Corey Robin heard of the term “black money“–untaxed income from under-the-table transactions–for the first time yesterday. (Unsurprisingly, he heard about it from an Indian friend, because if there is one place in the world where there is a lot of it, it’s India.) He was sufficiently intrigued to write a very interesting post, which, in response to the secretive hoarding that black money holders would have to indulge in to keep it from the attention of the tax authorities, attempts to make the case that:
[C]orruption stands the Marxist theory of capitalism on its head. Or at least two parts of it….the the person who deals in black money [is] similar to a miser, and for Marx, the miser in a capitalist economy is an irrational actor. The proper way to make and accumulate money under capitalism is to put the money one has into circulation.
And this the black money miser supposedly does not do. Corey’s post works off this premise to try and establish his two standings-on-the-head. First, the corrupt, like misers, become irrational actors as even if they were able to put their money into circulation, they would not be able to increase it. And second, contra Marx’s suggestion (in Corey’s words) that “Money…constituted a profound form, or instrument, of untruth”, corruption renders “money…the great instrument of truth….It is the most tangible sign of some ill-gotten gain, of some illicit or criminal activity. That is why its possessor must go to such lengths to hide it by hoarding or laundering it.”
There is a problem with this analysis, at least in the Indian context.
Black money does not just get hoarded in India, it funds and sustains a huge, “parallel economy.” This is the favored turn of phrase used by folks in India to describe the set of financial transactions underwritten by black money, and that nomenclature will tell you why black-money holders aren’t really ‘irrational actors.’ Because in India, those that have black money use it for lots of transactions. Indeed, without exaggeration, real-estate prices in India are astronomic precisely because they are fueled by non-taxed income. The transactions fueled by black money are as real as any other. Black money spenders in India are hardly misers; some of the most conspicuous displays of wealth in India are those of black wealth. And everyone knows so.
So the black money economy is not underground, it is pervasive and visible. Everyone has some black money; everyone spends it; and what this ensures is that if you have black money to spend, you can always find someone–and something–to spend it on because they in turn will find willing partners. Black money only remains hoarded if the hoarder cannot find sellers willing to take his black money from him, because, for instance, they want to be able to record their income from the sale and pay taxes on it. But if they are not interested in paying taxes either, then there isn’t a problem. And so, black money circulates, and you can use it to increase your wealth–by, say, investing in real estate or in businesses comfortable with accepting such funds–and thus, consequently, your material standard of living.
In this situation, the state, without sufficient mechanisms and will for tax-revenue collection and enforcement, can only watch, as independent economic actors freely construct an alternative economy funded by this wealth. This is corruption on a scale so immense that the potential miser or hoarder does not need to be one. And more importantly, if the corruption is so widespread so as to sustain a ‘parallel economy’ then that economy can be capacious enough to sustain within it the same “untruths” associated with money that Marx spoke of.
Samir Chopra 