The Parallel Economy and the panacea of Demonetisation

The shadow world of capital flight, money laundering, tax evasion, bribery and fraud
is much more complex a phenomenon than what the protagonists of demonetisation
would have us believe. They want us to see it as a collection of problems, not
necessarily related to each other, profoundly disturbing though. But if we list these
problems, not according to topic but as facets of the larger issues concerning the
polity itself, we can see that the crisis is a systemic one. It arises out of the basic
premises as organising principles governing the society today, which are hard wired
into the system, called the nexus. At the existential human level, it is a network
programmed on the basis of a value which is one dimensional: money making for the
sake of money making as one of the driving forces of globalisation and privatisation.
Sophisticated information and communication technologies enable financial capital
to move from one option to another, both locally and globally, in a relentless global
search for more lucrative opportunities. These technologies have led to virtual
replacement of gold and paper money by ever more abstract financial products, i.e.
future options, hedge funds, derivatives etc. The new global capitalism has also
created, as a corollary, a global criminal economy that profoundly affects national
and international Economies and politics.
Drug trafficking, arms dealing, smuggling, gambling, kidnapping, prostitution,
counterfeiting are some of the most significant operations of the global criminal
network. Money laundering to the tune of hundreds of billions of dollars is the core
activity of the criminal economy. The laundered money also enters the formal
economy through complex financial schemes and trade networks, making it even
more difficult to control national economic policies. At the same time, the state is
itself disintegrating through corruption of the democratic process, as the political
actors depend more and more on corporations and lobbying groups, which finance
their political campaign in exchange for policies which favour their special interest.
The pervasiveness of the enormous donation by industries and individuals to
political parties is akin to the ancient tributary system. Those who pay tribute are
buying the right to function as they wish, to be left alone, getting immunised from
those with official powers to harm them, a right to be treated with special
consideration, to be allowed to cross the kings terrain in peace. They are under the
kings protection and if anybody thwarts them or their activities, do so at their own
peril. The parallel economy is not an aberration to be flushed out by a surgical
strike, no matter how bold, but the emergent property of the system which requires a
new radically designed mother board as a systemic solution.
V P Jain