Introduction
This article examines the intricate interplay among the Central Govt., the rupee or currency, employment, and the process of nation-building. The expansion and contraction of the rupee in the Indian economy can only be carried out by the Government of India through taxes and expenditures. For the Central government, taxes and expenditures are independent of each other, unlike state governments and other currency users. An essential point to emphasise is that only Central governments possess the authority to issue currency in sovereign nations. Contrary to fiscal constraints, their limitations primarily revolve around resource availability. The primary cause of unemployment in the country lies solely in the incorrect fiscal policies of the Central Government due to ignorance of the modern monetary system. By leveraging the power of the central govt to create currency, all the unemployed individuals and resources within the country can be effectively utilised, leading to a happy, pollution free, ethical and prosperous India.
What are the issues in the country’s current economic and financial systems that contribute to unemployment, poverty and underutilization of economic capacities?
In the modern age, currency is as essential to an economy as energy is to machines. Currency allows producers to manufacture goods and services, and it allows consumers to purchase those goods and services. This cycle of production and consumption is what drives economic growth. The central government has the legal authority to create currency. This authority is important because it allows the government to manage the economy and respond to the economic challenges. For example, if technological advancements lead to increased productivity, the government can create more currency to employ the unemployed for public purposes to ensure that there is enough demand for the goods and services that are being produced. This can help to prevent unemployment and economic stagnation. With the advancement of technology, productivity in the economy has significantly increased. However, this has resulted in a situation where a few individuals produce a large number of goods, leading to widespread unemployment among many people.As a consequence of being unemployed, individuals lack the financial means to purchase goods and services, despite the abundance of available products. This creates an additional problem for farmers and industries who struggle to sell their goods and services at a profit due to a lack of purchasing power.
What are the issues in the country’s current economic and financial systems that contribute to unemployment, poverty and underutilization of economic capacities?
As stated above, the advancement of technology and influx of capital incentivising corporate and service jobs after 1991’s Liberalisation led to a sharp increase in the GDP growth rate due to the new means of production. However, this came at the cost of alienating unskilled and lesser-skilled labourers to the point that GDP growth rate far outpaced a stagnating employment growth rate. This is called jobless growth, and is one of the major problems faced by the country.
Is there truth to the notion that our money/taxes finance central governments and run the country?
Some people argue that they pay taxes which keep the government going. At face value, this statement sounds reasonable, but on close examination, it is the most absurd argument and shows total ignorance of how the economy functions. Taxes do not generate the foundation of national prosperity and advancement. True wealth arises from our interaction with nature— whether it’s cultivating the soil, extracting metals, nurturing forests, transforming raw resources into refined goods for human use, constructing homes, establishing vital infrastructure, or innovating technologies and novel products through extensive intellectual endeavours. These endeavours are undertaken by the extensive spectrum of our society, encompassing peasants, labourers, scientists, engineers, medical professionals, managers, and various other experts. Without the diligent efforts of the working populace, the very existence of goods and services would remain unattainable. Taxpayers, according to the conventional view, are at the centre of the monetary universe because of the belief that the government has no money of its own. Therefore, the only money available to fund the government must ultimately come from people like us. It is the currency issuer—the federal government itself—not the taxpayer, that finances all government expenditures. Taxes are important for other reasons. But the idea that taxes pay for what the government spends is a pure fantasy. Taxes serve as a means for the government to meet its needs and allocate resources without resorting to explicit force.
This graph shows the tax revenue of the government as a percentage of GDP. It has risen this century but stays true around 15-20% in the long run. The government has a diverse income stream, divided into Revenue and Capital receipts. Direct taxes like Income tax and corporate tax are one sub-part of this stream (namely revenue receipts). The government uses its revenue receipts like taxes to meet its regular and recurring expenditure, as shown below. It borrows money to meet expenditure not of that nature.
Is there truth to the notion that our money/taxes finance central governments and run the country?
How to understand the development of a modern monetary system and the crucial interplay between State, tax, currency, employment and nation-building? What were the intriguing insights offered by the development of the monetary system in Africa during the British colonisation period around 1850? What was the primary purpose of the hut tax, and how did it lead to the development of a local monetary based economy in Africa?
The development of the monetary system in Africa during the British colonisation period around 1850 offers intriguing insights. During the period when the British established colonies in Africa, they encountered African societies predominantly reliant on subsistence economies. These societies operated on a self-sufficient basis, with individuals growing their food and producing their clothing, unlike the more structured currency system present in India during colonisation by the East India Company. The British colonists had a desire to cultivate coffee on that particular land. However, achieving this goal necessitated the involvement of local labourers. The colonists faced a crucial decision, with only two viable options before them: the first was to resort to enslavement, coercing people into forced labour against their will. The second option involved implementing an indirect approach through the establishment of a tax system. The hut tax was first introduced in Natal, South Africa, in 1849. It was later extended to other British colonies in Africa, including Sierra Leone, Nigeria, and Kenya. The tax was typically set at a rate of a few shillings (a former British coin and monetary unit equal to one-twentieth of a pound or twelve pence) per hut.
The imposition of the hut tax compelled Africans to earn currency to fulfil their tax obligations for protecting their huts. This often necessitated their engagement as labourers in agricultural and other industries, aligning with the desires of the colonial authorities for earning currency. The primary purpose of the hut tax was to exert control over African labour. By compelling Africans to pay taxes, the British colonial administration effectively coerced them into seeking wage labour to generate the necessary funds to fulfil their tax liabilities. This arrangement served to meet the labour demands of the colonial economy. This system would lead to the development of a local monetary system, wherein individuals had to work to earn currency to pay taxes, and this currency would only be accessible through the colonists/state. This historical context highlights the evolution of a monetary-based economy in Africa and the critical interplay between the state, taxation, currency, and state objectives/nation-building.
What is the difference between a currency issuer and a currency user? How does the expansion or contraction (decrease and increase) of currency in the country occur and how does it affect our economy and nation-building?
There exists a profound interconnection among state/power, currency, economy, and the process of nation-building. Currency, which is produced by the governing power/state, plays a pivotal role in the functioning of the economy. It serves as a medium of exchange for the citizens, whose livelihoods and aspirations depend on the income generated through their efforts. Consequently, the act of nation-building materialises through the intricate relationship between citizens, currency, economy, and State (Central Govt.). To ensure a comfortable and secure future, both producers and other individuals must engage in work to earn currency. As the issuer and creator of the currency, the central government aims to leverage the human and natural resources within the nation to foster nation-building. To illustrate, when our country’s central government spends ₹100 and recoups ₹90 through taxation, economic activity
within the country experiences a boost, leaving ₹10 circulating in the economy for currency users. However, if the central government, based on its policies and the economic climate, spends ₹100 in the economy but collects ₹110 in taxes, it effectively retrieves ₹10 from currency users or the national economy. If there is a higher prevalence of unemployment and poverty, it impedes investment and necessitates the adoption of a fiscal policy by the central government to create currency, to provide employment opportunities for all to grow our nation to its full potential.
When the economy faces a recession, and is hindered by a lack of availability of credit (termed a deflationary tendency), the government increases its spending/public investment so as “pump” credit into the economy and to reverse the deflationary tendencies so as not to perpetuate a full blown depression. The government aims to keep aggregate demand stable or to increase it in times like this, however public investment by the government has decreased steadily over the past two decades.
CHALLENGES
Where will the money come from to employ everyone?
The Indian government has the sole authority to create or issue rupees through its legal power, and only the Indian government can make so many rupees available through its fiscal policy.
What are the job opportunities for millions of unemployed young men and women?
Substantial employment opportunities can be generated by focusing on the development and enhancement of essential and socially beneficial infrastructure, encompassing areas such as education, healthcare, healthcare, law enforcement, security, sanitation, environmental conservation, research and development, digital data management, administration, entertainment, community services, childcare, elderly care, water resources, food security, and energy sustainability, among others.
Will providing jobs on such a large scale improve or worsen the economy?
With technological advances, there is great potential for generating agricultural and industrial goods. However, unemployment and poverty limit individuals’ purchasing power, leaving productive capabilities underutilized. Creating ample job opportunities can enhance purchasing power, enabling people to buy more goods and services. This will stimulate the growth of agriculture and industry to meet market demand. Thus, a comprehensive employment policy is essential for rapid economic progress in our country.
How can corruption be curbed due to a large number of jobs and government spending?
Digitalization of money can help to curb corruption by making financial transactions more transparent and accountable. This is because digital transactions can be easily tracked, which makes it more difficult for corrupt citizens to hide their financial activities. Additionally, digital technology can be used to improve documentation transparency, accountability, and public participation. This can help to ensure that tasks and processes are performed with quality and integrity. Additionally, when people have a sense of self-confidence and morality, they are less likely to engage in corrupt behaviour. To accomplish this, it is crucial to develop the country’s administrative capabilities using digitization, which ensures active citizen participation and empowerment, thus safeguarding their dignity. Collaborative partnerships can continuously enhance administrative processes, making them more compassionate and humane. Furthermore, increased investments in advanced technologies can pave the way toward self-reliance and progress.
Will inflation increase significantly due to a policy of full employment?
The current situation in the country is characterised by limited utilisation of its productive capacity, primarily due to high poverty and unemployment rates that restrict people’s purchasing 6 power. However, once everyone is gainfully employed and possesses the means to make purchases, various sectors such as farming, dairy production, small industries, and others can operate at full capacity. This will result in increased production of essential goods like vegetables, milk, and other necessities, leading to improved availability and price stability. To mitigate the impact of price surges, producers of essential goods and services can receive interest-free funds, while expanding their production capabilities can help lower costs. While some individuals may exploit these circumstances for personal gain, implementing an effective administration and taxation system can effectively regulate and curb any instances of greed and profiteering.
Are there any examples in the past of utilising national currency for full employment and nation-building?
During the year 1933, the United States implemented a policy known as the New Deal. This transformative initiative not only generated widespread employment opportunities but also laid a strong foundation for the country’s overall advancement. Around the same period in Germany, a policy was enacted to ensure employment for all individuals, going so far as to make unemployment illegal. As a result of this extensive job creation, Germany witnessed significant progress across various sectors such as agriculture, industry, research and development, and infrastructure. Fast forward to the 1990s, China adopted comparable financial and administrative policies that led to the creation of extensive employment opportunities. This strategic move played a crucial role in propelling China to become an advanced nation, marked by remarkable development and growth.
Over the last two decades, our nation has experienced remarkable advancements in digital technology, information systems, and automation. These developments provide us with the opportunity to enhance the management and coordination of both human and physical resources. By harnessing the power of information and digital technology, we can optimise the utilisation of machinery and automation, leading to the swift eradication of unemployment and poverty in our country. Sovereign nations possess the legal authority to issue their currency. When faced with economic challenges and high unemployment rates, these nations should leverage their legal power to create currency and provide employment opportunities for everyone. By doing so, the nation can promote both economic growth and nation-building. Consequently, we can aspire to create an environmentally sustainable, ethical and prosperous India.
Are there any examples in the past of utilising national currency for full employment and nation-building?
More on the new deal: The New Deal made use of relief schemes such as the Civilian Conservation Corps (CCC), which employed young men in infrastructure and conservation schemes, such as conservation of national parks. The CCC would ultimately employ over 3 million young men in 9 years from 1933 to 1942.
Another scheme was the Federal Emergency Relief Administration (FERA), which gave direct financial aid to states to the tune of over $3BN in relief funds from 1933-1935, over $64BN today.