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Cheap ‘Charity’

Money is ever poor compensation for the physical, mental and psychological trauma suffered by the victim of an assault, more so in cases of sexual assault. It is therefore no surprise that the apex court should see insult being added to injury by the Madhya Pradesh government’s paying a miserly compensation of Rs 6,000 or 6,500 to rape victims. “Are you doing a charity? You value rape at Rs 6,500”, Justice Madan B. Lokur admonished the state government’s Standing Counsel, when sharing the Bench with Justice Deepak Gupta and dealing with a petition on the utilisation of the Nirbhaya Fund for the welfare of victims of such assault. “For Madhya Pradesh the figures are fantastic”, the court observed, “there are 1,951 victims and you are giving Rs 6000-6500 each. Is that good, commendable”; adding that “this is total insensitiveness”.

To be fair, the court came down equally heavily on the fact that as many as 24 states and union territories had not responded to its call for affidavits on their utilisation of the Fund. “It is sad that a large number of state governments are not bothered about the safety of women, in spite of all talk about gender justice…. ” It is worth noting that the Central government claimed difficulty in securing information from the states, clearly there is only lip service paid to the safety of women. A poser for Maneka Gandhi?

Compensation payments are only a small part of the story. Inept policing is another, many victims are hesitant to go to the cops fearing additional shame and pressure. The Womens’ Commissions in several states are comatose ~ Delhi is an exception, though possibly publicity-seeking ~ and traditional misogynistic mindsets still prevail even in urban areas. Sexual harassment at the workplace remains rampant, and the attitude of most politicians is negative.

The indifference of state governments, as pointed out in the Supreme Court, testifies to criminal dereliction of a basic duty. The nation appeared “shocked” at the Nirbhaya incident in the Capital a few years back. Alas that shock was short-lived and there have been several other Nirbhayas subsequently though all have not attracted media attention.

Legal action, no matter how widespread and punitive, cannot succeed in changing traditional attitudes, social action is necessary. From where will that originate? Movies on rape victims do not arouse emotions if religion, caste or community “pride” is not impacted (the furore over ‘Padmaavat’ proves that).

Though the nation is almost permanently in election mode, gender-inequality is never a vote-catching issue: a collective failure of women politicians, regardless of party affiliation. Their non-serious attitude is reflected in the state governments’ tardiness in response to the Supreme Court’s call for information. And finally, can their Lordships “fix” a compensation level high enough to coerce the administrations into effective preventive/punitive action?

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‘We Need More Youthful Dreamers Like You’: A Letter to Jawaharlal Nehru

(This appeared in one of the most independent  journalism platforms in India named The Wire and the featured article has huge worth for students who want to understand the great leader and the first prime minister of India- CSS Editorial)

My dear Jawaharlal ji,

Greetings from an India you loved and which loved you immensely in return. On your 125th birth anniversary, I had written to you narrating the life and times of the nation. I had promised in the closing lines that if the regressive trends then seen in several spheres come to an end, I shall not write to you again. But that was not to be and hence I hereby sit down to write to you again.

Contrary to my fragile hope, in the last three years we have been witness to an unfortunate vilification campaign around you and your ideas about freedom, secularism and socialism. The campaign managers have gone to the extent of putting you perpetually in an adversarial position with your colleague Sardar Patel and are using all kinds of propaganda techniques to convince the ‘New India’ that this alleged rivalry beset this nation the day Gandhiji chose you over Patel as his political heir. But then I shudder to imagine whether they have the capacity or even the inclination to appreciate the width and depth of the relation you shared with both of them.

The methodical and structured campaign to vilify your legacy and replace it with the more ‘organically patriotic’ legacy of Sardar Patel is undoubtedly the most dangerous design the collective memory of this nation has ever come across. We are being led by people who have no understanding of the nuances which made the freedom movement richer on account of differences over crucial issues during the struggle for the liberation of India. We know there were palpable differences between two different view-points represented by two equally dominant factions after the Lucknow Congress of 1936. You were perceived to be close to the ‘Socialist Block’ – a perception which did not go down well with the other faction represented by Rajaji, Rajendra Babu and Sardar Patel. Both the group wrote to Bapu and as always he read and responded to each and resolved the differences. I wish to share a few lines from the letter written to you by Bapu in response to yours:

Your letter is touching. The fact is that your colleagues have lacked your courage and frankness. The result has been disastrous. I have always pleaded with them to speak out to you freely and fearlessly. But having lacked the courage, whenever they have spoken, they have done it clumsily and you have felt irritated.” And still further he tells you so very affectionately… “Resume your humour at the committee meeting. That is your most usual role, not which of a care-worn, irritable man ready to burst on the slightest occasion… How I wish you could telegraph me that on finishing my letter you felt as merry as you were on that New Year’s Day in Lahore when you were reported to have danced around the tricolour flag.

Jawaharlal ji! Of late, our politics is dominated by people who cannot fathom the trajectory of relationship you all enjoyed in spite of differences over strategic matters and priorities in pursuance of the goal of freedom. In your country, politicians have declared themselves as ‘counterfactual’ historians and they wish to rewrite the chapters/phases of our history with most regressive ideas and ideologies. These politicians-cum-counterfactual historians fail to discern (historically) the conspicuous presence of ‘differences’ of Gandhi with Gandhi himself, of you with yourself and of your colleague Patel with himself. Annals of history revealed to us that there were palpable differences between the Gandhi of 1916-17 and the Gandhi of 1931, or between the Patel of the Bardoli satyagraha days to the Patel of the Dandi March. We learnt that such ‘differences’ never agitated either the history or the historians; and they certainly they did not have to quarrel with the historical data. They all believed that history is not constituted by mono-causality and even great people within the folds of history had the freedom and the prerogative to appear less consistent at different points of time.

As a child, growing up with an inherited memory derived from a well-read and politically informed family, and also having been a recipient of historical memory from the text books in the mid and late 1970s, the counterfactuals never appealed to people of my generation. Probably, the idea of ‘what-might-have-been’, was an indulgence that was not accessible to us who sailed through government run schools, and were taught using a pedagogy which aimed at nurturing the ‘seeds of unity in diversity’ in us. Perhaps, and fortunately so, the ones, who decided the contours and content of the history to be transmitted to us, believed that the brutalisation of collective memory based on ‘speculation’ can only damage the possibility of a diverse yet inclusive India.

What shall I tell the votaries of this ‘New India’, which is keen to pit you against Subhash babu after they are done with denigrating you in the context of their imagined rivalry tales with Sardar Patel? I should tell them to read the most versatile and lovely correspondence of Subhash babu with you. In each of those letters he mentions you as the ‘most trusted comrade’. After your Europe trip in 1938, Subhash babu wrote to you:

You cannot imagine how I have missed you all these months. I realise, of course, that you needed a change very badly. I am only sorry that you did not give yourself enough physical rest…

Of course, I know the hopelessness of my own request to these people to read and develop a nuanced narrative of history. The people who use the expressions like ‘termite’ for their political opposition shall never be able to understand the inherent warmth defining the relationship amongst the leaders who were instrumental in shaping the value-frame of the idea of India.

The politics which thrives on hatred for freedom, secularism and socialism cannot simply accept that in spite of their disparaging campaign, you still occupy a central position in the cognitive framework of a huge majority of Indians, not only as a writer, a thinker, and a statesman but also as a youthful dreamer, who tried bringing the ideas of liberalism to a nation deeply divided on all possible parameters of birth and belonging. I read a letter written to you by the outstanding painter Amrita Sher-Gil, on receiving your autobiography. She was frank in saying… “As I rule I dislike autobiographies… They ring false. Pomposity and exhibitionism. But I think I will like yours… (because) you are capable of saying ‘when I saw the sea for the first time’, when others would say ‘when the sea saw me for the first time’.” In these words she really captured your spirit, Jawaharlal ji!

We needed such youthful dreamers like you in plenty to remind us that if the economy and the society remain aloof or were kept insulated from the democratic processes, we shall invariably lose the battle against poverty, hunger and inequality. To you democracy did not mean merely a political doctrine but a committed and continuous engagement in the shape of lived reality. You were at times a lonely voice which refused to weigh an opinion based solely on the anticipation of whether it shall shake the foundation of a popular belief or a venerated tradition. While proud of the rich heritage of India, you were conscious of the ills prevalent in the Indian society and lamented the deterioration of public life and inter-community engagement in newly independent India. You clearly attributed it to preferring irrationality over reason.

Dealing with the dangerously new garam hawa (hot gust of wind) of our times, we now realise how difficult it must have been for you and your friends to ensure that this nation does not become a sectarian Hindu Pakistan. You knew that the best safeguard to counter such reactionary sentiment lay in vigorously promoting a culture of accommodation and committing the state to safeguard the uniqueness of each religious group and its culture, apart from promising equality in every sphere. You were acutely aware of the dimension communal politics had acquired.

Just two days before the assassination of Bapu you wrote to Shyama Prasad Mukherjee sharing your concerns regarding the nefarious activities of the Hindu Mahasabha. You wrote:

…what pains me most is the extreme vulgarity and indecency of speeches being made from Hindu Mahasabha platforms. ‘Gandhi Murdabad’ is one of their special slogans. Recently a prominent leader of the Hindu Mahsabha stated that they aimed at the hanging of Nehru, Sardar Patel and Mualana Azad. Normally one does not like to interfere with any political activities however much one may dislike them. But there is a limit to this kind of thing, and I fear that the limit is being reached if it has not already been crossed. I write to you especially because of your own close association with the Hindu Mahasabha.

While I finish this letter (promising to write another one), on behalf of millions and millions of Hindustanis, I wish you a very happy birthday and take the liberty of sharing the birthday wishes for you by Sarojini Naidu in 1937:

What shall I wish you for the coming year? Happiness? Peace? Triumph? All these things that men hold supremely dear are but secondary things to you…almost incidental…I will wish you, my dear… unflinching faith and unfaltering courage in your via crucis that all must tread who seek freedom and hold it more precious than life… Not personal freedom but the deliverance of a nation from bondage. Walk steadfastly…if sorrow and pain and loneliness be your portion. Remember Liberty is the ultimate crown of all your sacrifice…but you will not walk alone.

Jai Hind

Manoj K. Jha

Manoj K. Jha is a professor in Delhi University

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I need to speak up now-Yashwant Sinha

I shall be failing in my national duty if I did not speak up even now against the mess the finance minister has made of the economy. I am also convinced that what I am going to say reflects the sentiments of a large number of people in the BJP and elsewhere who are not speaking up out of fear.

Arun Jaitley is considered to be the best and the brightest in this government. It was a foregone conclusion before the 2014 elections that he would be the finance minister in the new government. His losing his Lok Sabha election from Amritsar was not allowed to come in the way of this appointment. One may recall that in similar circumstances Atal Bihari Vajpayee had refused to appoint Jaswant Singh and Pramod Mahajan, two of his closest colleagues in the party, to his cabinet in 1998. His indispensability was established further when the prime minister rewarded him not only by giving him the finance ministry including the department of disinvestment, but also the ministries of defence and corporate affairs. Four ministries in one go out of which he still retains three. I have handled the ministry of finance and know how much hard work there is in that ministry alone. Finance ministry, in the best of times, calls for the undivided attention of its boss if the job has to be properly done. In challenging times it becomes more than a 24/7 job. Naturally, even a superman like Jaitley could not do justice to the task.

Jaitley was, to begin with, a lucky finance minister, luckier than any in the post-liberalisation era. Depressed global crude oil prices placed at his disposal lakhs of crores of rupees. This unprecedented bonanza was waiting to be used imaginatively. The legacy problems like stalled projects and bank NPAs were no doubt there and should have been managed better like the crude oil bonanza. But the oil bonanza has been wasted and the legacy problems have not only been allowed to persist, they have become worse.

So, what is the picture of the Indian economy today? Private investment has shrunk as never before in two decades, industrial production has all but collapsed, agriculture is in distress, construction industry, a big employer of the work force, is in the doldrums, the rest of the service sector is also in the slow lane, exports have dwindled, sector after sector of the economy is in distress, demonetisation has proved to be an unmitigated economic disaster, a badly conceived and poorly implemented GST has played havoc with businesses and sunk many of them and countless millions have lost their jobs with hardly any new opportunities coming the way of the new entrants to the labour market. For quarter after quarter, the growth rate of the economy has been declining until it reached the low of 5.7 per cent in the first quarter of the current fiscal, the lowest in three years. The spokespersons of the government say that demonetisation is not responsible for this deceleration. They are right. The deceleration had started much earlier. Demonetisation only added fuel to fire.

And please note that the methodology for calculation of the GDP was changed by the present government in 2015 as a result of which the growth rate recorded earlier increased statistically by over 200 basis points on an annual basis. So, according to the old method of calculation, the growth rate of 5.7 per cent is actually 3.7 per cent or less.

Even the SBI, the largest public sector bank of the country, has stated with unusual frankness that the slowdown is not transient or “technical”, it is here to stay and the slowdown in demand has only aggravated the situation. It has openly contradicted what the BJP president said just a few days ago that the slowdown in the last quarter was on account of “technical” reasons and will be corrected soon. According to the SBI chairman, the telecom sector is the latest entrant to the long list of stressed sectors.

The reasons for this decline are not far to seek nor have they appeared suddenly. They have been allowed to accumulate over time to cause the present crisis. It was not difficult to anticipate them and take counter measures to deal with them. But that called for devoting time to the task, serious application of mind, understanding of the issues and then working out a game plan to tackle them. It was perhaps too much to expect from a person who was carrying the heavy burden of so many extra responsibilities. The results are there for all of us to see.

The prime minister is worried. A meeting convened by the prime minister with the finance minister and his officials appears to have been postponed indefinitely. The finance minister has promised a package to revive growth. We are all waiting with bated breath for this package. It has not come so far. The only new thing is the reconstituted Economic Advisory Council of the prime minister. Like the five Pandavas they are expected to win the new Mahabharat war for us.

The performance of the monsoon this year has not been flattering. This will further intensify rural distress. The farmers have received “massive” loan waivers from some state governments varying from one paise to a few rupees in some cases. Forty leading companies of the country are already facing bankruptcy proceedings. Many more are likely to follow suit. The SME sector is suffering from an unprecedented existential crisis. The input tax credit demand under the GST is a whopping Rs 65,000 crore against a collection of Rs 95,000 crore. The government has asked the income tax department to chase those who have made large claims. Cash flow problems have already arisen for many companies specially in the SME sector. But this is the style of functioning of the finance ministry now. We protested against raid raj when we were in opposition. Today it has become the order of the day. Post demonetisation, the income tax department has been charged with the responsibility of investigating lakhs of cases involving the fate of millions of people. The Enforcement Directorate and the CBI also have their plates full. Instilling fear in the minds of the people is the name of the new game.

Economies are destroyed more easily than they are built. It took almost four years of painstaking and hard work in the late nineties and early 2000 to revive a sagging economy we had inherited in 1998. Nobody has a magic wand to revive the economy overnight. Steps taken now will take their own time to produce results. So, a revival by the time of the next Lok Sabha election appears highly unlikely. A hard landing appears inevitable. Bluff and bluster is fine for the hustings, it evaporates in the face of reality.

The prime minister claims that he has seen poverty from close quarters. His finance minister is working over-time to make sure that all Indians also see it from equally close quarters.

The writer, a member of the BJP, is a former Union finance minister

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Is this the end of democracy?

A month before the Brexit vote, the Ipsos Mori polling firm discovered that the British public was systematically misinformed. For instance, Leave voters believed that EU immigrants comprise 20 per cent of the UK’s population. Remain voters estimated 10 per cent. The truth is about 5 per cent. Both Leave and Remain voters vastly overestimated what percent of the UK child benefit goes to children living in Europe. Both vastly underestimated how much foreign investment comes from the EU, and overestimated how much comes from China.

Brexit voters were misinformed about the basic facts, though Remainers on average were less wrong than Leavers. Yet even knowing these basic facts would not suffice to make voters well informed. To cast a smart vote, a citizen would need significant social scientific knowledge. They would need to know about the economics and sociology of trade and immigration, the politics of centralised regulation, and the history of nationalist movements. But there is no reason to presume even a tenth of the UK’s population has a basic grasp of the social science needed to evaluate Brexit.

Brexit illustrates the central problem with democracy. Political decisions are high stakes. To make sound decisions requires knowledge. But voters nearly always lack the necessary knowledge. They are not just ignorant; they are usually misinformed. Democracy is the will of the people, but the people usually have little clue what they are doing.

The fact of political ignorance

In designing political institutions, we face an unhappy dilemma. If we concentrate power in the hands of the few, their individual inputs make a significant difference. They thus have every incentive to use their power in a rational and informed way, but also to use their power selfishly. On the other hand, if we spread power out widely among the many, each individual loses the incentive to act selfishly, but also loses the incentive to be informed or to think in a rational, scientific way. Representative parliamentary government is supposed to split the difference, by making the elites answer to the people while also empowering them to override the people’s choices. Of course, referendums attempt to bypass this check on voter irrationality.

Thousands of years ago, Plato hypothesised that the democratic masses would be too ignorant to run their government. He did not have the data to back up his assertion. We do. It turns out Plato was right.

For over 65 years, researchers in the United States have been collecting data about what citizens know and don’t know. The results are depressing. (Results for other countries are similarly depressing; I use American examples because we have more data.) The American National Election Studies, conducted every other year, gives voters a test of basic political information. In general, the top 25 per cent of voters get about 90 per cent of the questions right, the next 50 per cent do little better than chance, and the bottom 25 per cent do worse than chance. In a typical election year, most Americans cannot identify their congresspeople or which party controls congress. Most cannot guess the unemployment rate within a few percentage points. Most have little memory of recent events.

In the 2000 US presidential election, while most Americans knew that Al Gore was more “liberal” than Bush, most did not seem to know what that term means. Fewer than half understood that Gore was more supportive of abortion rights, more supportive of welfare-state programmes, favoured a higher degree of aid to black people or was more supportive of environmental regulation.

Voters do not know the basic facts, but even if they did, that would not be enough. People choose candidates or parties who push policy agendas. Even if, contrary to fact, voters knew what candidates or parties wanted to do, they would still need to understand some basic social science in order to determine which policies are most likely to deliver their favoured ends. In the same way, even if I know I have stomach ulcers, I do not magically acquire the knowledge needed to treat the ulcers.

In fact, there is a big disparity between how laypeople and economists (both left and right) think about the economy. This disparity is not explained by demographic differences. Further, it turns out that better informed or higher IQ laypeople tend think more like economists.

It is no mystery why democratic voters know so little. The are not stupid; they just do not care. The democratic process gives them bad incentives.

In a democracy, how the majority as a collective votes matters, but how any individual votes does not. An individual vote matters only if it decides the election or the referendum, that is, only if it breaks a tie. Yet the probability that a vote will break a tie in a major election or referendum is vanishingly small. Accordingly, each individual voter has little incentive to be informed. They can afford to be ignorant, to be misinformed, or to indulge grossly irrational beliefs. For most of them, the cost of being informed outweighs the potential benefits.

As an analogy, suppose a university lecturer informed a 47 million-person class that they would take a final exam in three months, an exam worth 100 per cent of their final grade. But suppose she told them, “You will not receive your own grade. Instead, I shall average your grades together and you will each receive the class average.” In such a scenario, the class would likely fail. That is how democracy works, except that we cannot even force people to listen to three months of expert lectures before they take the test.

To be clear, it is not as though whatever the majority of the electorate prefers on election day automatically gets translated into policy. Even the Brexit referendum was not binding, the High Court has ruled parliament must take a vote and the Supreme Court could follow suit. More broadly, members of parliament, ministers, and bureaucrats have significant independence. Nevertheless, politicians tend to give voters what they want. But they want what they want because they do not know what they need to know.

The foolishness of crowds

Some defenders of democracy downplay the problems of democratic ignorance. They claim that wisdom is an emergent feature of crowds. Sure, they say, individuals may be ignorant (or worse), but when we aggregate their ignorant beliefs together, we get good results.

This theory sounds delightful, but it holds only in special cases.

Here are some such cases. If we ask carnival goers to estimate the number of jelly beans in a jar, most estimates will be far off. However, the more people we ask, the more accurate the average estimate becomes. Similar results hold for guessing the height of the prize horse or the weight of the prize pig.

If only citizens on the whole were as good at choosing members of parliament as they are at guessing the weight of prize pigs. The problem is that in politics, citizens make systematic mistakes, whereas in guessing the weight of pigs, they make random mistakes which cancel each other out. The so-called “wisdom of crowds” appears only in situations where individual errors are largely random.

In politics, alas, errors are not random. For instance, in the Brexit vote, Leave voters vastly overestimated the number of EU immigrants, while Remain voters slightly overestimated the number.

It is comforting to believe that perhaps the Labour and Conservative Parties will cancel each other’s mistakes out. Yet there is little reason to think the truth lies somewhere in-between. The spectrum between Labour and Conservative political beliefs occupies only a narrow niche in ideological space.

The same point holds for Democrats and Republicans in the United States. In the recent US presidential election, Trump pushed a strongly anti-immigrant agenda, while Clinton pushed to keep the already highly restrictive status quo. When we ask economists, though, we find that both major candidates and parties are far more restrictionist than the evidence supports.

Do not blame the schools

Commentators often think there is an easy solution to the problem of democratic ignorance: education. This just shows we need more and better public education, they say. We need to teach schoolchildren critical thinking, philosophy, politics, and economics.

It is a natural response, but it misses the point. The schools are not to blame. The problem is incentives.

In secondary school, citizens already know most of what they need to know to be good voters. They promptly forget it after their exams end. In fact, studies generally find that most citizens retain only a small fraction of the information they learned in schools.

Citizens allow themselves to forget the information because they do not find it interesting or useful. This type of knowledge is not useful because their individual votes count for so little. If I forget how to drive a car, I cannot get to work. But if I forget the economics of trade and vote accordingly, well, nothing happens.

British citizens are more educated than ever before. But in the UK, as elsewhere, levels of political knowledge have remained stable, and low, over the past half century. Even the internet has made little difference. As the joke goes, we carry devices with us capable of accessing all the world’s knowledge in an instant, but we use them to share pictures of our food.

The injustice of democratic incompetence

Democracies are not just about choosing mundane things like flag colors and national anthems. Democratic decisions affect matters of life and death, peace and war, prosperity and poverty.

The damage of bad decisions can compound over time. Suppose Brexit turns out to reduce the UK’s economic growth by one percentage point year after year. A one percentage point reduction in growth in any given year might not seem trivial. But over time, trivial problems add up to big problems. Had the UK had one percentage point less average growth since 1948, its gross domestic product would be only about £600bn, and the standard of living would be as low as Egypt’s.

Incompetent decision-making is not merely bad; it may be unjust. Consider an analogy. Suppose a 12-person jury hears a murder trial. Suppose the jury is ignorant: they completely ignore the facts of the case entirely, but decide to find the defendant guilty on the basis of a coin flip. Suppose instead they are irrational: they hear the facts of the case, but decide to find the defendant guilty because they believe him secretly to be an evil robot. Suppose instead they are malevolent: they believe the evidence indicates the defendant is innocent, but find him guilty because they hate people of Indian heritage. Or, finally, suppose instead the jury acts in bad faith: They find the defendant guilty because they accepted a bribe.

If we knew a jury behaved in any of these ways, we would judge the trial unfair and unjust. The defendant’s freedom and welfare is at stake. They owe the defendant, and perhaps the British public whom they represent, to decide the case competently and in good faith.

This line of reasoning applies just as well to the electorate. Political decisions are also high stakes. The outcomes — including all ensuing laws, regulations, taxes, budget expenditures, wars, and so on — are imposed upon us involuntarily. These decisions can and do harm us, and can and do deprive many of us of property, liberty and even life. At first glance, we should think that voters, like jurors, have a moral obligation to vote in a competent and morally reasonable way. But it appears that voters systematically violate this obligation.

Some might say this analogy fails. They claim voters are only hurting themselves. But that is not true. If I eat a dozen Cadbury Dairy Milks per day, I may get diabetes, but only I suffer the consequences. When voters vote, the majority decides not just for itself, but for the dissenting minority, and for the tens of millions affected by the decision who cannot vote. The disproportionately elderly Leave voters wish to impose their will upon the disproportionately young Remain voters.

We cannot fix democracy

The problems of political ignorance, misinformation, and irrationality are built-in to democracy. They are not superficial flaws, but problems democracy itself creates. We cannot “fix” the problem with more democracy anymore than we can fix a flood with more rain.

At the very least, these problems highlight why representative parliaments are important and why referenda are, in general, terrible ideas (especially in large democracies). We want our representatives to represent us. But sometimes that does not simply mean promoting the policies we favour. Sometimes, instead, it means doing what is good for us rather than what we want. Members of parliament are much better informed than the public as a whole, and they recognise their decisions have real weight.

A recent study on US politics seems to confirm that representative government explains why democracy performs as well as it does. Princeton University political scientist Martin Gilens asked, when voters at the 10th, 50th, and 90th percentiles disagree about policy, with whom do US presidents side? He found that presidents were about six times more likely to implement policies high-income voters want than what middle- or low-income voters want. (Surprisingly, George W Bush was more likely to side with low-income voters than more left-wing presidents.) We might say that this shows democracy does not work. But there is an upside: As Gilens notes, high-income voters are also in general high-information voters, and low-income voters are also in general low-information voters. Even within the Democratic Party, high- and low-information voters have different policy preferences. High-information voters are far more in favour of free trade and immigration, less in favour of war, and far more protective of civil liberties. Perhaps representative democracies overperform because politicians do not quite have to answer to the median voter.

If we want even better performance, though, we might need to depart from democracy altogether. The economist Robin Hanson argues we should use specialised betting markets to choose policies. We should, he says, bet on beliefs but vote on values. Law professor Ilya Somin of George Mason University argues that we need a system in which people can “vote with their feet”. This means having radically devolved political systems so that citizens can choose where to live. Both Hanson’s and Somin’s ideas mean to overcome voter ignorance by making mistakes costly and truths beneficial. University of Southampton philosopher Ben Saunders argues we should bypass voting and instead choose leaders through sortition, the random selection system used by the Athenians. Finally, in my recent book Against Democracy, I argue (expanding on an idea from John Stuart Mill) that we should consider implementing electoral systems in which citizens’ votes are weighted by their degree of  objective political knowledge.

These proposals set off alarm bells, especially among people who have not studied them in any depth. But they at least illustrate our dilemma. A misinformed electorate is the price we pay for universal, equal suffrage.

(Jason Brennan is a professor of strategy, economics, ethics, and public policy at Georgetown University, Washington DC.)

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Purifying democracy

When India attained freedom in 1947, its people were not familiar with the democratic system. Democracy was once described by Abraham Lincoln as a system “of the people, by the people and for the people’. But, such a definition hardly mirrors the reality of politics. It implies, ultimately, the existence of a system of Government formed by the majority of the people.

However, the autocratic rule of the British Raj for two centuries ruined the spirit of the people and the widespread illiteracy compelled them to live in sub-human conditions. No wonder some political thinkers had remarked that democracy would fail to strike roots in the Indian soil.

Jonhn Stuart Mill, the distinuished British political philosopher, had suggested that ‘universal education must precede universal adult-franchise’. In Britain, the voting right was actually extended step by step with the march of time and the spread of education. But, Article 326 of the Constitution of India overnight granted   adult franchise in spite of nationwide illiteracy.

Yet it is a stark reality that elections in India have revealed considerable enthusiasm among the masses (Sachdeva Gupta, Indian Constitution, p. 211). Since the first general election in 1952, a large number of people have evinced keen interest in voting. Even the villagers have taken part in the electoral process despite a variety of hazards. It would be instructive to note that as many as 1,635,000 votes were declared invalid in the first election. Many voters, because of illiteracy, left the ballot papers on the floor of the booths or on top of the ballot box. This would imply that the right to vote was granted long before the proper time (Dr AC Kapoor, The Indian Political System, p. 424). But, it can, by no means, be ignored that they were keenly interested in the electoral affairs and many disabled people reached the booths with the help of others in order to cast their valuable votes.

Indeed, the success of democracy largely depends upon the participation of the people in the elections. As SL Sikri puts it, “Elections lie at the heart of every democratic process”. They are actually the accepted means for modern democracies to establish legitimate Governments ~ they secure people’s participation in public affairs, ensure peaceful transfer of power and combine the authority of the Government with legitimacy. (Indian Government and Politics, p. 89)

But, from that point of view, our experience has not been particularly encouraging. True it is that a large number of people take part in the elections; but it is equally true that many others stay away from the polling booths for various reasons.

But, as Dr H H Das has pointed out, political participation is vital to the proper functioning of a democratic polity. It actually provides vitality and creativity of democracy and it also offers a defence-mechanism against tyranny and autocracy. (India: Democratic Government and Politics, p. 367)

The usual method of political participation is to exercise the right to vote in the elections. Yet a large number of people are averse to political participation or they participate at the lowest level. Political scientists have determined four reasons for such aloofness. First, there may be “apathy”, which would mean the individual’s indifference towards or abstention from electoral affairs. Such a mentality stems from a lack of interest in political affairs. Second, there may be a certain “cynicism” rooted in suspicion towards and distrust of the motive and activities of others. This attitude develops because of the feeling that politics is a dirty game and that the politicians are , usually, unscrupulous persons. Third, there may even be a degree of “alienation” or hostility towards politics. In such cases, the person keeps a distance from the active political system. Then, there is also a sense of “anomie” ~ a feeling of personal ineffectiveness and divorce from the society.

It is because of these reasons that some people keep themselves away from the centre of affairs. It is significant that in the parliamentary election of 1984, the voter participation was the highest (64 per cent), but subsequently, the figures remained between 55.3 per cent and 62 per cent. A recent report reveals that the voter-participation in some provinces has reached 70 per cent, but the overall figure is not at all sufficient when compared with the 80 to 90 per cent polling in the Western countries.

Obviously, there are some cogent reasons for this poor turnout. Politics in India has, in recent years, often become a dirty game and this is one of the reasons why many honest and idealistic people take no interest in it. Men of principle and morality are increasingly remaining outside the electoral arena and, in their place, self-seeking persons of less than third- rate quality, have occupied a dominant position in the polity. Moreover, people often feel that sometimes crime and politics go hand-in-hand and the mafia-dons have polluted the social life by their unholy alliance with the ruling party leaders.

The Vora Committee once reported that the crime-world was running a parallel administration in our country and that no effective measure has ever been taken to stem that pot. This is why, many people have lost their interest in political affairs.

Of course, democracy means demos (people’s) kratia  (Government or the rule of the people). But if a large number of people stay away from the polling booths, democracy surely becomes a misnomer. Modern democracy has become an indirect system due to the enlargement of territory and population. So, people’s rule through elections has come to the fore. Naturally, it requires the active and full-fledged involvement of the people in electoral affairs.

Hundreds of thousands of people remain away from the polling booths and some others turn up only to cavil that they do not support any candidate fielded in the particular constituency. Hence they press the NOTA (None Of The Above) button. Indian democracy is now suffering from a chronic ailment and it urgently needs to recover. Instead of blaming the absentees, it is imperative to purify our democracy so that it can serve the real interests of the people.

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Special Reports

Corruption: A worldwide phenomenon, but why? How to combat?

Corruption is worldwide phenomenon. Earlier it was considered to be an Afro-Asian-Latin American phenomenon in the least developed economies, but now even the developed countries are facing the hydra headed problem. Corruption has engulfed all the arenas of life- politics, business and governance. Is it appropriate to conclude that there is a marked decline in the moral and ethical values in the world irrespective of the level of development of the countries or education level of the citizens? Or bestial human instincts were always present in the world, only their degree varied depending upon good governance or responsible citizenry? Is it because of the increasing role of big money in development? Is it because of globalization in which there are both kinds of places- strong and weak financial jurisdiction? There are also many tax havens difficult to be governed by central banks or world watch dogs? There are many complex factors at play and no single reason can be attributed to rise in corruption.

Corruption is mainly associated with siphoning off of public money for private gains and adopting illegal means to amass wealth such as evading taxes, indulging in drug and narcotic trade or human trafficking and running prostitution or child labour or bonded labour rackets. The public servants may seek kickbacks for delivery of services to people which is their legitimate right given to them by state. There are occasions when in government procurement or defence procurement officials compromise on the quality of products or allow over invoicing by the supplier for different kinds of benefits including hefty commissions. In a broader parlance corruption includes all kinds of compromises on moral and ethical standards.  Exploitation of junior women staff by office bosses, a doctor or teacher remaining absent from their duty and police allowing unsocial elements to encroach public space or perpetrate criminal activities for some monetary consideration.

Corruption is by product of lack of rule of the law, transparency and accountability, crony capitalism and authoritarian governments. It is also a byproduct of lack of good governance, criminalization of society and politics and coalition between political power, business and other  dominant interest groups over common people who are poor, ill educated and helpless. Common people may fall into the trap of corruption due to greed, ignorance or absence of an effective institutional delivery system and lack of judicial redress.

Right from Panama leaks to the impeachment of heads of Brazil and South Korea and Chinese government’s anti corruption moves are some of the evidences that show that corruption is very rampant in the world. There are big businesses in some countries which have been indicted for their involvement in corruption. Sometimes line between good and bad is so blurred with regard to involvement in corruption that today it is very difficult to say who is unblemished and morally correct and ethically firm and resolute.

Let’s see some of the recent cases just to find that corruption is all pervading without exception.

Some recent corruption cases

Panama Papers

The Panama Papers are 11.5 million leaked documents that detail financial and attorney–client information for more than 214,488 offshore entities. The documents, which belonged to the Panamanian law firm and corporate service provider Mossack Fonseca, were leaked in 2015 by an anonymous source, some dating back to the 1970s. The leaked documents contain personal financial information about wealthy individuals and public officials which had previously been kept private. While offshore business entities are legal, reporters found that some of the Mossack Fonseca shell corporations were used for illegal purposes, including fraud, tax evasion, and evading international sanctions. “John Doe”, the whistleblower who leaked the documents to German journalist Bastian Obermayer from the newspaper Süddeutsche Zeitung (SZ), remains anonymous, even to the journalists on the investigation as he insisted  “My life is in danger”. In a May 6 statement, John Doe cited income inequality as the reason for his action, and said he leaked the documents “simply because I understood enough about their contents to realise the scale of the injustices they described”.

He added that he has never worked for any government or intelligence agency. He expressed willingness to help prosecutors if immune to prosecution. After SZ verified that the statement did come from the Panama Papers source, the International Consortium of Investigative Journalists (ICIJ) posted the full document on its website.

Because of the amount of data, SZ asked the ICIJ for help. Journalists from 107 media organizations in 80 countries analyzed documents detailing the operations of the law firm. After more than a year of analysis, the first news stories were published on April 3, 2016, along with 150 of the documents themselves.The project represents an important milestone in the use of data journalism software tools and mobile collaboration.

The documents were quickly dubbed the Panama Papers. The Panamanian government strongly objects to the name; so do other entities in Panama and elsewhere. Some media outlets covering the story have used the name “Mossack Fonseca papers”.

In addition to the much-covered business dealings of British prime minister David Cameron and Icelandic prime minister Sigmundur Davíð Gunnlaugsson, the leaked documents also contain identity information about the shareholders and directors of 214,000 shell companies set up by Mossack Fonseca, as well as some of their financial transactions.

Initial reports identified five then-heads of state or government leaders from Argentina, Iceland, Saudi Arabia, Ukraine, and the United Arab Emirates as well as government officials, close relatives, and close associates of various heads of government of more than forty other countries.The names of several then-current national leaders appear in the documents, including President Khalifa bin Zayed Al Nahyan of the United Arab Emirates, Petro Poroshenko of Ukraine, King Salman of Saudi Arabia, and the Prime Minister of Iceland, Sigmundur Davíð Gunnlaugsson.

Former heads of state mentioned in the papers include:

  • Sudanese president Ahmed al-Mirghani, who was president from 1986-1989 and died in 2008
  • Emir of Qatar Hamad bin Khalifa Al Thani owned Afrodille S.A., which had a bank account in Luxembourg and shares in two South African companies. Al Thani also held a majority of the shares in Rienne S.A. and Yalis S.A., holding a term deposit with the Bank of China in Luxembourg. A relative owned 25 percent of these: Sheikh Hamad bin Jassim Al Thani, Qatar’s former prime minister and foreign minister.

Former prime ministers:

  • Prime Minister Bidzina Ivanishvili of Georgia
  • Pavlo Lazarenko of Ukraine
  • Prime Minister Ayad Allawi, also a former vice president of Iraq, had Mossack Fonseca supply a nominee to stand in for him and screen his identity as owner of the Panama-registered company IMF Holdings. The company was dissolved in 2013 and owned a $1.5 million house near London. A second offshore, Moonlight Estates, registered in the British Virgin Islands, also held a property in London on his behalf. His media contact confirmed his sole ownership of the two companies and of Foxwood Estates as well, saying IMF was set up to own real estate on legal advice for security after an assassination attempt, and adding that any income was reported and taxes paid “promptly and on time.”
  • Ion Sturza of Moldova.
  • Ali Abu al-Ragheb of Jordan.

The leaked files identified 61 family members and associates of prime ministers, presidents and kings, including:

         the brother-in-law of China’s paramount leader Xi Jinping

         the son of Malaysian prime minister Najib Razak

         children of Pakistani prime minister Nawaz Sharif

         children of Azerbaijani president Ilham Aliyev

         Clive Khulubuse Zuma, the nephew of South African president Jacob Zuma

         Nurali Aliyev, the grandson of Kazakh president Nursultan Nazarbayev

         Mounir Majidi, the personal secretary of Moroccan king Mohammed VI

         Kojo Annan, the son of former United Nations Secretary-General Kofi Annan

         Mark Thatcher, the son of former British prime minister Margaret Thatcher

         Juan Armando Hinojosa, the “favourite contractor” of Mexican president Enrique Peña Nieto.

         Spanish Royal Family: Pilar de Borbón and her son Bruno Gómez-Acebes, Iñaki Urdangarín, Amalio de Marichalar, and people close to the family like the mistress of Juan Carlos I, Corinna zu Sayn-Wittgenstein.

Other clients included less-senior government officials and their close relatives and associates, from over forty countries. Over £10 million of cash from the sale of the gold stolen in the 1983 Brink’s-Mat robbery was laundered, first unwittingly and later with the complicity of Mossack Fonseca, through a Panamanian company, Feberion Inc. The company was set up on behalf of an unnamed client twelve months after the robbery. The Brinks money was put through Feberion, issued bearer shares only, and other front companies through banks in Switzerland, Liechtenstein, Jersey, and the Isle of Man. Two nominee directors from Sark were appointed to Feberion by Jersey-based offshore specialist, Centre Services. The offshore firms recycled the funds through land and property transactions in the United Kingdom. Although Metropolitan Police raided the offices of Centre Services in late 1986 in cooperation with the Jersey authorities and seized papers and two Feberion bearer shares, it wasn’t until 1995 that Brink’s-Mat’s solicitors were finally able to take control of Feberion and the assets.

Actor Jackie Chan is mentioned in the leaked documents as a shareholder in six companies based in the British Virgin Islands.

Indians in Panama Papers

In 2014, it was Swiss Leaks, a global list with over 1,100 Indians with secret bank accounts in HSBC Geneva, which shaped the debate over black money parked overseas. In Panama papers, over 500 Indians figure on the firm’s list of offshore companies, foundations and trusts. There are also 234 Indian passports (handed over by clients as part of the incorporation process), an eight-month-long investigation of over 36,000 files by The Indian Express revealed. From film stars Amitabh Bachchan and Aishwarya Rai Bachchan to corporates including DLF owner K P Singh and nine members of his family, and the promoters of Apollo Tyres and India bulls to Gautam Adani’s elder brother Vinod Adani. Two politicians who figure on the list are Shishir Bajoria from West Bengal and Anurag Kejriwal, the former chief of the Delhi unit of Loksatta Party. From Mumbai ganglord the late Iqbal Mirchi, the list includes scores of businessmen with addresses in nondescript neighbourhoods in Panchkula, Dehradun, Vadodara and Mandsaur. Addresses of individuals, in many cases, The Indian Express found out, led to physical locations, but with no trace of the individual.

Corruption cases in China

Cadre corruption in China has been subject to significant media attention since Communist Party General Secretary Xi Jinping announced his Anti-corruption campaign following the 18th National Congress which was held in November 2012. Despite this high-profile anti-graft drive, in 2014 China was ranked No.100 in Transparency International’s Corruption Perceptions Index, which is 20 places lower than 2013, when it ranked No.80. This puts China on par with Algeria and Suriname, and comparable to Armenia, Colombia, Egypt, Gabon, Liberia, Panama, Bolivia, Mexico, Moldova and Niger. China ranked less corrupt than neighbours Myanmar, Vietnam, Laos, North Korea, Russia, Kazakhstan, Kyrgyzstan, Tajikistan, Afghanistan, Pakistan and Nepal but more corrupt than  New Zealand, Singapore, India, Bhutan, Macau, Hong Kong and Mongolia. Means of corruption include graft, bribery, embezzlement, backdoor deals, nepotism, patronage, and statistical falsification. The CPC has tried a variety of anti-corruption measures, constructing a variety of laws and agencies in an attempt to stamp out corruption, but almost none have been proven to be even mildly effective.

Prominent individuals implicated in corruption in China include: Wang Shouxin, Yang Bin, Chen Liangyu, Qiu Xiaohua (the nation’s chief statistician, who was fired and arrested in connection with a pension-fund scandal), Zheng Xiaoyu, Lai Changxing, Lan Fu, Xiao Zuoxin, Ye Zheyun, Chen Xitong, Tian Fengshan, Zhu Junyi, Zhang Shuguang (a railways official, managed to steal $2.8 billion and move it overseas.

 According to a Xinhua report, China punished almost 300,000 officials for graft in 2015 as President Xi Jinping continued to wage a high-profile war against corruption. Among those ensnared by the wide-ranging crackdown were 200,000 who were given “light disciplinary punishments” and another 82,000 who were handed “severe disciplinary punishments and major demotions”. Ten “centrally appointed and administered officials” were given “drastic demotions” for serious violations against the Communist Party’s code of conduct. The code was identified by the party’s graft watchdog as a means to “spot problems earlier and prevent officials from slipping into corruption.” The figures cited China’s top discipline watchdog, the Central Commission for Discipline Inspection. The corruption crackdown has been one of President Xi’s key policies, although critics have questioned its lack of transparency and also claim it is more a tool to ensure potential rivals are removed from key positions. The CCDI rarely gives details on the evidence it uses when it publishes accounts of those ensnared in the graft crackdown, but there are daily reports in China on allegations of bribery and abuse of power among officials. Corruption is a major source of anger in China and Mr Xi has vowed to tackle high level ‘tigers’ and low level ‘flies’. Former Chinese security chief Zhou Yongkang  became the highest ranking former official in 2015 to be placed on trial for corruption in decades when he was sentenced to life in prison at a secret trial.

Prominent anti-corruption cases in China are often an outgrowth of factional struggles for power in the CPC, as opponents use the “war of corruption” as a weapon against rivals in the Party or corporate world. Often, too, the central leadership’s goal in cracking down on corruption is to send a message to those who step over some “unknown acceptable level of graft” or too obviously flaunt its benefits. Another reason is to show an angry public that the Party is doing something about the problem. The strict controls, placed on the media by the Chinese government, limit the discovery and reporting of corruption in China. Nevertheless, there have been cases of whistleblowers publicising corruption in China.

Impeachment of Dilma Vana Rousseff

Dilma Vana Rousseff,   a Brazilian economist and politician, the 36th President of Brazil from 2011 was impeached for breaking budgetary laws and removed from office on 31 August 2016. She was the first woman to have held the Brazilian presidency and previously served as Chief of Staff to President Luiz Inácio Lula da Silva from 2005 to 2010. She was elected in a run-off on 31 October 2010, beating Brazilian Social Democracy Party (PSDB) candidate José Serra. On 26 October 2014 she won a narrow second-round victory over Aécio Neves, also of the PSDB. Impeachment proceedings against Rousseff were officially accepted by the Chamber of Deputies on 3 December 2015. On 12 May 2016, the Senate of Brazil temporarily suspended President Rousseff’s powers and duties for up to six months or until the Senate decided whether to remove her from office if found guilty or to acquit her of the crimes charged. Vice President Michel Temer assumed her powers and duties as Acting President of Brazil during her suspension. On 31 August 2016, the Senate voted 61–20 in favor of impeachment, finding Rousseff guilty of breaking budgetary laws and removing her from office.

In March and April 2015 millions of protesters took to the streets during the 2015 protests in Brazil against Rousseff’s alleged involvement in the Petrobras scandal which involved kickbacks and corruption. When allegations surfaced that graft occurred while President Rousseff was part of the board of directors of Petrobras, between 2003 and 2010, Brazilians became upset with the government and called for Rousseff’s impeachment. No direct evidence implicating Rousseff in the schemewas made public, and she denied having any prior knowledge of it. Rousseff’s presidency also saw a concerted push to complete a number of hydroelectric dam projects in the Amazon River Basin, despite appeals from residents of areas that would be flooded, drained or otherwise adversely affected, including indigenous tribes, and pressure from both domestic and international groups to abandon such projects. Opposition to the dam projects, especially the Belo Monte Dam project, was driven by environmental, economic and human rights concerns, the latter concerning both the people to be displaced by the projects and the workers brought in from other parts of Brazil to build the dams. Working conditions for laborers involved in these projects (which Rousseff  insisted should continue, and even be accelerated, with some sites seeing multiple work shifts so that construction can continue more than twenty hours per day) were harsh. Rousseff is less popular with the Brazilian LGBT social movements than expected from a left-wing president.

Impeachment of South Korea’s President Park Geun-hye

The Impeachment of President Park Geun-hye  was the culmination of a political scandal involving the level of access to the presidency by an aide. The impeachment vote took place on December 9, 2016, with 234 members of the 300-member National Assembly voting to impeach Park Geun-hye and suspend her from the office. As a result of the impeachment vote, Hwang Kyo-ahn, the Prime Minister of South Korea, became acting president for a term of up to 180 days while the Constitutional Court of Korea rules on whether to accept or reject the impeachment.

Revelations were made in late October 2016, that President Park Geun-hye’s aide, Choi Soon-sil, who did not have an official position in the government, had used her position to seek funds from several business conglomerates (known as chaebol), including Samsung, Hyundai, SK Group and Lotte, to two foundations she controlled. Allegations also surfaced about Choi’s access to Park’s personal and work life, where it was said to have directly influenced, and interfered with the policy of, the state council. The response to the Sewol ferry sinking accident that occurred on April 16, 2014 also contributed to Park’s declining presidential ratings. The procedure for impeachment is set out in the South Korean Constitution. According to Article 65 Clause 1, if the President, Prime Minister, or other state council members violate the Constitution or other laws of official duty, the National Assembly can impeach them. Clause 2 states the impeachment bill must be proposed by one third, and approved by the majority of the total members of the National Assembly for passage. In the case of the President, the motion must be proposed by a majority and approved by two thirds or more of the total members of the National Assembly, meaning that 200 of 300 members of the parliament must approve the bill. This article also states that any person against whom a motion for impeachment has been passed shall be suspended from exercising his power until the impeachment has been adjudicated and a decision on impeachment shall not extend further than removal from public office. Provided, that it shall not exempt the person impeached from civil or criminal liability.

On December 8, the South Korean National Assembly announced that the vote of motion to impeach would take place on December 9.  As planned, on December 9, South Korean MPs approved the impeachment motion by a vote of 234 in favor and 56 against in a secret ballot. As a result of the impeachment motion passing, President Park is suspended from the presidency for up to 180 days while the Constitutional Court of Korea decides about the validity of impeachment motion. Six of the nine judges on that court must agree with the impeachment for the removal to take effect. If the court agrees with the impeachment, it would be the first time that a sitting president is removed from the office since the Sixth Republic of South Korea was set up after the country’s democratization. Prime Minister Hwang Kyo-ahn has taken charge of the office of the presidency at 19:30 Korean Standard Time, on an interim basis. If Park leaves office early for any reason – whether through the impeachment being approved by the Constitutional Court or through her own resignation – a new presidential election must take place within 60 days.

Bribery Charges on Lee Jae-yong, Samsung Heir

The de facto leader of Samsung, Lee Jae-yong, was arrested on February 17, 2017 on bribery charges, a dramatic turn in South Korea’s decades-old struggle to end collusive ties between the government and powerful family-controlled conglomerates. Mr. Lee, Samsung’s vice chairman, was taken to a jail outside Seoul, the capital, soon after a judge at the Seoul Central District Court issued an arrest warrant. He is accused of paying $36 million in bribes to President Park Geun-hye’s secretive confidante, Choi Soon-sil, in return for political favors. Those are alleged to include government support for a merger of two Samsung affiliates in 2015 that helped Mr. Lee, 48, inherit corporate control from his incapacitated father, Lee Kun-hee, the chairman. Samsung, whose market capitalization accounts for one-fourth of the value of all listed companies in South Korea, is a potent national symbol of power, wealth and technological innovation. Mr. Lee is the first head of the conglomerate ever to be arrested on corruption charges. Other charges against him include embezzlement, illegal transfer of property abroad and committing perjury during a parliamentary hearing. The head of Samsung, one of the world’s largest conglomerates, was indicted on bribery and embezzlement charges on February 28, becoming one of the most prominent business tycoons ever to face trial in South Korea.

The indictment of Lee Jae-yong, the company’s de facto leader, came at the end of a special prosecutor’s 90-day investigation of a corruption scandal that has already led to the impeachment of President Park Geun-hye. When huge crowds took to the streets in recent months to demand that she leave office, they also called for the toppling of Mr. Lee and other corporate titans.

South Koreans have grown weary of endemic corruption and the country’s traditional leniency toward tycoons accused of white-collar crimes. For decades, presidents have entered office vowing to end such favoritism, but they all eventually backtracked. Anticorruption advocates say Mr. Lee’s indictment and trial will be a test of whether the system can finally make a dent in those cozy relationships.

Sahara Family Investment Fraud Case

Sahara India Pariwar investor fraud case is the case of the failure of Subrata Roy-led Sahara India Pariwar to return Rs 24,000 crore plus interests to its investors as directed by the Supreme Court of India, after a prolonged legal battle with the Securities and Exchange Board of India. On 26 February 2014, the Supreme Court of India ordered the arrest of Subrata Roy, chairman and founder of Sahara India Pariwar, for failing to appear in court in connection with the Rs. 24,000 crore deposits his company failed to refund to its investors as per a Supreme Court order, after a legal dispute with the Indian market regulator SEBI (Securities and Exchange Board of India). He was eventually arrested on 28 February 2014 by Uttar Pradesh police on a Supreme Court warrant. In a statement after the arrest, his lawyer said Subrata’s 92-year-old mother was in poor health and needed her eldest son by her side, and hence he failed to appear at the court. He was granted interim bail by the Supreme Court on 26 March 2014 on the condition that he would deposit Rs 10,000 crore with SEBI. Subrata was eventually taken into judicial custody and sent to Tihar jail, along with two other Sahara directors, on 4 March 2014 for failing to deposit Rs 10,000 crore with SEBI. In Tihar jail, Subrata unsuccessfully tried to sell some of his hotel properties to raise Rs 10,000 crore for his bail bond. He remained in Tihar jail for more than two years, and was released on parole in May 2016 to attend the last rites of his deceased mother. November 2010 – Securities and Exchange Board of India barred Sahara India Pariwar chief Subrata Roy and two of its companies – Sahara India Real Estate Corp (SIREC) and Sahara Housing Investment Corp (SHIC) – from raising money from the public as they had raised several thousand crores through optionally fully convertible debentures (OCFDs) that SEBI deemed illegal. In January 2011, the Delhi High Court issued a warrant against Sahara India Pariwar chairman Subrata Roy and four other officials of the group on a complaint that it deceived investors in a proposed housing project of Rs. 25,000 crore. October 2011 – Securities Appellate Tribunal (SAT), set up by the Supreme Court, ordered two unlisted Sahara group companies to refund within six weeks about Rs. 17,656.53 crore with 15% interest, which it had raised through OFCDs.  In January 2012, the Supreme Court gave three weeks time to Sahara India Pariwar to choose between options to return investments made by public in its OFCD scheme. Sahara to either to give sufficient bank guarantee or attach properties worth the amount raised through OFCDs. In August 2012, the Supreme Court directed Sahara India Real Estate Corporation Ltd. (SIRECL) and the Sahara Housing Investment Corporation Ltd. (SHICL) to refund over Rs. 24,400 crore to its investors. In  March 2015, the Supreme Court stated that the total dues from Sahara have gone up to Rs 40,000 crore with the accretion of interest. July 2015 – SEBI cancelled the licence of Sahara’s mutual fund business.

NSEL case

The NSEL (National spot Exchange Ltd) scam or NSEL fraud was a systematic and premeditated fraud perpetrated in the commodity market from 2007 to 2013 by the Jignesh Shah owned National Spot Exchange (NSEL), a private company based in Mumbai, India. The NSEL was a company promoted by Financial Technologies India Ltd and the NAFED (only 100 shares given for misusing the NAFED brand who was touted as a co-promoter). The NSEL scam was a Ponzi scheme and is estimated to be a Rs. 5600 crore (around US$0.95 billion) fraud that came out to light after the National Spot Exchange failed to pay its investors in commodity pair contracts after 31 July 2013. 13000 investors from India lost about Indian Rupees 5600 Crores when the fraud was discovered and it was found that NSEL had neither the money nor the stocks to pay them back.

The Forward Markets Commission in July 2013 asked NSEL to stop all trades extending 11 days settlement (which were illegal). This led to less interest from investors and renewing their contract and the wheel of roll-over trades came to a halt as NSEL could not raise fresh investor funds to pay old investors whose funds were maturing. It was discovered after the exchange defaulted on 31 July 2013 that most of the underlying commodities did not exist and the buying and the selling of commodities like steel, paddy, sugar, ferrochrome etc. was being conducted only on paper. The pair trades in various commodities were offered in one-day forward contracts of T+2 and T+25 (sometimes even T + 35) payment terms (bought and sold at the same time).

Such pair trades offered an arbitrage opportunity of about 12-15% return per annum. The investors, who honored the T+2 payment obligation, found that the National Spot Exchange neither had the money, nor the commodities, to honor their T+25 dues. Around 24 borrowers were given the funds by the NSEL, without any underlying commodity deposited by those borrowers. One of those borrowers who borrowed around Rs. 1000 crores is a company named NK Protein Ltd., and is owned by the son-in-law of the former Chairman Shankarlal Guru of NSEL.

An estimated number of 13000 investors, along with public sector units like MMTC and PEC, were victims of this NSEL scam. The ROC report on NSEL fraud has come down heavily on the promoters and the FTIL, as it was found that a majority of minutes of meetings of the NSEL board were fabricated, as cell phone location data of the said board members did not match to the meetings’ locations. Some of the warehouses mentioned on the NSEL website were found to be physically non-existent, and the SGF (Settlement Guarantee Fund) – of around Rs 839 crores (about US $140 Million), as on 29 July 2013, vanished into thin air.

Anjani Sinha, the sacked CEO and the MD of the company, attempted to take the blame for the fraud in order to exonerate other promoters, and filed an affidavit. Mr. Anjani Sinha’s wife, Shalini Sinha, though being a related party, traded on MCX for about Rs. 40000 crores in one year through her company SNP Designs P Ltd. However Anjani Sinha after arrest retracted his earlier affidavit and filed a fresh affidavit pinning the blame on the board of NSEL stating that they fully knew what was going on at NSEL. Anjani Sinha in his police statement however claimed that his wife Shalini Sinha is a small garment designer and the trades done by IBMA under the name SNP Designs were actually speculative trades done on MCX by Jignesh Shah himself. He also claimed there was no financial dealing between IBMA and SNP designs whatsoever. Surprisingly Anjani Sinha whom the promoters blamed as the main culprit was kept with NSEL by Jignesh Shah for almost 12–13 weeks after the scam as a ‘special office recovery’ showing the collusion between the two.

All said it seems that corruption is a cancer afflicting the society which is obsessed with material advancement and where values, ethics and morality are considered to be hindrances in progress and success and where short cuts to big name, fame and glory are preferred paths. Lack of monitoring and supervising institutions as well as lack of transparency and accountability is major reasons of corruption. Corruption is not only a Law and order problem, but it involves sabotage of a good system, none compliance of law, siphoning and plundering public money due to greed and selfishness. The world has started taking a move forward for transparency and accountability with the help of rules and regulation on one hand and education on the other for attitudinal change. Institutional changes and a proper system of monitoring, evaluation as well as deterrence and incentives would go a long way in tackling the problem of corruption.

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Economic Development and Policies Special Reports

Insights into the dilemma of Cash vs digital transaction

Who will outright assert that digitalization of economic transaction or services is bad? And who would say that for each small transaction swiping your debit and credit card is a convenient option. There is no dilemma in deciding how to carry our economic transactions. Both the systems-cash transaction and digital transaction- have their own advantages and disadvantages. All in all it seems rational and logical to allow both the modes simultaneously with a predominance of digital transactions. But the lure of making political capital out of demonetization and digitalization by the government and protest by the opposition for the same lure has confused people. One group insists that is good and other says it is bad. Theoretically and practically both the groups have their own justifications. But people are confused.

It all started with the promise of the Prime Minster Narendra Modi to bring back black money stashed in safe havens in foreign countries to India and credit Rs. 15 lakhs to the account of every Indian. When Modi government came to power, the opposition parties started reminding about the promise. Not only that, they also tried to take up propaganda against the government by telling the people that this government was not doing anything against the black money contrary to its electoral promise. The situation took a satirical turn in August 2016, when the Prime Minister’s Office was directed by the CIC to respond to an RTI applicant who sought to know when will Rs 15 lakh, as promised by Narendra Modi during 2014 General Elections, be deposited in his account. The direction came in connection with the plea by one Kanhaiya Lal from Jhalawar district of Rajasthan who had filed an RTI application with the PMO seeking to know the status of his representation to Prime Minister Narendra Modi. Lal had also asked the top office that “at the time of election, it was announced that black money will be brought back to India and Rs 15 lakh will be deposited in the account of each poor, the complainant wants to know what happened to that.”
Now Punjab and UP elections in the offing, the present government announced demonetization with an aim to display its sincerity in curbing black money and to pre-empt the possibility of opposition exploiting its inaction on black money in the election campaign. Government demonetized Rs. 500 and Rs. 1000 currency note since midnight of November 8, 2016. But the preparedness to address the side effects of demonetization was not assessed properly and so due to lack of preparedness of the government, the exercise worsened the availability of cash to the common people as well as SMEs and cash based economic activities. The opposition started making a political capital of unplanned and hasty decision of demonetization of Rs 5000 and Rs, 1000 notes, which formed about 85 per cent of the total circulation. Then came a phase when government tried to justify the step as ‘initial pangs’ while the country is going to adopt ‘digitalization’ of economic transactions. Former Finance Minister P Chidambaram Charged Modi Government with “waging a war against poor of the country” and “breaking back of 45 crore daily wage earners by taking the decision of demonitisation”, which according to him was as “absurd and thoughtless move.” He accused the Government of “changing the narrative” and “shifting the goal-post” as the “original announcements of fight against black money, blocking terror fund and flush out counterfeit currency are now replaced by digital and cashless economy.”
It is interesting to see what the current trends in the world are and why India should also try to proceed in the direction of digitalization. But simultaneously it needs to be understood that such changes cannot be ‘forced’ and without adequate digital infrastructure and financial inclusion this would prove counterproductive.
When money was created it was recognized that it has remarkable advantages over the barter exchange in which there were problems of “double coincidence” and “storing value” for future use. Now when the world has already spent about 500 years since money was introduced first time in its present form in England, the form of money has extended to plastic money (debit card and credit card) from paper currency and metallic money. Progressing further, now we have e-wallets and many other platforms for ecommerce, offering a trilateral interface among banks, consumers and retailers. The most nascent way of payments has been offered by what is known as bitcoins. No doubt with the new inventions and innovations money as a medium of transactions has varied faces and interfaces. The use of cash has been decling in some economies, while it is still predominant medium of transaction.
Cash is power. Wherever one goes and whatever one does, cash is synonymous with power and freedom. Transactions are handy in cash if they are routine and small kind. But cash has its own problem if the transactions are relatively big. There are threats of thieves and snatchers. Carrying bundles of cash is also difficult. Every time one needs money, one has to access banks or ATMs, leading to waste of time and energy. And ATMs are also prone to thieves. Net banking, cashless payments through debit and credit cards or e-wallets are safer, quicker and they do away with the requirement of frequently visiting banks or ATMs on one hand and the fear of theft or snatching on the other. It is also said that cash transactions beget black money faster. Digital transactions are less prone to generate black money, because they can be better monitored by formal banking system and tax authorities.
Digital economy also reduces the cost of transactions in an economy. It also eliminates middle men in case of services and welfare programmes, so it reduces chances of corruption by eliminating bribes and commissions etc. Ideally, therefore, it seems that digital economy is better. But digital economy has its own hassles. There are chances of hacking, theft of passwords and stealing of money by cyber criminals. Also in recent Indian experience, since e-wallets are operated through mobile numbers, many instances have been observed in which women’s mobile numbers go into the hands of unsocial elements who harass them.
The first recorded paper-money transaction took place in 7th-century China and, although banknotes were not issued here until the Bank of England was founded in 1694. Now the UK is moving away from cash. Promissory notes issued by central banks world over “promise to pay the bearer.” Cash transactions are almost quaintly anachronistic. The paper itself has only nominal intrinsic value, of course, and it serves as a “proof” that the carrier has wealth totaling the number written on its face.
However, after the internet revolution since 1996, there has been substantial growth in cashless or digital transactions in the world. The world is today using the digital means of economic transactions wherever it is easy and secure. Finland has the highest amount of non-cash transactions in the world, per head, and Norway is also very high. Scandinavian countries are early adopters of innovations, such as internet banking. Last May, according to the UK Payments Council, the value of card transactions overtook cash for the first time in the UK. In this country, at least for those with a comprehensive view, the appetite for new ways to pay is vivacious. Contactless, online, mobile, e-wallets, apps, bitcoin- the U.K citizens use each of these methods. Even countries in Africa have adopted mobile payment systems, such as M-Pesa, which in some respects are more sophisticated than those available in Europe and North America. Across the developing world, technology is seen not just as a conduit for faster payments, but also a bulwark against fraud. In Africa, for example, a quarter of people who have a mobile phone have a mobile wallet. Conversely, in many countries in Western Europe the reliability of cash-based transactions has not reduced in any great way. And so it’s not the same story globally.

• Finland: The use of cash in the pioneer in digitalisation
• The use of currency as a form of payment is dwindling in Finland,
• The Bank of Finland has calculated that if the current trend in using debit and credit cards continues, the use of banknotes in Finland will dry up completely by the year 2029 at the latest.
• Yet, demand for a robust currency supply is growing strongly in Finland, and the Bank of Finland, which reserves the sole right to print banknotes and coins in Finland, reports it has put over 14 million euros into circulation.
• At the same time, the number of banks distributing banknotes has been cut by nearly half in the last 15 years, from 1,600 to 850 nationwide. Likewise, the number of ATM machines has also fallen; from 2,500 twenty years ago to 1,500 today.
• Finnish residents have preferred using payment cards in retail shops. The latest figures show that 7 out of 10 customers use a card, while only 13 percent tend to pay with cash. The remainder says they use a combination of both.
• Measured in euros, card payments account for 42 billion in sales, while cash is used in transactions worth 16 billion. These figures account for 70 and 30 percent of total sales, respectively.
• But if the residents of the country are using less and less cash, where are all the banknotes going to? Bank of Finland says just a tiny fraction of the currency at large is being held in banks and ATMs, saying a full 95 percent is held by the public.
• Digital Agenda for Finland 2011-2020 is geared to promoting growth and productivity throughout society.
• Digitalisation has advanced at a remarkable pace in all areas of life, from the workplace and education to service use and leisure activities.
• Services are now spreading to interactive platforms, monitors and touch screens making them accessible wherever and whenever they are needed.
• Total Transaction Value in the “Digital Payments” segment amounts to US$7,553m in 2016.
• Total Transaction Value is expected to show an annual growth rate (CAGR 2016-2021) of 12.9 % resulting in the total amount of US$13,874m in 2021.
• The market’s largest segment is the segment “Digital Commerce” with a total transaction value of US$7,290m in 2016.
• From a global comparison perspective it is shown that the highest cumulated transaction value is reached in the United States (US$645,876m in 2016).
The world is going digital, but not all at once. A new study by MasterCard revealed that 85 per cent of payments in Japan were made with cash, compared with 48 per cent in the UK. The varied picture from country to country is due to a number of factors – cultural, infrastructural, and demographic and so on. But the differences are not straightforward; that is to say that it’s not as if the biggest economies lead the pack and developing ones bring up the rear.
True, transaction in cashless mode or digital mode is increasing by its own momentum and not by force in many countries. According to European Central Bank data for 2015, seen in the value terms, in cashless transaction, the UK leads at euro 21.27 billion, France euro 18.6 billion, Germany euro 17.99 billion, Netherlands euro 6.4 billion, Spain euro 6.28 billion, Italy 4.79 billion, Sweden euro 3.9 billion, Poland euro 3.87 billion and Belgium euro 3.44 billion.

But this should not be taken as indication of dominance of cashless transactions in all the European countries or developed countries in other continents. It is very important to note that the developed countries still do prefer cash transaction to a great extent. Seen as proportion of total transactions, the cash transactions in the USA stands at 46 percent, Netherland 50 per cent, Canada 52 per cent, France 55 per cent, Australia 65 percent, Germany 80 per cent and Austria 80 per cent. All of them might have different reasons for doing so according to prevalent public perception and preferences. But digitalization in these countries has not taken a forced route. Because of convenience and safety reasons, digitalization in these countries has grown with its own pace.
In Japan, where technological opportunities are usually seized upon with gusto, cash is still favoured by the majority of people. The amenability to digital transaction may depend on cultural and demographic differences, and maybe a lack of a credit economy, mean card payments have discriminated against and thus consumers remain accustomed to using cash in many parts of the world. This explains why two near neighbours such as Germany and Sweden can have such wildly different adoption rates. Germany, the engine room of the European Union and the world’s fourth largest economy, should be positively buzzing with electronic payments, but it isn’t, not at all. Around 80 per cent of transactions in Germany are still made by exchanging cash.
While analyzing the reasons for adopting digitalization we need to see beyond convenience or safety. Research by the Bank of Japan showed that Japanese consumers see convenience as the main benefit of e-payments, while in the UK people use digital medium of payment as the value safety, time-saving, and the ability to pay online and better anti-fraud features. Broadly speaking, the Germans are sceptical about making card payments while it is the second nature in the UK. Germanic thriftiness and love of privacy could be the two main drags on e-payment pick-up. In addition, using cash means customers will only be able to spend the money in their pocket. Germany is a nation known for priding itself on its thriftiness, avoiding debt and shunning credit cards.
Sweden’s head start in the field began in the 1960s, when banks persuaded employers and workers to use digital bank transfers for wages as a matter of course, with credit and debit cards receiving a boost in the 1990s when Sweden’s banks started charging for cheques. Cards are now the main form of payment: according to Visa, Swedes use them more than three times as often as the average European, making an average of 207 payments per card in 2015. So keen are Swedes on electronic payments that the government has created policies to discourage transactions using banknotes. When it comes to innovation in this area, Scandinavian countries are blazing a trail. Here, pressure to update comes directly from the government and the financial system itself.
According to central bank the Riksbank, cash transactions made up barely 2% of the value of all payments made in Sweden last year – a figure some see dropping to 0.5% by 2020. In shops, cash is now used for barely 20% of transactions, half the number five years ago, and way below the global average of 75%. And astonishingly, about 900 of Sweden’s 1,600 bank branches no longer keep cash on hand or take cash deposits – and many, especially in rural areas, no longer have ATMs. Circulation of Swedish krona has fallen from around 106bn in 2009 to 80bn last year.
Apart from consumer choices, it is accessibility and availability of technology that counts in digitalization. It should be noted that in Sweden, it is not just consumer preferences, but the very technology that’s on offer. In Northern European markets, shoppers prefer debit-based payment methods, such as SEPA [Single Euro Payments Area] Direct Debit, which is particularly strong in Germany, or iDEAL, popular in the Netherlands, or open invoice payment methods in Scandinavian markets.
The same is now seen in case of China. It is a hotbed of innovation when it comes to mobile payments, but the methods people use to pay are completely different to the UK. Two e-wallets – Alipay and WeChat Pay – lead the way. With hundreds of millions of users, they are essential for UK businesses to offer in order to reach the critical mass of potential shoppers in the Chinese market.”
In India, the digital journey started in 1996 with the advent of internet and issue of debit and credit cards since the second half of 1990s. Gradually banks started providing value added services including electronic platforms for transaction. This was further accelerated by the advent of ecommerce. Then all of a sudden why there is added compulsion for digitalization. It is because the present government is in a haste to adopt new policies to establish that it can make difficult and fast decisions, which the earlier governments were not capable of. This is a misplaced belief. Every measure takes a reasonable amount of time in preparation.
There is no problem in digitalization as a concept. But there are two things which went wrong- the element of ‘force’ and ‘unpreparedness’. Change is never an easy thing to accomplish; thorough planning and bold decision-making are required to effectively take advantage of information and communication technologies. Reforms never happen by accident or impulses. We need proper planning and strategy for success of measures against black money and measures for digitalization. The major part of black money in India is reportedly either stashed in the safe havens in foreign countries or in real estate, gold and bullion and also frontal fake companies within India. It is far better to stop the generation of black money at its sources of generation. Demonetization would sterilize for sure black money lying hidden by tax evaders as well as fake Indian currency in circulation, but it is a very small part of the total black money. Also digitalization is something which needs proper infrastructure and platforms to people to shift from cash to digital payments and with security. Progress has taken place and this government has expedited the process, but in any case forcing adoption of digitalization may boomerang if it eats into sales of retailers, employment in the SMEs and leads to inconvenience to common men, including farmers in day-to-day transactions.
Government needs to appreciate that to accomplish digitalization, the country’s digital operational environment needs to be expanded and updated to meet requirements and modern standards. The manufacturing sector – as well as society as a whole – should heed the solutions the internet of things has brought into improving both products and business. India now has a chance to become an international safe haven of data if it successfully implements digitalization. This requires the right kind of expertise, smart regulation regarding data protection, cyber safety, taxing and data cables, as well as a bold attitude towards coming up with new solutions. Rather than fighting, the government, opposition and people should encash this great opportunity. At present access to internet, digital infrastructure and mobile technology is not adequate in India. We need to work more in this direction.