Category Archives: Economy

Demonetisation Will Not Bring Down Corruption and Black Money in India

Picture above: Nearly 40 deaths – including suicides, cardiac arrests in long queues, hospital casualties and a murder in a fit of rage in the first few days of India's demonetisation. The move caused a huge cash crunch in the country and turned life upside down for the lower middle class and poor families in India.

[Prout Globe, December 2016] – The demonetisation of 500 and 1000 rupees banknotes a month ago in India has raised pertinent questions about Indian government policies on corruption. In the short term, the sudden and previously unannounced move may have shocked and disturbed the criminal rackets: counterfeiting of banknotes and the flow of black money in the country, rampant corruption, the use of drugs, smuggling, etc. The long-term effects of demonetisation policy remain to be seen.

"While fighting corruption there should be a constructive ideal."

However the immediate effect of demonetisation has also been utterly disastrous for the people of India. A universal inability to pay for goods and services has brought the country to a standstill and near-collapse. The lives of ordinary people, small businesses, agriculture, and transportation have been thrown in greater chaos than ever.

Cause and symptoms

The science of medicine says that in order to cure a disease, its causes and not its symptoms must be addressed. In this particular case it seems that the government of India has determined that bank notes are the cause of corruption, black money, and counterfeiting allegedly used by terrorists to destabilise the country, etc.

According to PROUT, if corruption in the form of black money is to be treated at its root, it should be done via the taxation system. PROUT advocates a system of taxation where individual income tax is abolished and essential commodities are tax-free. Taxes should be levied at the starting point of the production of each taxable commodity and be paid directly by the consumers of such products. PROUT founder Shrii Prabhat Rainjan Sarkar suggested:

“If income tax is abolished and excise duty on excisable commodities is increased by only 10%, there will be no loss of government revenue. When there is no income tax, nobody will try to accumulate black money. All money will be white money and as a result there will be economic solidarity, an increase in trade and commerce, more investment, more employment and an improvement in the position of foreign revenue.”*

Some historical examples

“The best system of taxation was in vogue in the ancient Hindu Age. In those days only twenty-five percent of the entire produce was given to the king as taxes. The farmers could also give cows, horses or sheep as taxes. In such a system farmers did not face any inconvenience. Today, however, farmers face much inconvenience because they have to pay their taxes in cash. Farmers cannot always arrange cash by selling agricultural produce, because a proper market does not always exist.

“According to PROUT, a certain percentage of the farmers produce should be collected as direct taxes. It is also convenient for the government to realize taxes in the form of goods, because it needs to store produce as insurance against future contingencies. Taxes in such a form can easily be distributed from government stores when the people are in need. Moreover, this system will easily meet the requirements of people in the towns and cities. Such a system can rapidly transform the Indian economy.”**

“To overcome the great famine that struck Bengal in 1943, the Wavell administration introduced a rationing system. Wavell also tried to alleviate the famine by restricting the movement of food from one province to another. But these measures did not solve the problem – rather most people became trapped in the food rationing system.

“Even after the departure of the British in 1947, about 145,000 people were included in the rationing system. This resulted in the gradual increase of black marketeering, profiteering and other corrupt practices. The central government suddenly abolished the food rationing system in an attempt to solve the problem of corruption. This precipitous step caused the price of food to rise to exorbitant heights. Later the food rationing system had to be reintroduced.

“The Indian leaders tried to solve this food problem by calling for a “grow more food” campaign, but the campaign was a failure because the system of agriculture was not changed to increase output. The government adopted the policy of increasing the area of arable land and not the productivity of the existing land. There was no planning to determine whether or not the new land was suitable for agriculture, and no proper irrigation facilities to improve productivity.

“But above all, in the democratic system bureaucrats had ample scope to neglect their responsibilities, and due to defective administration much agricultural potential was wasted. Consequently, dishonest traders conspired to make the agricultural sector ineffective. They perpetuated the food problem to satisfy their own selfish interests. So from all points of view the agricultural system in India is extremely weak.”***

Conclusion 

Banknotes are physical objects and cannot themselves be the cause of corruption. Neither can they be described as its symptoms. It is the illegal handling of banknotes that may be viewed as symptoms of corruption. The cause or causes of such corruption are yet to be named properly by the government of India.

PROUT stands for rational distribution, development and maximum utilization of all the resources of this world – physical, mental and spiritual – all has to be taken care of. This theory will create harmony and peace in the society, a society where exploitation and corruption will not exist.

This means that corruption is the result of greed, mean-mindedness, and selfishness. In order to cure a society and its members of such a severe disease, PROUT advocates the practical application of firm principle as a short-term measure, and the cultivation of deep humanism and spirituality as a long-term measure.

“While fighting corruption there should be a constructive ideal. Different civic movements in India have failed to give benevolent service because they lacked a constructive ideal. They fought only for the sake of fight. Therefore it is necessary that the ideal should be first, the ideal second and the ideal always.

“Those who lack a constructive ideal help the capitalists in their exploitation. Only criticizing capitalism will not be of any service to the people, rather it will help the antisocial elements to find or invent more tactics for exploitation. This is the condition in India today. The leftist groups are engaged in criticizing the capitalists, which is bearing no fruitful results, and the capitalists have captured power by influencing the ruling party.****

Only a radical re-orientation of human aspirations and efforts towards truly great individual and collective goals will succeed in rooting out corruption for good and will introduce a moral and spiritual society for all and not only for a few.

Notes

* “Some Aspects of Socio-Economic Planning,” P.R. Sarkar, Prout in a Nutshell Part 15
** “Agrarian Revolution,” P.R. Sarkar, A Few Problems Solved Part 2
*** “Agrarian Revolution,” P.R. Sarkar, A Few Problems Solved Part 2
**** P.R. Sarkar, Discourses on Prout 2

Chinese yuan replacing US dollar as global currency: A not so distant prospect

Susmit Kumar, Ph.D.

Published at South Asia Monitor on May 1, 2016

During World War II, only the US and UK deliberated about the future of global economy, culminating into the 1944 Bretton Woods Accord. At that time, entire Europe was under Hitler and countries like India and China did not have any economy to have a say in the Accord. Under British Plan, which was rejected, there would have been one Global Currency (say Bancor) manage by an international bank and also an International Clearing House to oversee export and import of each country. 

The British team was led by none other than John M. Keynes, a genius in economics. Keynesian stimulus plan is named after him. That “neutral” world currency would be exchangeable with national currencies at fixed rates of exchange. Under Keynes’ plan, both debtors and creditors would be required to change their policies. A country with a large trade deficit would pay interest on its account and devalue its currency to prevent the export of capital. On the other hand, a country with a large trade surplus would increase the value of its currency to permit the export of capital. 

A country with a Bancor credit balance more than half the size of its overdraft facility would be required to pay interest on it. Keynes went so far as to propose the severe penalty of confiscation of surplus if at the end of the year the country’s credit balance exceeded the total value of its permitted overdraft. But the US was able to impose its dollar as global currency, as UK was entirely dependent on US, even for food. It also created institutions like IMF where nothing can happen without the wishes of the US. In IMF, nearly all decisions require 85% vote and US, with 16.72% vote share, is the only country which has more than 15% voting share with Japan being the 2nd largest with 6.56% vote share.

Till now taking advantage of dollar being the global currency the US has been funding its twin deficits – trade and budget deficits, by printing its currency whenever it wants. The United States imports goods and services from other countries by simply giving them pieces of paper i.e. dollars. Countries like India, Brazil and South Africa have to “earn” dollars to pay for their imports whereas the US has to just “print” the dollar to pay for its imports. In return, the manufacturing and service-providing countries deposit majority of the same pieces of paper in the United States. It is nothing but a Ponzi scheme run by the United States. According to economist Allan H. Meltzer at Carnegie Mellon University, “We (United States) get cheap goods in exchange for pieces of paper, which we can print at a great rate.” 

It is a little known fact that the Soviet Union collapsed because it could not get external funding for modernizing its economy under Mikhail Gorbachev’s Perestroika and Glasnost policy. There was drastic reduction is price of crude oil, the main Soviet export, during late 1980s and early 1990s after the end of Iraq-Iran War (1980-88). Crude oil price dropped from an average of $78.2 a barrel in 1981 to as low as $7 a barrel one time. These two factors led to a rise in Soviet external debt. In 1985, Soviet oil earnings and net debt were $22 billion and $18 billion, respectively, whereas these numbers in 1989 were $13 billion and $44 billion, respectively. By 1991, when external debt was $57 billion, creditors, many of them major German banks, stopped making loans and instead started demanding repayments, contributing to the collapse of the Soviet economy. Had oil prices increased, like it did during early Putin administration (2000s) or had German banks financed Gorbachev’s Perestroika and Glasnost like Japan and China financed US debts since 1980s, the USSR and communism would not have collapsed in 1991. 

Unlike the Soviet Union, the US has been getting external funds from Japan during 1980s and 1990s, and thereafter from China, in form of treasury bond investment as well as foreign investments in its private sectors and other government bonds, like Fannie Mae and Freddie Mac bonds. Till last year, both Japan and China had more than $1 trillion US Treasury Bonds, each. Even countries like India and Russia had nearly half of their FOREX invested in the US financial system. 

But in last several years, China has become the number one trading partner, replacing the US, of nearly all major countries. For an example, China has become the number one trading partner with the entire Africa continent. It is using its currency yuan, instead the US dollar, as the mode of transaction with its trading partners. In 2009, only 1% of Chinese trade was in yuan whereas in 2014, 19% of Chinese trade was in yuan. As per HSBC CEO, more than 50% of Chinese trade would be in yuan by 2020. Hence in next several years, yuan is going to replace the US dollar as the mode of transaction in global trade. Describing the stranglehold of China over the US economy, Richard Haass, President on Council of Foreign Relations, a premier US think tank, said: 

"Essentially the U.S. took advantage of Britain's Sterling problem to exercise economic leverage over the British government, and that led to a hasty retreat in the 1956 Suez War (despite defeating the primitive Egyptian army on all the fronts, the invading forces had to withdraw). So one can imagine a situation nowadays, where, say, there is a crisis over Taiwan between the U.S. and China—which holds a significant number of dollars—and one can imagine the Chinese might be prepared to threaten the dollar, make some comments to weaken it unless the U.S. backs off some of its support of Taiwan.” 

In 2009, the Pentagon for the first time held a series of economic war games exercises. The soldiers were Wall Street traders and executives, economists, and academics. The weapons were stocks, bonds, and currencies. The participants were divided into teams: the US, China, Russia, Japan, the EU, and so on. Then the teams were presented with different scenarios—North Korea is imploding, a major global economy is melting down—and told to do what was in their best interests. What the exercises showed was that the United States consistently lost to China in economic warfare. China won, without so much as reaching for a gun. 

After creation of two international financial organizations by China, Asian Infrastructure Investment Bank and New Development Bank (formerly BRICS Bank), the IMF and World Bank, dominated by the US, are bound to lose their status to the former two. Once UK joined the Asian Infrastructure Investment Bank, against the wishes of the US, all Western countries, except the US, Canada and Japan, joined it. Commenting on it, Lawrence Summers, ex-US Treasury Secretary and ex Harvard University President, wrote, “[it] may be remembered as the moment the United States lost its role as the underwriter of the global economic system. I can think of no event since Bretton Woods comparable to the combination of China’s effort to establish a major new institution and the failure of the United States to persuade dozens of its traditional allies, starting with Britain, to stay out.” 

Since last year, China has started to sell its dollar holdings, reducing it to $3.2 trillion from near $4 trillion, as per its plan to get rid of dollar as global currency. It is just a question of time that both the former banks would start to lend money in yuan, leading to the collapse of US dollar status as the global currency. Once the US dollar loses the status of global currency, the US economy would collapse in the same way the Russian economy collapsed in late 1980s. But China would not be able to impose its will on the global economy. Instead the collapse of US economy would lead to the global Great Depression. The world will not have an option but to implement the British proposals during the deliberation before the signing of 1944 Bretton Woods Accord.

Copyright Dr. Susmit Kumar 2016
susmitkumar.net

The Chinese Swap

[PROUT Globe, January 2015] – The shift from a US-dominated world economy to a Chinese-dominated one will lead to a transfer of global power to previously industrialised underdeveloped countries.

In Africa, Chinese “swap” dynamics are now stimulating a number of economies, where Zimbabwe and Ghana are already using the yuan as part of their reserve currency.

China has also begun supporting the Argentinian peso and the Russian rouble in ways that strengthens the three currencies involved as well as increasing the export of Chines goods to those countries.

Since 2005, China has replaced USA as the number one trading partner of nearly all major countries (among them Japan, South Korea, India, Russia, Brazil, Australia, EU countries, Latin American countries). Soon all these countries too will be using yuan in trade.

For instance, when an Indian will send money to say Uganda, it would go in Yuan and not in dollar, which is the mode of trade right now. By then the US dollar hegemony, if not the currency itself, will be history, notes Dr. Susmit Kumar.

In 2009, only 1% of Chinese trade was conducted in Yuan. In 2014, it was 15% and by 2016 nearly one-third of Chinese trade will be in Yuan.

References

Dr. Susmit Kumar: http://susmitkumar.net/index.php/us-economy?id=130:stop-blaming-china-it-is-the-structural-failure-of-the-global-trade-system

Wolf Street: http://wolfstreet.com/2014/12/24/global-monetary-power-shifts-from-dollar-china-stakes-claim-rescues-currencies-of-argentina-and-russia/

The Africa Report: http://www.theafricareport.com/North-Africa/chinese-yuan-and-us-dollar-compete-in-african-markets.html

WIkipedia: Internationalization of the renminbi (yuan)

Marketing Progressive Economics

masscapitalismMass Capitalism; A Blueprint for Economic Revival. Apek Mulay. Book Publishers Network, 2014. 242 pages. $15.57 paperback, $9.99 Kindle Get it at Amazon

By Trond Overland

Semiconductor expert Apek Mulay may have been a naughty child. His own mother may or may not agree but Mr. Mulay still appears to be mischievous today. In Mass Capitalism, A Blueprint for Economic Revival, Mr Mulay serves up heavy systematic criticism of capitalism — while promoting “mass capitalism.” Mass capitalism? Everyone knows there is no such thing as mass capitalism. We have private capitalism, state capitalism (as under communism), mixed economy (where private sector sponsors public sector directly and indirectly through such means as employment, taxation, etc.), corporate capitalism, crony capitalism, to name but a few. But we will never have mass capitalism and for a very good reason: Capitalism is naturally limited to economic exploitation carried out by the few on the many.

In fact, everyone cannot perpetrate economic exploitation in the same way as a herd of cows cannot subsist for very long only by drinking the milk of each other. Cows must graze and calves must stop drinking after a while to allow for newcomers — and someone quite different must do the milking and butchering, that is how exploitation of cows goes. Even if one construes a term such as “majority capitalism,” where economic exploitation would be carried out by the many on the few, it would be a misnomer. Such a system cannot sustain, at least not over time, let’s say for more than a few minutes, as there simply would not be enough genuine source material to be exploited by the disproportional (majority) number of exploiters. This is the reason pyramid schemes invariably collapse, and sooner rather than later. So what does Mr. Mulay mean by mass capitalism?

Alas, it appears that the imaginative Mr. Mulay is not alone but in cahoots with the spirited economist Ravi Batra, Professor of Economics at Southern Methodist University, Dallas. The latter is the actual coiner of the term mass capitalism. When employees own the majority of shares in large companies and private property on a massive scale, it is mass capitalism according to Dr. Batra.* Similarly, Mr. Mulay suggests a system “that would lead to free market reforms, enabling capitalism to work for the masses, and would take the US semiconductor industry to the next level of innovation and financial success.”

Then what is their mass capitalism actually? Mr. Mulay reveals to us that it is nothing but a pseudonym for PROUT, the Progressive Utilization Theory. It is well known that American policy makers and most of the public and the media are wary of the term “socialism” in the same way as a hyperallergic person is wary of fiendish allergen. So while PROUT´s founder Shrii Prabhat Rainjan Sarkar dubbed PROUT “progressive socialism” (while dismissing capitalism to the scrapheap of destructive and useless systems), Mr. Mulay goes along with Dr. Batra´s local market plan.

PROUT postulates that no one should be allowed to accumulate physical wealth without the permission or approval of society. This is its first fundamental principle. Its scientific base is that physical wealth is finite whereas human urge is infinite, and therefore accumulation of physical wealth must be limited in the interest of all, while accumulation of mental and spiritual wealth should be unlimited. Becuase of the inherent limitedness of all things physical, capitalism in any form and shape can never sustain.

There is no way we can call PROUT capitalism; PROUT is not a system of private capitalism and it is also not state capitalism, it rejects economic centralisation and promotes economic decentralisation. Since the picture of Shrii Sarkar adorns the book´s dedication page, and PROUT is the ideological focus of the Mr. Mulay´s work, it seems only right to emphasise this point.

Is Batra and Mulay´s mass capitalism only a contrived selling point then? Yes, in all probability. Since the beginning of the semiconductor race, the US has been the leader of the pack, with Intel, Qualcomm, Texas Instruments, Broadcom and Micron Technology claiming nearly one third of the global market share at present, while the combined force of South Asian giants Samsung and Hynix (South Korea) and Toshiba and Renesas (Japan) amounts to less than 20%. Mr. Mulay proves to be a strong advocate of the US sustaining and even increasing that share – by “mass capitalism.”

All in all, Mr. Mulay´s work offers a great view from the American standpoint. As is common knowledge, all indications are that the Western economy is in for a very rough ride, in particular because the Western individualised world has sacrificed so much of its social, cultural, and industrial base to external interests, and in the process has outsourced large chunks of its technical skills and knowhow to foreign agencies and lands. Life on other continents on the other hand seems to have retained more of a traditional structure. Therefore it seems probable that a sinking global economy and the eventual collapse of capitalism as we know it would harm the First and Second Worlds infinitely more than the Third. It is therefore not inexplicable that Mr. Mulay and Dr. Batra find it opportune to stimulate a will and sentiment to do something radical about the impossible situation of their (new) country and economic sphere.

The author´s solid background in the semiconductor industry, and his lofty vision of an economic and industrial system based on PROUT is instructive at a time when our very survival is in need of a new paradigm that can carry it forward into a world of numerous new beginnings. Thinkers and activists, also from other parts of the world, would be able to draw lessons from Mr. Mulay´s patriotic fervour based on his methodical professional and systemic analyses and syntheses.

* Statement in interview with New Zealand National Radio, 5th November 2011, http://proutglobe.org/2012/03/ravi-batra-predictions-and-politics/ (sourced: October 8, 2014).

What Is Economics

By T N Das

“PROUT involves a revolutionary transformation of the world and mystical love involves the merger of both in the inundation of Bliss or infinite happiness. In this article we will explore the roots of economics by examining the meaning of the English term “economics”, as well as the Sanskrit term artha. Through this we will discover the roots of the PROUT paradigm for the liberation of humanity not just from exploitation, but from limited states of Consciousness and the mind itself.

“Economics is by definition a form of housekeeping. This is why one of the meanings of oikanomia is thrift or prudent and wise use of resources, saving as much as possible in the pre-production and post-production stages. So we can see that economics is essentially part of family dynamics and family growth. Hence economic decisions are then made with the welfare of the entire family foremost in mind. This family includes the animals and even the trees.”

Download the whole article (PDF 7,5 MB)

Mass Capitalism: A Blueprint for Economic Revival

MassCapitalismThe upcoming Mass Capitalism: A Blueprint for Economic Revival by Apekshit Mulay offers to solve the economic problems which are threatening the survival of the US and world economy. The  solutions presented in the book would help establish a free market economy. They would lead to a balanced economy, high investments, high growth, and increased motivation for employees to work hard and result in a steady growth in corporate profits.
Click to read more about the book
CLICK TO PRE-ORDER THE BOOK

 

The Winner Takes It All and Continues to Act Like a Cheat

October 3, 2013 – This month marks the fifth anniversary of  the launch of America’s Troubled Assets Relief Project (TARP), a 430 billion dollars bank bailout program. This month also saw the US government stopping the wages of 800.000 government employees, thereby shutting down numerous public services in a move that is hitting the economy severely.

Do TARP and similar programs, such as the trillions of dollars provided to big banks through Quantitative Easing (QE), work as intended?

The major difference between the 1930s depression and the current financial crisis is that nowadays governments intervene to keep the top players afloat while leaving ordinary people to twist to the wind. Back then, it was the other way around.

Following the 1929 stock market crash, Western governments allowed overstretched enterprises to fall. Instead of aiding those that had generated the crisis – speculators and the banks that had funded them – governments launched large-scale public programs. Comprehensive public efforts, such as America’s New Deal, allowed ordinary people to gradually increase their purchasing capacity and participate in rebuilding the real economy, not hedging the speculative one.

The 3 Rs of the New Deal program were Relief for the Unemployed and Poor, Recovery of the Economy to normal levels, and Reform of the Financial System to prevent a repeat depression. It may be subsumed that the foundations of the modern welfare state in many countries today were laid in part by the introduction of such large-scale public programs during those difficult pre-war years.

Relief for the rich

80 years on, the US government launched TARP, a federal program providing failing top capitalist players with taxpayers’ money. At the same time much of the Western world practises the policy of QE.

Unlike TARP, which takes real money from the poor and gives it to the rich, QE involves spinning money out of thin air and giving it to large banks exclusively. Since 2001, Japan, US and Europe have systematically calmed the panic of very big banks in very big trouble by purchasing their debts to the tune of trillions of dollars. Private capitalism has gone state capitalism in a way that was previously reserved for communist countries.

How is TARP doing?

How does TARP affect morale among bankers? The Guardian put the question to top experts directly involved with TARP.

Sheila Bair, chair of the Systemic Risk Council and former FDIC chair:
I don’t want anyone who’s big to have a giant “put” on taxpayers. It’s problematic for big financial firms think that they can profit by taking a lot of risks, and if they lose money they can put it on taxpayers. There’s no more damaging and destabilizing message the government can send than this idea that if you’re big, the government will get you out of trouble.
Read more of what Sheila Bair has to say about TARP

Christy Romero, special inspector general for Tarp:
When their risky gambling went south these bankers lied, plain and simple. They hid bad loans and bad balance sheets through illegal accounting trickery. Some sought taxpayer dollars to fill in the holes on the fraud-riddled books. Some criminally concealed that the bank itself was funding their luxury lifestyles, believing they were entitled to the best even while they foreclosed on homeowners.
Read more of what Christy Romero has to say about TARP

Neil Barofsky, professor of law at New York University and first special inspector general of TARP:
Here we find ourselves, five years later, with banks like giant Frankenstein monsters, roaming the earth and wreaking havoc. Ultimately these giants might be Tarp’s biggest legacy … That’s not free market capitalism, that’s corporate socialism. Everyone’s inner capitalist should be cheering to break up these institutions.
Read more of what Neil Barofsky has to say about TARP

Anat Admati, professor of finance and economics at Stanford:
Tarp’s legacy is disturbing. Most of those who got into financial trouble because of “troubled assets” suffered severe consequences, and many innocent people are still suffering the collateral damage. Those who aren’t are the bankers who took excessive risks and the policymakers who did not control the system effectively. They would prefer us to think that everything is fine now, when in fact much too little has changed.
Read more of what Anat Admati has to say about TARP

Trond Øverland

U.S. Income Gap Stratospheric

(PROUT Globe, June 2013) – The gap between haves and have-nots in the Unites States is now so unhinged that researchers find it difficult to fit it with that of other developed nations. A new report from the International Labour Organization shows that U.S. inequality has literally gone off the chart, TruthOut reports.

income inequality

“Income inequality in the United States is soaring so high, in fact, that the authors of the ILO’s new 2013 World of Work report couldn’t even place the United States on the same graph with the other 25 developed countries their new study examines,” the agency writes.

The last time income inequality in America rose to such heights was at the time of the Great Depression, noted a 2010 U.S. Senate report. The report suggested that high levels of income inequality may precipitate economic crises, and that income inequality may be part of the root cause of the 2008 Great Recession.

See an informative video on the present income inequality in the U.S.

Little has changed since in terms of government income policy. In an interview with PROUT Globe last year, Proutist economist Ravi Batra stated that the wealth gap “is conscious government policy. The sad part of it is that it reflects political corruption. Anything that reduces labor demand will reduce the real wage and reduce people’s salaries.”

PROUT’s solution

In its effort for creating a dynamic and just economy, PROUT focuses on the surplus available to society after the minimum necessities have been supplied to all. By fixing both a ceiling for maximum salary and private property, as well as a minimum wage, a surplus will be available for further distribution to the meritorious. This factor, the allocation of incentives for further dynamics among the meritorious after first having secured basic necessities for all, is called atiriktam in the PROUT system.

“For long, economic efficiency and fairness have been regarded as two separate issues. Many have argued that economists should not even consider equity at all,” notes a recent book on PROUT, After Capitalism, Economic Democracy in Action.

“Atiriktam resolves this dilemma both logically and morally,” argues the book. “PROUT asserts that the only justification for granting higher income to a person is to reward him or her for providing a greater benefit to society.”

At present in America, inequality is not only “off the chart” but still rising. Income inequality in the U.S. rose during the recession of 2008-2009, and continued rising through the lackluster recovery of 2010-2011.

Read also: The Bubble and the Wealth Gap

Rational Purchasing Cost for All Foods, Bills, Tickets and Rent for All Citizens

By Manas Nandi, India

purchasecardEvery citizen will be given an electronic card for all-purpose purchases. Government will provide an electronic Purchase Card to a citizen based on his monthly income. The Purchase Card will contain an assessed Purchasing Factor. Purchasing Factor depends on one’s purchasing capacity. Every citizen needs to credit a money balance. The amount of money balance will be credited as per the citizen’s wish and ability. The citizen can credit any value of his money to his electronic purchase card from registered centers. Money filling can only be done from directly debit card to purchase card. Cash money or paper money and coins will be banned to control crimes. How will the registered money filling centers get paid? The centers will be paid by the government on the basis how much money they have filled to citizens’ electronic card. So if a citizen wants to credit Rs. 100 to his electronic purchase card, he needs to visit any money filling centres. He can himself transfer Rs. 100 from his debit card to his electronic purchase card. The money-filling centre will fill exactly same amount Rs. 100 to the citizen’s electronic purchase card. The money-filling centre will not take any charge or any remuneration from the citizen for money filling in return. Rather, the money-filling center will be paid by government at any time on the basis of how much money the center has filled till date.

The money-filling center will have record electronically. Also there will be a check during payment to money filling, if the centre has correct information. The centre can be caught red handed in case of false information. Suppose the money filling centre false claims that it has filled Rs. 1 million to 50000 number of citizens purchase card. The electronic data of money filling centre will be checked electronically with fraction of seconds, if misused is occurred. Because every money-filling is carried out by transfer certain amount of money from one debit card to one purchasing card. The money amount is debited from the debit card and credited on purchase card. Every such transaction will contain the debit card information and the purchase card information. The money-filling centre is basically an electronic machine that facilitates the transfer of fund from one debit card to a purchase card and secondly the money-filling centre contains all the transaction in details and aggregate transaction. So there is no possible for an owner of a money-filling centre to claim more from a government as commission.

Now every citizen have the purchase card. Every purchase will be made only by the purchase card. No cash is allowed to purchase any kinds of things like bus ticket, train ticket, grocery goods, cloths, furniture, hospital bills, electricity bills … any thing. As of now citizens are used to purchase all goods with the help of cash. But, todays article, every body will purchase only with the help of his purchase card. Why such arrangement? This arrangement is made to rationalize the purchase cost. Let me explain it clearly. Any nation has millions of citizens. But, all citizens do not earn the same amount – it should not be same. Income should be different according to one’s labor, hard work, innovative, investment, honesty, skill and qualification. Since income is rational ( in other words income is not equal), so the purchasing capacity should be rational. As of now, purchasing capacity is considered as equal for all citizens. Say, 1 kg wheat costs Rs. 22 for all citizens irrespective of purchasing capacity. It means, a rich citizen can purchase 1 KG wheat at Rs. 22 whereas a beggar has small price to purchase 1 KG wheat because the purchasing price is high for him (Rs. 22 per KG). If the wheat price could have Rs. 10 per KG, the beggar could have purchased it. Hence we need to rationalize the purchasing cost. Purchasing price or purchasing cost should be varied with respect to one’s earning. Less earning less purchasing cost. More earning more purchasing cost. Gradually, it will become more clear.

Table of purchasing factor versus income need to calculated based on the economy

The purchasing factor obviously vary time to time with respect to supply-demand rule, inflation and other relevant economic criteria. How will the table will look like and what should be the working principle? Table : Purchasing Factor Vs Income (Values are arbitrary. Values need to be calculated based on certain economic criteria. The values will vary according to certain economic rules)

purchasing factor m nandi

How may it be facilitated? Citizen will go for any purchase to a merchant. He will show his card and the merchant will swipe the card and provide him the material. The merchant will know the Purchasing Factor, because as soon as the Purchase Card is swiped, all relevant information such as card balance, purchasing factor, card validity will be displayed. So the merchant will calculate the bill according to above method. During payment the bill amount will be debited from the purchase card. Now, how will the merchant get paid? Every merchant will also have Merchant’s Purchase Card and Selling Card. Merchant will purchase any goods as per standard purchase cost from framers and the producing companies or cooperatives. But the merchant cannot sell his products at standard cost. Why? The reason is already explained above. The merchant needs to sell as per rational selling cost.

Some particular situations arise here:

  • The more higher income citizens will purchase from a merchant, the merchant’s earning will be increased and the more poor citizens will purchase from a merchant, the merchant’s earning will minus i.e. the merchant will face a loss.
  • To balance it, the merchant will need to produce his selling details such product quantity sold to the government centre. The selling details are also maintained in a card electronically. The government centre will know the selling status and the government will pay the merchant based on how much goods is sold. The calculation to pay the merchant by the government will be:

Merchant payment by the government= (Sold Product 1 Quantity* Product 1 Standard Purchasing Cost + x% profit) + (Sold Product 2 Quantity* Product 2 Standard Purchasing Cost + y% profit) + (Sold Product N Quantity* Product N Standard Purchasing Cost + z% profit).

Ex. Suppose a grocer has sold out in March 2013 the following:

100 kg wheat
200 kg rice
10 tooth paste
10 soaps.

The grocer has purchased the above items from a company at standard purchasing cost as per following:

Wheat = Rs 20 per kg
Rice = Rs. 30 per kg
1 tooth paste = Rs. 25
1 soap = Rs. 15.

Different product has different profit percentage. Say for wheat it is 20%, rice it is 15%, toothpaste it is 20% and soap it is 10%.

So the grocer’s total purchasing cost from the company = 100 kg wheat * Rs. 20 + 200 kg rice * Rs. 30 + 10 tooth paste * Rs. 25 + 10 soaps * Rs. 15 = Rs. 2000 + Rs. 6000 + Rs. 250 + Rs. 150 = Rs 8400/-

Now after selling above quantities, the government will pay the merchant:

100 kg wheat merchant payment= Rs. 2000 + Rs. 2000*0.20= Rs. 2000 + Rs 400= Rs. 2400.

200 kg rice merchant payment = Rs. 6000 + Rs. 6000*0.20 = Rs. 7200
10 tooth paste merchant payment= Rs. 250 + Rs. 250*0.20= Rs. 300
10 soaps merchant payment= Rs. 150 + Rs. 150*0.10= Rs. 165.

So total merchant payment by government= Rs 10065.
So total merchant’s profit= Rs 10065 – Rs. 8400 = Rs. 1665.

In this way the purchasing price remains rational. The merchants are paid with profit. Income of merchants are visible to the government. The merchants can not cheat customer as well the merchants can not can not hide their income tax and their other relevant taxes.

The merchant is also a citizen. So depending upon his monthly net profit he will also hold a purchase card for his family. He will get same benefits like all other purchase card holders. Remember, purchasing card is for purchasing family goods and items for personal and family use. Whereas, a merchant uses different card called Merchant Purchase Card for purchasing goods for business. And merchant uses Merchant Selling Card for selling the goods.

Moreover, those who hold negative purchasing factor, government allow themselves to purchase products in less price. These low cost products should be labeled properly so that they cannot sell it further. Suppose a citizen has below Rs. 1000 monthly income. So his purchasing factor is minus ½. So he can but product at half cost. These negetaive price products must be labeled in such as way so that every body will understand that these are negative purchasing factor products and cannot be sold further.

As cash money and coins are banned, then how your friend will lend some money from you in case he has shortage of money in his debit card. It is simple to lend a person some money, it can be done through fund transfer from your debit card to your friend’s debit card.

If cash money and coins are banned, how will a day labor get paid? The day labor will also have a debit card, so his debit account will be credited with his wages by fund transfer.

Furthermore, in this way false billing can also be restricted.

Author’s blog:
http://devoteesofshriishriianandamurti.blogspot.in/2013/04/rational-purchasing-cost-for-all-goods.html

Copyright The author 2013

Shrii Prabhat Rainjan Sarkar on Purchasing Capacity

Sources are referred at the end.

"The greater the purchasing power of the people, the higher their standard of living."

"To effectively implement this, increasing the purchasing capacity of each individual is the controlling factor in a Proutistic economy. The purchasing capacity of common people in many undeveloped, developing and developed countries has been neglected, hence the economic systems of these countries are breaking down and creating a worldwide crisis. The first thing that must be done to increase the purchasing capacity of the common people is to maximize the production of essential commodities, not the production of luxury goods. This will restore parity between production and consumption and ensure that the minimum requirements are supplied to all." [Quotes continue below illustration]

"PROUT does not support the existing practice of considering the per capita income as the index of people's economic standard. Per capita income is a deceptive and defective measure of collective wealth popularized by capitalist economists to fool people and cover their exploitation. The genuine measure of people's economic advancement is increasing purchasing capacity."

"To increase people's purchasing capacity, the easy availability of the minimum requirements, stable prices, progressive, periodic increases in wages and salaries, and increasing collective wealth must be ensured."

"In a Proutistic economy, there will be no limit to purchasing capacity – that is, purchasing capacity will be ever increasing. The minimum requirements must be guaranteed and should always be increased according to time, space and person, and this can best be done by continuously increasing the purchasing capacity of the people in relation to the economic development of the concerned socio-economic unit. The greater the purchasing power of the people, the higher their standard of living."

"No economic system in the world has been able to continuously increase the purchasing capacity of the people, because economic power is concentrated in the hands of a few."

"According to PROUT, the minimum requirements of life should be assured through the availability of essential goods and purchasing power."

"It may be questioned whether it is wise for any government to guarantee the minimum requirements. If the state is to supply cereals, pulses, salt, gram, ghee, butter, etc. to all people then naturally the state has to institute some process of control which people may not like. Hence PROUT’s view is that people should be guaranteed the provision of sufficient purchasing power to meet these requirements. In that case the state need not adopt control measures. The other disadvantage of guaranteeing the supply of minimum requirements is that if consumable goods are supplied to everyone, people will become lethargic. They should therefore be supplied with purchasing power in exchange for their work according to their physical, psychic or spiritual capacity."

"I have not said anywhere that society should give plenty of money to everyone; I have only said that the purchasing power of each and every person should be increased."

"The maxim of PROUT's productive economy is, 'Increase the purchasing capacity of the common people above all.' If this maxim is followed in practice, it will be easy to control the prices of commodities through the cooperative system and economic decentralization."

"The minimum requirements can be assured through guaranteed purchasing capacity which should be enshrined in the constitution as a fundamental or cardinal human right. This will give the citizens of the country legal power if their minimum requirements are not met, hence the necessity of purchasing capacity will be reinforced by constitutional law."

"If the market price of a commodity is five rupees and if the salaries of the government employees are doubled with the intention of providing them greater amenities, will the purchasing capacity of the government employees also be doubled? If they go to market with more money in their pockets they will find that everything costs more. Such an approach is like adding fuel to fire. If the market price of commodities goes sky-high the country will be thrown into the clutches of high inflation. So, increasing the expenses of a government department at the cost of developmental programmes amounts to committing economic suicide. If production is increased through investment in developmental programmes instead, the purchasing capacity of the people can be increased without increasing their salaries. When purchasing capacity is increased, both government and non-government employees will benefit. In pure economic terms developmental programmes are those programmes which directly increase national wealth and indirectly support this increase. Programmes which only increase national wealth indirectly, not directly, cannot be regarded as developmental programmes until the minimum requirements of the people are guaranteed."

"In the subtle economic sense, the value of wealth is the real wealth. Wealth, if not properly defined, may mean only riches. But the value of wealth is to be measured in terms of its capacity to purchase commodities. That is, the purchasing capacity of wealth is its real value. This real value of wealth has not yet been properly understood in numerical terms by economists."

"To save society from depression, the approach of PROUT is to increase purchasing power by increasing production, reduce disparities in the value of wealth, and increase the circulation of money."

"The formation of a World Government will require a world constitution … each country must guarantee purchasing power to all its citizens."

"In the economic structure of the society, the purchasing power of the people plays the most important role in their all-round physical welfare."

"Question: What do we want, increase in per capita income or increase in purchasing capacity?
Answer: According to PROUT, increases in per capita income are not a sufficiently reliable and scientific index to determine the standard and progress of a particular socio-economic unit. Rather, this approach is misleading and deceitful, because it refers to a simple mathematical calculation of total national income divided by total population. This does not give the correct picture of the standard of living of the people of a particular socio-economic unit as the wealth disparity in society is concealed. Per capita income shows the mean and not the variation of income distribution. If inflation is also considered, the reliability of per capita income is further reduced. Purchasing capacity, on the other hand, is the real index of how people's economic needs can be met by their income. All PROUT's plans and programmes in the socio-economic sphere should be aimed at increasing the purchasing capacity of the people. PROUT stresses increasing purchasing capacity and not per capita income. Per capita income is not a proper indication of the increase in the standard of living of the people because while people may have very high incomes they may not be able to purchase the necessities of life. If the per capita income is low and people have great purchasing capacity they are much better off. So, purchasing capacity and not per capita income is the true measure of economic prosperity. Everyone's requirements should be within their pecuniary periphery or purchasing capacity."

Sources

Economic Dynamics
Social Security and the Authority of the State
The Importance of Society
Requirements of an Ideal Constitution
Developmental Programs
One Human Society
Block-Level Planning
Quadri-Dimensional Economy
Some Specialities of Prout's Economic System
"Questions and Answers on Economics", Proutist Economics

Copyright Ananda Marga Publications 2012