Monthly Archives: January 2017

The Global War On Corruption

The war on corruption is global. In order to understand it we need to see it in its global context, as part of a worldwide Zeitgeist.

  • The President of Brazil, Dilma Roussef, was impeached and removed from office by the legislature, and a former President, Luiz Inácio Lula da Silva, had his home raided, was detained, and had charges filed against him, in connection with an influence peddling investigation.
  • The President of South Korea, Park Geun-hye, has been impeached and a Constitutional Court is now hearing arguments to decide whether the President should be permanently removed from office.
  • In South Africa, the ruling party, ANC, and the President, Jacob Zuma, has been at the centre of allegations of corruption going back almost ten years.
  • In the just concluded Presidential election in USA, one of the candidates, Hilary Clinton, was perceived as the “most corrupt ever” by some voters and may have lost the election because of this.
  • Christine Lagarde, the former Finance Minister of France, and now the Head of the International Monetary Fund, faced an investigation into a possible misuse of power, but was found guilty only of negligence.
  • In India, corruption has been at the centre of political discourse for several years, and was an issue that was partly responsible for the stunning 2014 victory of Narendra Modi and the BJP over the allegedly corruption ridden INC, led by Sonia Gandhi. The latest chapter of the Indian war on corruption is the demonetisation of 86% of its currency by the government. This unprecedented move has led to major dislocations in the Indian economy, but is nevertheless supported by a significant section of the population as a way to root out corruption and “black money”.

The war against corruption is the latest in a long sequence of wars fought by the global community against various purveyors of evil and wickedness. In order to understand these global wars we need to understand their history and their usefulness in politics. Although the history of just wars goes back at least to the medieval Crusades, the modern era of “good wars” starts with the Napoleonic wars of the 19th century that were fought to bring the enlightened principles of the French Revolution to more benighted nations. Since then we have had the American Civil War, which was fought either to free African slaves and to save the Union, or to save the way of life of the American South and to uphold States’ rights. The Great War of 1914 was fought to defeat the evil designs of the Kaiser, and to save the British way of life and also to uphold the rights of the German nation. And then there was the Second World War, fought to defeat the most evil monster of the modern era, Adolf Hitler and his genocidal campaigns, or to defeat the macabre designs of “International Jewry” to enslave Aryans, if you were in the other side. As soon as that war ended, we seamlessly entered the Cold War era, when freedom loving cigar chomping Western capitalists fought vanguard parties of Russian and Chinese workers and Communist wickedness to a standstill.

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The Recession of 2017: An Update

We have previously suggested that the cash crunch caused by the Indian demonetisation is likely to cause a recession in 2017. Our analysis was based on estimates of demand contraction caused by cash shortages. However, the effect of cash shortages on demand will be partly mitigated by informal credit arrangements, and there are few credible estimates of the strength of this mitigation. It is possible that the effects of demonetisation on GDP would turn out to be much more muted or much stronger than we have expected, once we start to see the actual data. Here we update our views in light of the data that has become available since we published our last post.

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