Kenneth S. Rogoff's eloquent defence of downsizing the role of transactional cash (that is, paper currency), albeit implicitly for developed countries (Wall Street Journal, August 28, 2016), confronts the growing call for "nothing but cash" in the 21st Century global political economy, particularly in certain types of exchanges and widely across less developed countries.
To be sure, cash-less tendencies have resonated well with affluence: wealthy individuals and countries use such alternatives as credit/debit cards, cheques, electronic transfers, and bullion more than those lower down the income hierarchy; and, indeed, the absence of wealth propels individuals to hoard, feel, see, and touch cash more frequently than plastic cards or some other paper instrument. Yet, the affinity with cash may have less to do with poverty and low-income increasingly: since it is the medium smugglers and traffickers use and understand the most, somehow it also complicates crime-control. Any clash over its continuation or elimination must first draw a security line and confront a confidence crisis among citizens, before enhancing technological innovations that do our transactions for us.
That has proved difficult in the 21st Century, in spite of so many advances. Among the global-level cross-currents have been the Great Recession (2008-10), exposing why neither buyers nor sellers portray transactional confidence without cash in their hands. The explosion of illegitimate economies, smugglers, and traffickers also reduce the resort to any medium but cash: imagine a cocaine peddler transacting with credit card processing paraphernalia. Why he does not utilise one exposes the tip of yet another offsetting practice: tax-evasion. Non-cash media carry too much personal information for any citizen to bring comfort, while simultaneously permanently registering one's transaction information in a public media that tax-collectors can easily check should they wish to. At stake is the confidence level; and as one might imagine, confidence grows from history being conducive. As the September 13, 2016 Wall Street Journal elaborated, "the more cash people have, the happier they are," for multiple good reasons too.
With bankruptcies, mergers, failures, and off-shore production/corporate migration accompanying the Great Recession, the typical citizen is often wary of the very financial institutions s/he deposits her/his resources in, or accesses that institution through increasingly unknown and often unintelligible global call-centre operators. If institutional association breeds confidence, that is, credibility increases the longer the account is held, then distance has the exact opposite effect: as local banks merge with more global banks, the neighbourhood teller gets replaced by a completely unknown telephone counterpart, often a foreigner, and rarely the same one twice over. Standardisation of this sort at the global level may be a fact of life in today's political economy, but it is at an unfamiliar level to grassroots clients, which they will be reluctant to embrace for obvious reasons.
Even more crippling to "life beyond cash" is the level of poverty at stake. Credit/Debit cards have not been commonly used instruments at the economic margin, certainly not compared to the middle-income or wealthy echelons; but they completely disappear below the poverty line, where, in fact, possessing hard cash is seen as substantively and symbolically eliminating poverty. Across more than half the world, people either cannot sign or cannot reproduce the original one to begin the journey of a cash-less society. Finger-prints and eye-scans have not yet fully entered their domain, indicating not only the wide income-bred gulf in the early 21st Century, but also how with the rapid shifts into emergent contraptions of artificial intelligence (AI), this gap is only likely to widen before any streamlining results.
That is not good news for building confidence, let alone ridding society of cash, and thereby lessening crime and guaranteeing a fairer tax collection. They also strengthen the old order through development efforts when development is all about taking us to higher thresholds. For example, Bangladesh's shift to a pay-as-you-go irrigation system uses a metre to measure how much water is pumped out of the ground in the dry-season under the Irrigation Management Improvement Project, first adopted in 2015. A credit/debit card payment procedure was only a logical resort to make the system functional and accountable, but even in the big cities, enterprises by and large refuse to use non-cash media, even a personal cheque. Therefore, the cash medium not only becomes a necessity, as in all previous centuries, but at the same time when other developed countries explore new frontiers at every crossroad, we remain stuck with the old model because it carries more trust over something more precious than any other resource or through any other yardstick. In the process, the novelty of a metre system to compensate for dry-season water paucity barely gets as much mileage and credit as is its due.
How we can collectively embrace new technologies demands we build our confidence level. Crucial to that outcome is security. Once in place, security breeds trust; and once trust gets transacted, confidence grows. Technological interruptions, even as facilitators, yield as much mileage as security itself: the higher the latter, the better the changes of technological adjustments positively impacting more recipients. In the final analysis, any clash over the usage of cash as a medium may be resolved by mitigating the clash over security fears; and the longer the wait for any such resolution, the more likely social segmentation will rigidify further. Since domestic incongruities predict external spillover, even the most advanced gadgets, refined services, and enhanced welfare/payoffs will continue to elude more than a majority of the planet's 21st Century inhabitants.
It will be a very long innings, but building trust in the increasingly evaporating family institution would be the guaranteed start to establishing mutual confidence between communities/countries, when technology would enter a level playing field and cash would be just another four-letter dictionary entry.
Dr. Imtiaz A. Hussain is Professor & Head of the newly-built Department of Global Studies & Governance at Independent University, Bangladesh.
[email protected]
- Wednesday, 24 April 2024 |
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