In his 15-min interview to The Wire recently, he explains why the demonetization will be ineffective to check the flow of black money and how the government must do if they want to really catch the real culprits in the black money business.
An Interview with Prabhat Patnaik
Here is a gist of the conversation for quick overview.
What is Black Money?
Black Money is not just a stock of currency notes which you put inside a box and hide it somewhere; it’s actually a whole range business activities undertaken illegally in order to avoid taxes.
There are many businesses which are illegally carried out with or without cash transactions. There the scope of black money goes much beyond the currency notes.
How Much Gains of These Undisclosed Business would be Kept in Cash Format?
Black money arising out of undisclosed businesses are not kept in cash; they are constantly put in circulation because that’s how the black money grows. The difference between a miser and a capitalist is while the former believes in throwing money into circulation, the latter keeps it in cash format to themselves.
How Useful is Demonetization Going to be in Flushing Out Black Money?
The move betrays a lack of understanding of capitalism in the government. The current demonetization of currency notes will give rise to proliferation of black businesses. There is a whole range of people who can accept Rs. 1000 currency note to offer you Rs. 700 or 800 in return. This is how things have always worked in black money business. Black money always gets converted into white money with millions of such transactions and there’s no way the tax authorities are going to catch the culprit.
What Should the Govt Do to Curb the Black Money?
The government can work on the leads of foreign holdings and foreign businesses. They can set an example by catching one of the very large operators of black business and prosecuting them. In Germany, Steffi Graf’s father went to jail but you can’t really expect our government to act against any favored businessman who is dishonest.