During
the dotcom boom of the nineties, former US Chairman of the Federal Reserve,
Alan Greenspan in one of his speeches to the American Enterprise Institute used
the expression ‘irrational exuberance’, to explain the tech bubble, a term that
was construed as a warning that the market might be overvalued. The short
comment within the speech went on to become history because it was followed by
an immediate market selloff worldwide.
A market
bubble is best described when asset prices temporarily rises in the market far
above their intrinsic value thus forming a bubble. These bubbles can exist for
many years, but eventually burst causing prices to go below their actual values
before returning to normal prices.
A bubble
is not a recent market phenomenon, it has occurred way back in 1637 in the
Netherlands where contract prices of tulips had a humungous rise that the Dutch
only wanted to deal in tulips ignoring every other trade and craft. As a result
when the crash came it turned out very ugly for the economy. This awful experience
made the Dutch weary of speculative investments for quite some time.
Has corruption
in India reached bubble proportions? The way corruption is engaging the whole nation’s
attention, making Indians engrossed in debate like never before, the support for
the anti-corruption crusade, and now corruption getting mentioned even in small
talk. All of this might be strong indicators that we may be heading towards a corruption
bubble if not already in one.
In that
case where does the smallest state of India (Goa) stand in the corruption
bubble? Goa might not attract attention in India in terms of scale, especially
when you compare scams in other states with gigantic proportion. But corruption
in Goa is in serious danger of reaching critical mass, where stealing via the
state is becoming the only norm to create wealth.
When
prospective and existing politicians, for that matter all and sundry make a
beeline either to enter or hang-on to politics in such large numbers, means the
incentive is huge in the form of perks and power. Any trade or service even if it
means political aspirations, start getting chased by so many, at a given point
of time, is usually an indication that a bubble is in the making. After all politics
in Goa is one trade that gives you fortune and fame, and the means to make money
in the form of kickbacks, illegalities, and extortions. The only qualification
being, you should be able to control and manipulate the masses.
However,
what is more distressing is not the accumulation of wealth by corrupt means,
but the deployment of this tainted wealth in a sophisticated manner into
legitimate businesses throughout Goa. It will be too much to expect ignorant
Goans to understand the difference between earned wealth and stolen wealth. As
it is the job of the regulators who unfortunately pretend as if these
transactions never exist. To prevent money laundering into the economy the
Reserve Bank of India has cumbersome forms for the common citizen know as Know
Your Client (KYC), when actually they should be having a Know Your Politician/Proxy
(KYP) form which will effectively achieve their desired goal, if they have any
and that too with less voluminous paperwork.
However,
the good news in a bubble formation is that it invariably breaks. If corruption
in Goa has reached this magnitude it’s a matter of time this bubble will burst.
However the challenge will lie in tracking tainted money being laundered into lawful
commerce. If the Goan economy gets used to this kind of money, everything fraudulent
will be made-up to look virtuous. It will be unfair on the Generation Next with
legitimate degrees forced to work for illegitimate businesses. We cannot expect
Generation Next preparing for a job interview to spend time in scrutinizing on
how the owner made his first million.
Above Article appeared on Herald, Goa on 7th January 2012
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