Thursday, December 14, 2017

Ideal Money – Ideal or a Far Cry from the Idea?

By Deepthi Mary Mathew*
The world has witnessed two major economic crises over the last decade – Sub-prime and Euro zone crises. These periods witnessed a string of discussions and debates aimed at lifting the ailing economies out of the crises. Keynesian economics that lost its glory during the 1970s returned to the centre stage. The central banks in the crisis-hit countries resorted to unconventional measures and started pumping money into the economies. From ‘Quantitative Easing’ to ‘Helicopter Money’, we were introduced to different concepts, while capital was flooded to financial institutions. The result was a sudden movement of capital between the countries in search of maximum returns. Consequently, there was huge instability in the currency markets that witnessed sudden depreciation/appreciation of major currencies.
Now, the central banks in these economies are in a major dilemma, as the withdrawal of measures meant to combat the crises could possibly lead to another major financial crisis. The whole situation throws light on the inherent weaknesses in the existing monetary system. Under the present system, central banks and governments have a monopoly in printing currency. With ‘fiat money’ in circulation across the globe not backed by any commodity but only by the government, central banks are given a free hand in deciding the amount of currency to be printed. Bubbles and burst experienced by us is mainly an offshoot of this system.
The demand for an alternative monetary system that could ensure stability in the currency market and limit the manipulative powers of central banks gained traction. It was against this backdrop that John F Nash introduced the concept of ‘ideal money’ as an alternative to the existing system. He proposed the construction of a good Industrial Consumption Price Index (ICPI) statistic, which would include the prices of commodities such as copper, tungsten, silver etc that are mainly used in industrial activities. He states that ICPI would serve as the standard for the value of international monetary unit, thus limiting the political roles of the central banks and state authorities.
Nash does not guarantee that such a system would completely eliminate political corruption, and argues that its success, to a great extent, depends on how the index is constructed in the first place. In his words, “… politicians in control of the authority behind standards could corrupt the continuity of a good standard, but depending on how things were fundamentally arranged; the probabilities of serious damage through political corruption might become as small as the probabilities that the values of the standard meter and kilogram will be corrupted through the actions of politicians.”
A major concern is with regard to the commodities that should be included in the construction of the index. From gold and platinum to crude petroleum, Nash maintains that a good ICPI should be accommodative enough to include a ‘miracle energy source’ that would be found in the future. “If a good ICPI is constructed, it should not be expected to be valid as initially defined for all eternity. It would instead be appropriate for it to be regularly readjusted depending on how the patterns of international trade would actually evolve,” he adds.

However, it is difficult to ensure that the ICPI will have a smooth ride. Changing market conditions and growing technology could have a direct impact on the prices of the commodities that are included in the index. This, in turn, will be reflected in the value of the index. As the Consumer Price Index (CPI) for measuring inflation rate varies in different quarters, so will the value of ICPI. The changing value of ICPI can make the currency market more risky and unstable. Thus, the selection of commodities to ensure stability in the value of ICPI could turn out to be a costly affair. 

*Deepthi Mary Mathew is Research Associate at CPPR-Centre for Comparative Studies. Views expressed by the author is personal and does not represent that of CPPR

Wednesday, December 13, 2017


By Ginu Sunny*

Domestic workers comprise a significant part of the unorganised sector and contribute to the national income. Yet, they remain invisible, unregistered in any book and excluded from the labour legislations of our country. The domestic workforce is often considered the grey area of work force that works behind closed doors of private households and is often hard to reach by any conventional policy tools.For instance, this is how the National Sample Survey Organisation (NSSO) in its survey in 2009–10 described the Indian scenario of employment and workforce.
“The total employment in the country was 46.5 crore comprising around 2.8 crore in the organised and the remaining 43.7 crore workers in the unorganised sector. Out of these workers in the unorganised sector, there are 24.6 crore workers employed in agricultural sector, about 4.4 crore in construction work and remaining in manufacturing and service.”(C-DAC, 2016)
Being a highly feminised sector, the nature of domestic work differs from person to person making it a unique and complex workforce. The household works and the employer–employee relationship differ in each situation. Even though most of them work 24/7, they are paid very low wages, have no guaranteed weekly day of rest or medical cover, face restrictions on freedom of movement, and often suffer physical, mental and sexual abuse.
The exploitation of domestic workers can partly be attributed to gaps in national labour and employment legislations, and often reflects discrimination along the lines of sex, race and caste. Various state governments put forward legislations such as the Unorganized Social Security Act and Minimum Wages Schedule, which refer to domestic workers also. However, we can still find an absence of a comprehensive, uniformly applicable national legislation that guarantees fair terms of employment and decent working conditions. Building and strengthening national institutions, adopting effective policy and legislative reforms, facilitating the organisation and representation of domestic workers and their employers, regulation of recruitment and placement agencies in the resource states, and raising awareness and advocacy on domestic workers’ rights are some strategies put forward to change this situation. Main hurdles in implementing these strategies are society’s attitude towards domestic workers and illiteracy, which exclude this disadvantaged section from enjoying the benefits of their own rights. Organising them into one group is also a giant leap in achieving these strategies. But other than these, the ultimate change should happen on the part of employers, who should ensure that theyrespect the rights of domestic workersand treat themfair and square.
There is no dearth of legislations or programmes in our country that intend to cover domestic workers and protect their rights. The problem lies in their implementation and weak institutions and systems of the country. Rather than framing new legislations and forming new organisations, we should work to fortify these institutions and make them capable of delivering and defending the rights of domestic workers. This will help turn the spotlight on the plight of domestic workers and kindle the society to recognise their contributions.

The author is Research Intern with CPPR. Views expressed by the author is personal and does not reflect that of CPPR.

*Featured Image source: Business Line