Dirty Money Enters Neoliberal Game

By N. Gunasekaran

Money laundering is not new to capitalist society. But, in the era of neoliberalism, it spiraled to dizzying heights, robbing nations’ wealth. The neo-liberal structure builds up the unholy nexus between politicians, bureaucrats and corporate executives and this trio creates and enhances the parallel black economy.

In Indian politics it has now become an important theme.

The media and the opposition parties are claiming that billions of dollars of “dirty money” were hidden in Swiss banks. In their estimation, the Indian money stashed in the illegal personal accounts of corrupt politicians, top bureaucrats and industrialists could be on the order of $1.4 trillion. It’s actually 13 times larger than India’s foreign debt and accounts for 40% of GDP of India.

Every year this amount is increasing at a rapid speed. Under-invoicing/over-invoicing of exports and imports and getting the balance stored abroad, kickbacks from major defense and civilian contracts and transactions done abroad and not reporting inside the country are some of the methods followed to accumulate the “dirty money.”

Prof. Arun Kumar, professor of economics at the Jawaharlal Nehru University in New Delhi said:

“The huge outflows have set back India’s development by 5% of GDP growth every year.

“We (Indians) could have been at a per capita income of $6,000 per annum instead of the current level of around $1,000 if this was prevented.”

Opening up of the Indian economy by introducing liberalization policies has helped the flow of black money and other illicit funds from the country. The money flow out of the country has doubled in the period of post-liberalization. Illicit financial outflows from India which amounted to 9.1% annually between 1948 and 1990 and increased to 16.4% between 1991 and 2008. According to the estimates of Global Financial Integrity, a US-based think-tank, the outflows totaled $462 billion between 1948 and 2008. Nearly half of this amount was accumulated after 1991, which was the peak period for vigorous implementation of neo-liberal policies.

This “dirty money” is actually undermining the development of the country. The Indian Left asked the government to “directly confiscate unaccounted and ill-gotten wealth, amassed through tax evasion, money laundering and other illegal means, parked in these Swiss Bank accounts and the details of the account holders must be made public.”

Stepping up its scrutiny over this issue, the Supreme Court of India demanded that the government find out the exact sources of black money and asked whether it was being generated through smuggling, arms deals and drug trafficking.

Currently the Supreme Court is probing the case involving stud-farm owner Hasan Ali, who has stashed huge black money abroad and for his weapon deals. While the magnitude of private wealth of the rich and corporates has increased through tax evasions, mega-scams and other illegal means along with active state policy, the ruling elites, not surprisingly, were least concerned about this huge loss of country’s capital.

Recently, Anna Hazare, 71-year old social activist, started a “fast unto death,” demanding that the government pass a law creating a “Lokpal,” an ombudsman body with the power to investigate any public official, including the Prime Minister. People including youth and middle-class women gathered in large numbers in the streets of Indian cities, supporting Hazare’s campaign against corruption and the government agreed to set up Lokpal. The issue of looting of public money has aroused nation-wide anger.

It is estimated by experts that 1% of the world’s population holds more than 57% of total global wealth.

Such a world of gross inequality is being nurtured by the ruling political classes in countries like India, with the connivance of big corporate executives. It is happening simultaneously with the deprivation of basic livelihoods of working people. The united struggle of working people across the world against the evil of money laundering, which is an offshoot of neo-liberalism, assumes significance now.

N. Gunasekaran is a political activist in Chennai, India.

From The Progressive Populist, May 15, 2011