.” The total of $213 billion is a
misleading figure because “the present value of India ’s illicit financial flows
is at least $462 billion,” the GFI report
explains, adding, “This is based on the short-term US Treasury bill rate as a
proxy for the rate of return on assets.” The GFI (Global Financial Integrity) report points out that the
“total capital flight represents approximately 16.6 percent of India’s GDP as of year-end 2008”; that “illicit financial flows out of
India grew at 11.5 per cent per year”; and, that “India lost $16 billion per
year between 2002-2006”.The present value of illicit assets held abroad ($462
billion) “accounts for approximately 72 per cent of India’s underground economy
— which has been estimated to account for 50 per cent of India’s GDP ($640
billion at the end of 2008)”. Just above a quarter of illicit assets
are held domestically.The fact that deposits in tax havens have increased from
36.4 per cent of illicit financial flows in 1995 to 54.2 per cent in 2009 tells
its own story.
Well if Swiss Bank
cann`t give information to India then why Indian Government is not
stopping money that they are coming from outside India . But how can a
corrupt system do?
We need to start a
movement to pressurize the government to do so !! this is perhaps the only way,
and a golden opportunity, to expose the high and mighty and weed out corruption
!!
Is India poor, who
says? Ask Swiss banks With personal account deposit bank of $1500 billion in
foreign reserve which have been misappropriated, an amount 13 times larger than
the country’s foreign debt, one needs to rethink if India is a poor
country?.
_______________________
June 7,
2012
As Grain Piles Up, India’s Poor Still Go
Hungry
By VIKAS
BAJAJ
RANWAN, India
Just 180
miles to the south, in a slum on the outskirts of New Delhi
Such is
the paradox of plenty in India India now grows so much food that it has a
bigger grain stockpile than any country except China ,
and it exports some of it to countries like Saudi
Arabia and Australia
“The
reason we are facing this problem is our refusal to distribute the grain that
we buy from farmers to the people who need it,” said Biraj Patnaik, who advises
India
After
years of neglect, the nation’s failed food policies have now become a subject
of intense debate in New Delhi
Proponents
say the new law, if written and executed well, could help ensure that nobody
goes hungry in India , the
world’s second-most populous country behind China
India’s
food policy has two central goals: to provide farmers with higher and more
consistent prices for their crops than they would get from the open market, and
to sell food grains to the poor at lower prices than they would pay at private
stores.
The
federal government buys grain and stores it. Each state can take a certain
amount of grain from these stocks based on how many of its residents are poor.
The states deliver the grain to subsidized shops and decide which families get
the ration cards that allow them to buy cheap wheat and rice there.
The
sprawling system costs the government 750 billion rupees ($13.6 billion) a
year, almost 1 percent of India
The new
food security law could more than double the government’s outlays to 2 trillion
rupees a year, according to some estimates.
Much of the
extra money would go to buy more grain, even though the government already has
a tremendous stockpile of wheat and rice — 71 million tons as of early May, up
20 percent from a year earlier.
“India is paying the price of an unexpected
success — our production of rice and wheat has surged and procurement has been
better than ever,” said Kaushik
Basu, the chief economic adviser to India ’s
Finance Ministry and a professor at Cornell
University
The
biggest gap is the inefficient, corrupt system used to get the food to those
who need it. Just 41.4 percent of the grain picked up by the states from
federal warehouses reaches Indian homes, according to a recent World Bank
study.
Critics
say officials all along the chain, from warehouse managers to shopkeepers,
steal food and sell it to traders, pocketing tidy, illicit profits.
Poor
Indians who have ration cards often complain about both the quality and
quantity of grain available at government stores, called fair price shops.
Other
families do not even have ration cards because of the procedures — and often,
bribes — required to get them. Some are denied because they cannot document
their residence or income. And critics say more people would qualify if the
income cutoff were raised; in New
Delhi
Ms. Devi,
who lives in the Jagdamba Camp slum in south Delhi
“Sometimes,
we just have to sit and wait,” she said. “My mother-in-law gets subsidized food
and she gives me some when she can.”
Indian
officials say they are addressing the system’s problems. Some states, like
Tamil Nadu and Chhattisgarh, have made big improvements by using technology to
track food and have made it easier for almost all households to get ration
cards. Other states, like Bihar , have
experimented with food stamps.
Reformers
argue that India should move
toward giving the poor cash or food stamps as the United
States , Mexico
“Why only
wheat and rice? If he wants to have eggs, or fruits, or some vegetables, he
should be given that option,” Mr. Gulati said. “You need to augment his income.
Then, the distribution, you leave it to the private sector.”
But most
officials say they are worried that if India
“It has
to improve, I have no doubt about it,” said K. V. Thomas , India
Officials
say Parliament is likely to vote on a new food policy at the end of the year.
In the meantime, the government is working on temporary solutions to its grain
storage problems, putting up new silos and exporting more rice.
Still,
much of it is likely to keep sitting on the side of the road here in Punjab .
“It’s
painful to watch,” said Gurdeep Singh, a farmer from near Ranwan who recently
sold his wheat harvest to the government. “The government is big and powerful.
It should be able to put up a shed to store this crop.”
Neha Thirani
contributed reporting from Mumbai and Karishma Vyas from New Delhi
This article has been revised to reflect the following
correction:
Correction:
June 12, 2012
An article on Friday
about malnourishment in India
June 7,
2012
As Grain Piles Up, India’s Poor Still Go
Hungry
By VIKAS
BAJAJ
RANWAN, India
Just 180
miles to the south, in a slum on the outskirts of New Delhi
Such is
the paradox of plenty in India India now grows so much food that it has a
bigger grain stockpile than any country except China ,
and it exports some of it to countries like Saudi
Arabia and Australia
“The
reason we are facing this problem is our refusal to distribute the grain that
we buy from farmers to the people who need it,” said Biraj Patnaik, who advises
India
After
years of neglect, the nation’s failed food policies have now become a subject
of intense debate in New Delhi
Proponents
say the new law, if written and executed well, could help ensure that nobody
goes hungry in India , the
world’s second-most populous country behind China
India’s
food policy has two central goals: to provide farmers with higher and more
consistent prices for their crops than they would get from the open market, and
to sell food grains to the poor at lower prices than they would pay at private
stores.
The
federal government buys grain and stores it. Each state can take a certain
amount of grain from these stocks based on how many of its residents are poor.
The states deliver the grain to subsidized shops and decide which families get
the ration cards that allow them to buy cheap wheat and rice there.
The
sprawling system costs the government 750 billion rupees ($13.6 billion) a
year, almost 1 percent of India
The new
food security law could more than double the government’s outlays to 2 trillion
rupees a year, according to some estimates.
Much of
the extra money would go to buy more grain, even though the government already
has a tremendous stockpile of wheat and rice — 71 million tons as of early May,
up 20 percent from a year earlier.
“India is paying the price of an unexpected
success — our production of rice and wheat has surged and procurement has been
better than ever,” said Kaushik
Basu, the chief economic adviser to India ’s
Finance Ministry and a professor at Cornell
University
The
biggest gap is the inefficient, corrupt system used to get the food to those
who need it. Just 41.4 percent of the grain picked up by the states from
federal warehouses reaches Indian homes, according to a recent World Bank
study.
Critics
say officials all along the chain, from warehouse managers to shopkeepers,
steal food and sell it to traders, pocketing tidy, illicit profits.
Poor
Indians who have ration cards often complain about both the quality and
quantity of grain available at government stores, called fair price shops.
Other
families do not even have ration cards because of the procedures — and often,
bribes — required to get them. Some are denied because they cannot document
their residence or income. And critics say more people would qualify if the
income cutoff were raised; in New Delhi
Ms. Devi,
who lives in the Jagdamba Camp slum in south Delhi
“Sometimes,
we just have to sit and wait,” she said. “My mother-in-law gets subsidized food
and she gives me some when she can.”
Indian
officials say they are addressing the system’s problems. Some states, like
Tamil Nadu and Chhattisgarh, have made big improvements by using technology to
track food and have made it easier for almost all households to get ration
cards. Other states, like Bihar , have
experimented with food stamps.
Reformers
argue that India should move
toward giving the poor cash or food stamps as the United
States , Mexico
“Why only
wheat and rice? If he wants to have eggs, or fruits, or some vegetables, he
should be given that option,” Mr. Gulati said. “You need to augment his income.
Then, the distribution, you leave it to the private sector.”
But most
officials say they are worried that if India
“It has
to improve, I have no doubt about it,” said K. V. Thomas , India
Officials
say Parliament is likely to vote on a new food policy at the end of the year.
In the meantime, the government is working on temporary solutions to its grain
storage problems, putting up new silos and exporting more rice.
Still,
much of it is likely to keep sitting on the side of the road here in Punjab .
“It’s
painful to watch,” said Gurdeep Singh, a farmer from near Ranwan who recently
sold his wheat harvest to the government. “The government is big and powerful.
It should be able to put up a shed to store this crop.”
Neha Thirani
contributed reporting from Mumbai and Karishma Vyas from New Delhi
This article has been revised to reflect the following
correction:
Correction:
June 12, 2012
An article on Friday
about malnourishment in India
____________________
http://www.thehindu.com/business/Economy/article3529070.ece?css=print
Official Indian funds in Swiss banks go up
Switzerland on Thursday said the quantum of money held by Indians
in Swiss banks stood at 2.18 billion Swiss francs (about Rs. 12,740 crore) at
the end of 2011, having risen for the first time in the past five years.
The total funds held by Indian individuals and entities include
2.025 billion Swiss francs held directly by them and 158 million held through
‘fiduciaries' or wealth managers, shows the latest data disclosed by the Swiss
National Bank (SNB) in its annual handbook on Swiss banks published on Thursday.
The funds, described by the SNB as ‘liabilities' of Swiss banks
towards their clients from India, are the official figures disclosed by the
Swiss authorities and do not indicate the quantum of the much-debated alleged
black money held by Indians in the safe havens of Switzerland.
Also, the SNB's official figures do not include the money that
Indians or other nationals might have in Swiss banks in the names of others.
While there is no official estimate for such unaccounted funds, some estimates
put it as high as $20-25 billion.
As per the SNB data, the quantum of funds held by Indians last
increased in 2006 by about one billion Swiss francs to 6.5 billion Swiss francs
(over Rs. 40,000 crore), but fell by more than two-thirds by the end of 2010. It
rose by about Rs. 3,500 crore in 2011.
The White Paper on black money tabled in Parliament last month
mentioned that the total liabilities of Swiss banks towards Indians had been
coming down since 2006 and had fallen by more than Rs. 14,000 crore during
2006-2010.
The liabilities stood at Rs. 9,295 crore at the end of 2010,
compared to Rs. 23,373 crore in 2006.
Amid allegations of Indians stashing away huge amounts of illicit
wealth abroad, including in Swiss banks, the government says it is making
various efforts to bring back the unaccounted-for money.
The White Paper said that “Switzerland has agreed to share
information prospectively only and has accepted limited retrospectivity only in
case of some countries such as India.”
As per the SNB data, the funds held by Indians directly in Swiss
banks increased by about 370 million Swiss francs to 2.025 billion Swiss francs
(Rs. 11,800 crore) in 2011.
On the other hand, the funds held through ‘fiduciaries' nearly
halved to 158 million Swiss francs (about Rs. 900 crore) in 2011 — marking the
fifth straight year of decline.
Fiduciaries are essentially wealth fund managers, who hold the
money of Indian private holders and families in the so-called numbered accounts.
The Swiss banks' direct liabilities towards clients from India
include funds held in savings and deposit accounts by individuals, financial
institutions and corporates.
In terms of liabilities through fiduciary accounts, the United
Kingdom tops the list with 6.1 billion Swiss francs, followed by Saudi Arabia's
5.95 billion Swiss francs, while Pakistan is also placed higher than India with
355 million Swiss francs.
On the other hand, the size of Swiss banks' assets in India
increased from about two billion Swiss francs to 6.4 billion Swiss francs (over
Rs. 37,000 crore) in 2011. Their assets have been continuously increasing since
2006 and have more than doubled in this period.
According to experts, there has been a “perceptible flight of
funds” of Indian accountholders from Swiss banks to other places in recent
years.
Foreign-capital-friendly regulations in places like Mauritius and
Dubai were possibly being exploited by those seeking to move their funds away
from Swiss banks, which have come under strict scrutiny of late.
At the same time, the global pressure has been rising on
Switzerland to ask its banks to share information about their clients with
foreign governments.
It is being suspected now that Indians having illicit wealth in
Swiss banks may be moving their funds in fear of being exposed due to growing
scrutiny. At the same time, even those having legitimate funds in Swiss banks
may be moving away, due to a growing level of negativity attached to them.
The Securities and Exchange Board of India and Reserve Bank have
already stepped up their vigil over Indian entities diverting their funds.
It is feared that the money might be routed back to India, either
into the stock market through FIIs or even via the FDI route.
______________________________
Ten things about the rich in India
The total net worth of India ’s rich or
the ultra high networth households is set to reach Rs 318 trillion (Rs 318 lakh
crore) or $ 5.6 trillion by 2016-17. It currently stands at Rs 65 trillion or $
1.2 trillion. India ’s
current gross domestic product is just over $ 1.7 trillion.
Kotak Mahindra and CRISIL Research recently
published a survey of India ’s
rich titled ‘Top of the Pyramid’.
Here are key highlights of the report:
1) The
report expects a five-fold increase Our estimates suggest that the total net
worth of Indian ultra high networth households will reach Rs 318 trillion in
2016-17, a five-fold increase from today’s Rs 65 trillion. This growth is
expected to be driven predominantly by growth in the number of ultra-high
networth households and returns on wealth.
2) There
are more than 81,000 ultra high networth households in India in
2011-12. A HNH is a household with a minimum net worth of Rs 25 crore. Although
this number represents a miniscule 0.03 per cent of the total households in India , it is
poised to more than triple to over 286,000 households by 2016-17.
3) Entrepreneurship
is clearly the dominant source of wealth in India , but fast-growing service
industries such as technology and financial services too have catapulted many
hitherto middle-income group households into the ultra HNH bracket.
4) Over
half of the rich households in the country are in the four metros. The other
top 6 cities account for around 13 per cent and the next 40 cities are home to
about 15 per cent. The rest are spread across the country.
5) The
survey on luxury cars also indicates that the Indian ultra high networth
individuals as a class represents a market with very distinct tastes, borne out
of a combination of rich traditions and heritage and modern needs. It is also
increasingly likely to become a market that is becoming younger with time, as
indicated by the success that some recent entrants into the luxury car market
have been able to achieve by targeting the youth.
6) The
approach of the rich towards investments this year was cautious and low risk,
reflecting the economic and business sentiment of the day. Many of them used
their business acumen and understanding of markets and shifted focus to
investing in safe havens such as debt and gold. Proportion of incremental
investments in equity markets was stable even in uncertain situations as they
view it as a long-term bet.
7) The
general feeling among our respondents was that the situation would come back to
normal by mid to late 2013. So, many of them are in a wait and watch mode and
caution has crept in only on investments so far. But if the uncertainty
concerning the global economic recovery lingers for some more time, however,
there is a real risk that the patterns seen in investments will spill over into
spending. And in a tough economic climate, such as the current one, some of the
above mentioned findings may well turn out to be game changers on the road to
success.
8) On
an average, the inheritor wealthy owns 3-4 cars, while the self-made and the
professional own 1-2 cars each. Interestingly, the number of rich who owned
more than 4 cars was more in the non-metros than in the metros.
9) Most
rich increasingly prefer to let the child study in India until graduation, perhaps
because they are quite comfortable with the quality of such institutions in the
country up to this level, and also because it helps in the family staying
together during the childhood years. For post-graduation, there is an
overwhelming preference for institutions overseas, because of the apparent
dearth of such high quality colleges in the country.
10) Despite the
staggering rise in gold prices during the year and the portends for further
such increases in future, most rich continue to view and buy gold in the form
of jewellery rather than as an investment.
____________________________
‘Super rich have $20 trillion in tax havens’
A new report by tax researchers estimates that the amount of black money deposited by a ‘global super-rich elite’ in offshore accounts is as much as $20 trillion — equivalent of the combined GDPs of the U.S. and Japan.
The report by Tax Justice Network released to The Observer is said to be the “most detailed estimates yet of the size of the offshore economy”.
In an appendix, the report says that “[it] first became evident in the late 1980s that a vast amount of flight capital was pouring out of the developing world”.
The report suggests that for many developing countries the cumulative value of the capital that has flowed out of their economies since the 1970s would be more than enough to pay off their debts to the rest of the world.
In the report, James Henry, former chief economist at consultancy McKinsey and an expert on tax havens, shows that at least $20 trillion — perhaps up to $31 trillion — has leaked out of scores of countries into secretive jurisdictions such as Switzerland and the Cayman Islands with the help of private banks.
Their wealth is, as Mr. Henry puts it, “protected by a highly paid, industrious bevy of professional enablers in the private banking, legal, accounting and investment industries taking advantage of the increasingly borderless, frictionless global economy“.
According to Mr. Henry’s research, the top 10 private banks — which include UBS and Credit Suisse in Switzerland, as well as the U.S. investment bank Goldman Sachs — managed more than $6 trillion in 2010. This is a sharp rise from $2 trillion five years earlier, The Observer reported.
According to Mr. Henry’s calculations, $10 trillion of assets is owned by only 92,000 people, or 0.001 per cent of the world’s population — a tiny class of the mega-rich who have more in common with each other than those at the bottom of the income scale in their own societies.
“These estimates reveal a staggering failure: inequality is much, much worse than official statistics show, but politicians are still relying on trickle-down to transfer wealth to poorer people,” said John Christensen of the Tax Justice Network.
____________________________
We Are Now One Year Away From Global Riots, Complex Systems Theorists Say
_____________________________________We Are Now One Year Away From Global Riots, Complex Systems Theorists Say
Posted by Brian_Merchant
on Monday, Sep 10, 2012
What’s the number one reason we riot? The plausible, justifiable motivations
of trampled-upon humanfolk to fight back are many—poverty, oppression,
disenfranchisement, etc—but the big one is more primal than any of the above.
It’s hunger, plain and simple. If there’s a single factor that reliably sparks
social unrest, it’s food becoming too scarce or too expensive. So argues a group
of complex systems theorists in Cambridge, and it makes sense.
In a 2011 paper, researchers at the Complex Systems Institute unveiled a model that accurately explained why the waves of unrest that swept the world in 2008 and 2011 crashed when they did. The number one determinant was soaring food prices. Their model identified a precise threshold for global food prices that, if breached, would lead to worldwide unrest.
The MIT Technology Review explains how CSI’s model works: “The evidence comes from two sources. The first is data gathered by the United Nations that plots the price of food against time, the so-called food price index of the Food and Agriculture Organisation of the UN. The second is the date of riots around the world, whatever their cause.” Plot the data, and it looks like this:
Pretty simple. Black dots are the food prices, red lines are the riots. In other words, whenever the UN’s food price index, which measures the monthly change in the price of a basket of food commodities, climbs above 210, the conditions ripen for social unrest around the world. CSI doesn’t claim that any breach of 210 immediately leads to riots, obviously; just that the probability that riots will erupt grows much greater. For billions of people around the world, food comprises up to 80% of routine expenses (for rich-world people like you and I, it’s like 15%). When prices jump, people can’t afford anything else; or even food itself. And if you can’t eat—or worse, your family can’t eat—you fight.
But how accurate is the model? An anecdote the researchers outline in the report offers us an idea. They write that “on December 13, 2010, we submitted a government report analyzing the repercussions of the global financial crises, and directly identifying the risk of social unrest and political instability due to food prices.” Four days later, Mohamed Bouazizi set himself on fire as an act of protest in Tunisia. And we all know what happened after that.
Today, the food price index is hovering around 213, where it has stayed for months—just beyond the tip of the identified threshold. Low corn yield in the U.S., the world’s most important producer, has helped keep prices high.
“Recent droughts in the mid-western United States threaten to cause global catastrophe,” Yaneer Bar-Yam, one of the authors of the report, recently told Al Jazeera. “When people are unable to feed themselves and their families, widespread social disruption occurs. We are on the verge of another crisis, the third in five years, and likely to be the worst yet, capable of causing new food riots and turmoil on a par with the Arab Spring.”
Yet the cost of food hasn’t quite yet risen to the catastrophic levels reached last year. Around the time of the riots cum-revolutions, we saw the food price index soar through 220 points and even push 240. This year, we’ve pretty consistently hovered in the 210-216 range—right along the cusp of danger. But CSI expects a perilous trend in rising food prices to continue. Even before the extreme weather scrambled food prices this year, their 2011 report predicted that the next great breach would occur in August 2013, and that the risk of more worldwide rioting would follow. So, if trends hold, these complex systems theorists say we’re less than one year and counting from a fireball of global unrest.
But the reality is that such predictions are now all but impossible to make. In a world well-warmed by climate change, unpredictable, extreme weather events like the drought that has consumed 60% of the United States and the record heat that has killed its cattle are now the norm. Just two years ago, heat waves in Russia crippled its grain yield and dealt a devastating blow to global food markets—the true, unheralded father of the Arab Spring was global warming, some say.
And it’s only going to get worse and worse and worse. Because of climate change-exacerbated disasters like these, “the average price of staple foods such as maize could more than double in the next 20 years compared with 2010 trend prices,” a new report from Oxfam reveals. That report details how the poor will be even more vulnerable to climate change-induced food price shocks than previously thought. After all, we’ve “loaded the climate dice,” as NASA’s James Hansen likes to say, and the chances of such disasters rolling out are greater than ever.
This all goes to say that as long as climate change continues to advance—it seems that nothing can stop that now—and we maintain a global food system perennially subject to volatile price spikes and exploitation from speculators, without reform, our world will be an increasingly restive one. Hunger is coming, and so are the riots.
In a 2011 paper, researchers at the Complex Systems Institute unveiled a model that accurately explained why the waves of unrest that swept the world in 2008 and 2011 crashed when they did. The number one determinant was soaring food prices. Their model identified a precise threshold for global food prices that, if breached, would lead to worldwide unrest.
The MIT Technology Review explains how CSI’s model works: “The evidence comes from two sources. The first is data gathered by the United Nations that plots the price of food against time, the so-called food price index of the Food and Agriculture Organisation of the UN. The second is the date of riots around the world, whatever their cause.” Plot the data, and it looks like this:
Pretty simple. Black dots are the food prices, red lines are the riots. In other words, whenever the UN’s food price index, which measures the monthly change in the price of a basket of food commodities, climbs above 210, the conditions ripen for social unrest around the world. CSI doesn’t claim that any breach of 210 immediately leads to riots, obviously; just that the probability that riots will erupt grows much greater. For billions of people around the world, food comprises up to 80% of routine expenses (for rich-world people like you and I, it’s like 15%). When prices jump, people can’t afford anything else; or even food itself. And if you can’t eat—or worse, your family can’t eat—you fight.
But how accurate is the model? An anecdote the researchers outline in the report offers us an idea. They write that “on December 13, 2010, we submitted a government report analyzing the repercussions of the global financial crises, and directly identifying the risk of social unrest and political instability due to food prices.” Four days later, Mohamed Bouazizi set himself on fire as an act of protest in Tunisia. And we all know what happened after that.
Today, the food price index is hovering around 213, where it has stayed for months—just beyond the tip of the identified threshold. Low corn yield in the U.S., the world’s most important producer, has helped keep prices high.
“Recent droughts in the mid-western United States threaten to cause global catastrophe,” Yaneer Bar-Yam, one of the authors of the report, recently told Al Jazeera. “When people are unable to feed themselves and their families, widespread social disruption occurs. We are on the verge of another crisis, the third in five years, and likely to be the worst yet, capable of causing new food riots and turmoil on a par with the Arab Spring.”
Yet the cost of food hasn’t quite yet risen to the catastrophic levels reached last year. Around the time of the riots cum-revolutions, we saw the food price index soar through 220 points and even push 240. This year, we’ve pretty consistently hovered in the 210-216 range—right along the cusp of danger. But CSI expects a perilous trend in rising food prices to continue. Even before the extreme weather scrambled food prices this year, their 2011 report predicted that the next great breach would occur in August 2013, and that the risk of more worldwide rioting would follow. So, if trends hold, these complex systems theorists say we’re less than one year and counting from a fireball of global unrest.
But the reality is that such predictions are now all but impossible to make. In a world well-warmed by climate change, unpredictable, extreme weather events like the drought that has consumed 60% of the United States and the record heat that has killed its cattle are now the norm. Just two years ago, heat waves in Russia crippled its grain yield and dealt a devastating blow to global food markets—the true, unheralded father of the Arab Spring was global warming, some say.
And it’s only going to get worse and worse and worse. Because of climate change-exacerbated disasters like these, “the average price of staple foods such as maize could more than double in the next 20 years compared with 2010 trend prices,” a new report from Oxfam reveals. That report details how the poor will be even more vulnerable to climate change-induced food price shocks than previously thought. After all, we’ve “loaded the climate dice,” as NASA’s James Hansen likes to say, and the chances of such disasters rolling out are greater than ever.
This all goes to say that as long as climate change continues to advance—it seems that nothing can stop that now—and we maintain a global food system perennially subject to volatile price spikes and exploitation from speculators, without reform, our world will be an increasingly restive one. Hunger is coming, and so are the riots.
Where buying a motorcycle can spark a riot
Refusal by Dalits to work as agricultural labour and to perform menial duties plus their relative economic improvement have made them the targets of caste violence
In the recent violence against the Dalits in Dharmapuri district in Tamil Nadu, about 300 of their houses were burnt down and other properties destroyed by the Vanniars, a numerically strong intermediate caste, sections of whom have been economically stagnant. The immediate cause for the rampage was a Vanniar woman’s marriage to a Dalit youth and the consequent suicide of the woman’s father. However, the large-scale and systematic destruction of Dalit properties was a result of the simmering discontent against the upward mobility of the Dalits.
The growing intolerance of the intermediate castes towards this economic mobility of the Dalits is not confined to Dharmapuri district alone. In the last two decades, 11 districts in the State have witnessed similar destruction of Dalit property as part of caste violence. There are two aspects to this Dalit mobility and the resultant violence against them. One is the declining of role of agriculture in rural Tamil Nadu and its impact on the social and economic relations within villages. The second is the specific ways in which the changing economic relations have been negotiated through altered caste and gender relations posing challenges to the intermediate caste’s pre-existing power.
Younger workforce
Across Tamil Nadu, the role of agriculture in sustaining rural livelihoods has dramatically declined with non-farm employment increasingly playing a significant role. A recent survey of rural households in four districts in the State done by the Institute of Development Alternatives, Chennai reveals that only 28 per cent of households rely on agriculture solely for their livelihood. In the remainder, at least one member of the household was engaged in non-agricultural employment, ranging from construction work to a range of manufacturing sector jobs. This resonates strongly with the observations made about the “commuting worker” in contemporary rural and urban landscapes. In Tamil Nadu alone, more than 72 lakh workers commuted from rural areas to work in non-agricultural sectors. This mobility is highly gendered with the age profile indicating the emergence of a young male workforce. This mobility has been accompanied by a new mobility of capital too. Studies indicate a growing ruralisation of the formal manufacturing sector in the last 15 years, with its output increasingly coming from the rural areas even as urban manufacturing employment is becoming more informal.
Impact of manufacturing
It is in this context that one needs to understand Dalit mobility in parts of Tamil Nadu. The spread of a range of manufacturing activity in small towns in Tamil Nadu and its diffusion into the nearby villages have spawned new rural-urban and rural-rural mobilities and a move into manufacturing and service sector jobs among Dalit youth, particularly in the northern and north-western districts. This mobility has also been backed by investments in education albeit of a limited kind.
The move away from traditional agricultural work has undermined the control that the intermediate castes could wield on Dalit youth. Fieldwork in villages adjoining and housing textile and clothing factories in the Coimbatore and Tiruppur districts, and shoe factories in Vellore district reveal not only a striking shift from agricultural work among the Dalit youth, but also a strong reluctance among them to take up agricultural work. The mobility beyond the village has enabled Dalit youth to challenge their traditional caste obligations and the masculine powers of the dominant castes. The refusal of Dalit women to perform menial duties for intermediate castes, the refusal of the younger generation of Dalits to labour in the lands of intermediate castes and to perform caste obligations such as funeral drumming — combined with relative improvements in their every day existence — have become the source of conflicts between the Dalits and the intermediate castes in the State. The inability and reluctance of sections of intermediate castes to make a shift from agriculture despite its non profitability due to strong social values attached to agriculture, their inability to force the castes below them to work on their farms and their lack of control over the mobility of Dalit youth have underwritten their caste anxieties.
Masculine power
Further, caste dominance is contingent upon the masculine power of men, their ability to control women in private and public spheres and also their ability to control the subordinate men of oppressed castes. With the challenge posed to their caste dominance, the intermediate castes find their masculinity in crisis since they are unable to exert power over the subaltern Dalit men and women. They also imagine an erosion of their masculine power in the private sphere with their claim that Dalit men lure away “their women.” The crisis of intermediate caste masculinity, which is the result of the economic mobility of the Dalits, is certainly at the core of these conflicts and the caste violence which targets Dalit properties. Otherwise, how can one explain the fact that invariably during the caste violence in recent times, motorbikes owned by the Dalits, a symbol of masculine mobility, have been targeted by the intermediate castes who desire to imitate the erstwhile dominant castes in their starched white dhotis moving on Enfield motorbikes!
(The writers are Associate and Assistant Professors at the Madras Institute of Development Studies, Chennai.)
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April 5, 2013 16:23 IST
Coveted haven for Indian barons
Investigation highlights how ‘nominee directors’ serve as on-paper representatives of several companies
The recent exposé by the International Consortium of Investigative Journalists (ICIJ) and its Indian partner, The Indian Express, has reflected the long-standing perception that Indian business barons have a particular hankering for the British Virgin Islands (BVI), and not just for its scenery.
Among the 612 Indians included in the list range are Lok Sabha Congress MP Vivekanand Gaddam and industrialists Ravikant Ruia and Vijay Mallya.
In some cases, the name of the investor is mentioned as a “director” or “beneficial owner” of the offshore company, which will contain names, addresses and passport details of the investor in question. The investigation has also shed some light on how a group of “nominee directors” serve as on-paper representatives of more than 21,000 companies, with some directors representing as many as 4,000 firms each.
Some of the companies have said that it was a case of “mistaken identity,” while others have claimed that it is “in accordance with all laws and that no transactions had taken place.”
In Vijay Mallya’s case, he had registered a BVI company called Venture New Holding in 2006 — in which he is listed as the beneficial owner. The UB Group, however, claims that this is normal practice. “Dr. Mallya is a non-resident Indian with business activities in different parts of the world. It is common practice to use BVI registered companies in connection with such activities which are not confined to India alone. All disclosures in regard to Dr. Mallya’s wealth have been duly made to Parliament,” Prakash Mirpuri, a UB Group spokesperson, told The Hindu.
The list also includes Thiagarajan Murugesan, who launched the now-defunct Paramount Airways. According to the ICIJ, he started five BVI companies in 2008 and is a director and shareholder in all of them.
Mr. Thiagarajan has clarified, however, that these companies were set up legally as “wholly-owned subsidiaries.” “No transaction has been carried out in these companies. These are non active, non-existent companies,” Mr. Thiagarajan told The Hindu.
Vice-Chairman of the Essar Group Ravikant Ruia, on the other hand, has registered three companies in the BVI, while Essar Power has five BVI accounts. “The companies have been disclosed to the Indian authorities as required under the applicable laws” said an Essar Group spokesperson said.
The eldest son of former chairman of Satyam Computers, Ramalinga Raju, is also on the list. According to the ICIJ, the Rajus set up two BVI companies, Global Network Overseas and Stapley Universal Limited. Teja Raju is listed as beneficial owner of both.
The ICIJ also named the sons and grandson of the founder of MRF over records showing that they have registered a BVI company, Moon Mist Enterprises Limited. The offshore company’s directors are MRF Chairman Kandathil Mammen, Managing Director Arun Mammen and MRF Director Rahul Mammen Mappillai.
There is no official word as yet from the Central Board of Direct Taxes (CBDT) on the veracity of the Indian Expressexposé. In fact, there is a studied silence on the issue, even as top officials were huddled in meetings late in the evening.
While a number of senior CBDT officials The Hindu tried to reach were busy in meetings, one top official called back only to excuse himself saying he was not authorised to speak on the issue and that the right official was the media spokesperson. The authorised spokesperson, however, is away in Japan. A Finance Ministry official said that an official statement would be issued in a day or two, if necessary, but no decision has been taken as yet.
(With inputs from Lalatendu Mishra from Mumbai and Ashok Dasgupta)
anuj.s@thehindu.co.in, lalatendu.mishra@thehindu.co.in, dasgupta.a@thehindu.co.in
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