In this discussion, I examine India’s currency controls, demonetization, and the corruption that such arbitrary state action is likely to create rather than eliminate.

India’s sudden attack on cash is being presented as a strike against corruption. In reality, it is damaging ordinary people, crippling small businesses, expanding bureaucratic power, and creating new opportunities for corruption, favoritism, and coercion.

Watch the full discussion below:

Key Takeaways

• India’s demonetization is creating chaos in a cash-dependent economy.
• Currency controls hurt ordinary people and small businesses far more than the politically connected.
• The policy is unlikely to eliminate corruption; it is more likely to redirect corruption through bureaucracy and political networks.
• When the state suddenly attacks cash, people naturally move toward gold, foreign currency, and other stores of value.
• India’s deeper problem is not merely black money, but weak institutions, arbitrary enforcement, and a culture of corruption.