Thursday, 1 December 2016

Governments' lust for people's gold

Not the first Government to show a keen interest in its subjects' personal wealth
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The practise of Governments controlling the wealth exiting the country is fairly well documented. The Moghuls from their early days did so. There is documentation of how the Europeans vied for permissions of the Delhi court to conduct trade in the Indian subcontinent (1). And Alamgir Aurangzeb used Jeziya as a tool to control the prosperous Hindu traders and pheasants (apparently quite a few categories of people including the Brahmans were exempted from Jeziya).

Entrance to Moghul Emperor Akbar's palace at Ajmer, Rajasthan where his great grandson Emperor Jahangir received Thomas Roe of East India Company on Mar 1616
Pic: Ameen Ahmed. Info source: ASI board at the site
1700s in Mysore Kingdom: People’s gold and invading armies
But ever since the earliest organised Governance emerged, many Governments and rulers administering territories in what now is India have had their lust for their subjects wealth go beyond the taxes they impose. Surely there is no better way to control a geographical territory than through the absolute control of the wealth of its subjects. Post Aurangazeb, a state of anarchy prevailed in much of the subcontinent with kingdoms fighting each other for supremacy. As the Mughals receded the Maratha armies topped the list of native rulers successful in controlling the subcontinent’s largest geographical area. There are records of the Mysore Wodeyars paying ransom to the Maratha Armies each time the later invaded Mysore Kingdom and pillaged through towns and villages (2), till Hyder Ali (father of Tipu Sultan) put an end to this in 1758. Despite the change in power, subjects still managed to save their wealth thanks to the gold which they hid during raids of invading armies. The rulers knew this. And hence the rulers also banked on the wealth of trading community in their territories to fund their political survival. Hyder Ali borrowed a few lakh rupees (of those days) from the wealthy traders of Bengaluru Pete as he tried to regroup after his defeat by the Maratha army in early 1760s (3). And armies invading other kingdoms adopted various methods to take away the personal wealth of subjects. Edward Moor gives graphic details of the looting of personal wealth in Mysore Kingdom by invading Marathas during the 3rd Anglo Mysore War. When a Mysorean town was captured by the Marathas the residents would flee with their personal wealth. They would wander as refugees from one hill and jungle to another until the Maratha armies vacated their towns and villages. The Marathas adopted a strategy at some towns. They would invite residents back to a town offering them sanctuary if they paid a portion of their wealth. This way they would identify those who had wealth and then strip them off their remaining wealth.

1799 to 1947 - Brits and India’s gold

'Tipu Sultan seated on his throne' by Anna Tonelli. From the Clive Museum at Powis
Downloaded from Wikipedia on 1 Dec. 2016
Post Tipu Sultan’s death on 4 May 1799 his wealthy capital Srirangapatna was looted of almost every single ounce of gold. This included his golden throne which was cut and distributed as a war spoil, apparently as it was too heavy to be carted off to England. The Brits removed the remaining thorns in their path to the complete domination of India with little difficulty. And for the next 148 years, despite their taxation of ordinary people, the siphoning away of the sub-continent’s resources they still remained interested in the personal wealth- the gold which the ordinary Indians had saved. In the Raj era literature whenever the British touched economics they rarely failed to mention the gold that Indians had (or ‘hoarded’ according to the Brits). John Hurst in his book ‘Indika’ (1891) gives a good insight to the gold which the Indians held on to so dearly. To quote him:

The passion for acquiring jewels, instead of available property seems to continue. It is probably an inheritance from the earlier generations of the unsettled times. "I maintain." says Sundararaman, "that in every family in this country there is a disproportionate amount of the fortune of the family locked up in the form of jewels. There are families which can boast of 50,000 rupees worth of jewels, and often this amount is exceeded.

It is a very ordinary thing that over a third of the possessions of a family which has an estate of 10,000 or 15,000 rupees should be locked up in jewels. Even in the poorest families, there exists this disproportion of jewels to possessions. When Messrs. Orr & Sons put forth their advertisements in The Hindu regarding Hindu ornaments, they are said to have realized in the very first month a sale of over 20,000 rupees." - Unquote

Katherine Mayo (6) reaffirms the above almost 4 decades later in ‘Mother India’ (1927). She goes into greater details into the wealth of the people. To quote her:

‘A third actual drain upon prosperity, seldom advertised, yet affecting not only India but the rest of the world, is India's disposition of bullion. Since the early days of the Roman Empire, western economists have been troubled over India's intake of precious metals, rather than of foreign goods, in payment for her produce. These metals she has always swallowed up.
In 1889 it was estimated that India held imprisoned "a stock of gold bullion wholly useless for commercial purpose and increasing at the rate of nearly 3 million sterling [$14,000,000] annually, of the value of not less than two hundred and seventy million pounds sterling [$ 1,312,000,000] ."

This ever-accumulating treasure lies in the hands of all conditions and orders of men, from the poorest laborer to the most eminent prince.” - Unquote

Using people’s personal wealth for state purpose
How can people’s wealth be tapped for state use? The current government seems to be following in the footsteps of what foreign economists had stated nearly a century ago.
Mayo in Mother India reproduces an interesting statement in 1927 by Don C Bliss, American Trade Commissioner in Bombay in The Bombay Bullion Market, Don C. Bliss, Jr., U.S.Bureau of Foreign and Domestic Commerce, Trade Information Bulletin No* W, PP. 5-6.

“Vast reserves have been accumulated, . . . estimated as amounting to more than five billion dollars but they have been jealously hoarded in the form of unproductive precious metals. Put to productive uses, or loaned out in the world's money-markets, they would suffice to make India one of the powerful nations of the world. The traditional "wealth of the Indies" is there, but in such a form that it yields nothing to its possessors.

From time immemorial it has been considered improper for any great heir to draw upon his father's hoard of precious treasure and equally improper for him not to build up a hoard of his own. The late Nyzam of Hyderabad collected in his vaults jewels to immense values. The present prince is understood to prefer bullion, of which his own accumulations are said to reach to between 150 and 200 million dollars. 

Equally, every peasant in the land secretly buries silver in the earth, and loads it upon his women's necks and wrists and ankles, for safe-keeping. Forty per cent, of the world's total gold production, and 30 per cent, of the world's silver, is thus annually absorbed by India. None of this gold is coined or goes into currency, and, says Mr. Bliss, of silver: "All of the absorption is in response to the demand for bullion for . . ornamental uses." 

"Undoubtedly," he adds, "an enormous quantity of bullion has been buried and forgotten."

The man heavily in debt to the bania commonly possesses a store of hidden coin, yet continues borrowing. This custom rests on the idea of being prepared for the rainy day and on a profound distrust of the human element in any scheme of banking.

The tendency of the world's gold and silver to concentrate in India and there to disappear from action tells its own story. On the one hand, an essentially poor country could not bring such a thing about. On the other hand, no country that buries its wealth and then lies down and sleeps on the grave can be really prosperous. - Unquote

A women displaying her gold bangles at a jewellery store in 2016 at Bengaluru, India
Pic: Ameen Ahmed
Post-independence successive governments have been trying to use the personal gold and wealth of people for state use. This seems to have acquired greater urgency in the past decade. The previous UPA Government tried to attract the common man to invest his money in Gold ETFs by offering tax exemptions on the same. Elected to power in 2014, the NDA took it a step further by offering to keep people’s gold in exchange for gold bonds. There is a distrust of the Government (irrespective of the party in power) hence all the previous schemes and provisions to attract people to give their gold to the government failed. This drastic step of making every Indian account for every single gram of gold they have at home seems to be a product of this attitude of the common man. Will this make the ordinary citizen trust the Government more by parting with her or his gold (although there is no choice)? And will the Government retain the trust by managing the state resources instead of squandering them to a select few? Time will be a witness to it.

References:
(1) Jahangir giving permission to the Europeans to trade. Information at Ajmer by ASI.
(2) Mark Wilks, ‘Historical Sketches of the South of India’, 1817.
(3) Meer Hussein Ali Khan, Kirmani, ‘The history of Hydur Naik’, Translated by Col.W.Miles. 1842.
(4) Edward Moor, A narrative of the operations of Captain Little's detachment, and of the Mahratta army, commanded by Purseram Bhow; during the late confederacy in India, against the Nawab Tippoo Sultan Bahadur, London, J.Johnson, 1794.
(5) John Hurst, ‘Indika’, 1891
(6) Katherine Mayo, 'Mother India' 1927

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