IDEAs' workshop on 'Financial Crime and Fragility under Financial Globalisation', India Habitat Centre, New Delhi, India, December 19 - 20th, 2005 featured a set of papers and a panel discussion on the increased susceptibility of the system to endemic financial frauds and manipulation of regulatory frameworks in wake of changes sweeping the global financial markets with a rise in financial liberalization. The workshop was hence geared towards examining whether financial crimes of varying intensity are the rule rather than the exception and whether, institutionally speaking, the currently dominant "ideal" financial structure and the regulatory forbearance it incorporates is inherently fragile and prone to systemic failure. If so, the contours of an alternative need to be drawn. This section features the papers presented in the workshop.

• Global Inequality and Global Finance
  James. K. Galbraith (Size : 3.80 Mb, App. Download Time : 25 min @ 28 kbps) (Powerpoint Presentation)
      
  The paper begins by presenting a survey of existing studies on global economic inequality , pointing out some unexplained and glaring contradictions present in prominent mainstream studies done in this area including the works of Deininger and Squire and Salai-A-Martin. Thereafter the author lays out the methodology, the premises and some of the recent conclusions of U-T Inequality project based on measurement of global pay inequalities and using International Data Sets for Global Comparisons (such as UNIDO’s Industrial Statistics). The most important results presented by the study gave evidence of rising Inequality in most countries in the age of globalization, projected to be an outcome of “global finance” and arising due to various phenomenon ( such as high interest rates and debt crises) unleashed by global governance structures.
      
• When Fragile becomes Friable: Endemic Control Fraud as a Cause of Economic Stagnation and Collapse
  William Black (Size : 61.4 kb., App. Download Time : 1 min @ 28 kbps)
     
  In a very pointed indictment of policy prescriptions derived from neo-classical economic theories, the author brings out how they contribute towards eroding the institutional bases that constrain 'control frauds' and make markets more efficient. Drawing on certain basic premises in the study of 'criminology', he lays out the manner in which such prescriptions produce strongly criminogenic environments that far from containing endemic “control frauds”, actually lead to whole waves of such systemic failures. With globalization, these crises can transmit to other nations through "contagion" or by causing key international investments to fail. Though neo-classical economists minimize the incidence and importance of fraud for reasons of self-interest, class and ideology , such control frauds are in nature of financial super-predators, causing greater losses than all other forms of property crimes combined. They have actually led to a series of recurrent disasters (as brought out for instance in the cases of Latin America and Russia) that have discredited neo-classical policy nostrums throughout the world and paved the way for 'anti-US' and ‘anti-free market' formations in different parts of the world. .
       
  
• Financial Liberalisation and Financial Fraud: Revisiting the 1990s
  C.P.Chandrashekhar (Size : 340 Kb, App. Download Time : 5 mins @ 28 kbps)
      
  The paper presents an interesting perspective on post liberalization stock market trends during the 1990's in an attempt to look beyond the official picture to identify the possible causes behind the recent surge in stock market indices which have led to an incontrovertible and unprecedented bull run on India's stockmarkets. In an informative analytical survey of the present trends while comparing them with similar instances in the past, the author indicates certain factors which were unique to the recent surge besides highlighting the usual features which are concomitant with financial liberalization (such as increased speculation accompanied by increased vulnerability of the financial system due to volatile FII inflows and significant restraints on scope for budgetary, fiscal and monetary policy maneuvers). A special feature of the current upswing in addition happens to be a trend ratio of price to book value higher than the price earning ratio in turn hinting at the possibility of accounting malpractices in an attempt to shore up stock values and reduce the cost of capital. The paper also brings out several features of financial liberalization which result in manifoldly increased vulnerability of stock markets in developing countries like India to financial frauds and speculative manipulations.
   
  
• Vulnerability of Power Sector from Financial Globalisation
  Girish Sant (Size : 185 Kb, App. Download Time : 1 mins @ 28 kbps) (Powerpoint Presentation)
   
  The paper is an informative presentation on the conditions under which the power sector in India and other developing nations has typically developed in the post liberalization era. It outlines the entire trajectory of international influences in the Indian context over time right from the imports of equipment and finance in the beginning to unbundling, privatization and regulation to the recent moves towards mapping out a competitive market model. The malpractices, inherent in the system, and greatly facilitated by financial liberalization (such as massive demand over projections, price rigging, huge misappropriations of public money, complete absence of competitive bidding processes, pushing forward of one sided, high-cost contracts, allegations of huge pay-offs and kickbacks etc) are highlighted not merely in the case of India but also by drawing examples from the developed world. The basic contention is that privatization alongwith increased mobility of financial flows does not necessarily leads to increased efficiency in provision of services. On the other hand, it implicitly actually leads to larger increases in state subsidies and entails increased scales of manipulation in case of essential public services requiring larger regulatory capacity and continuous interventions on part of the state.
     
  
• Neoliberal Imperialism, Corporate Feudalism and the Contemporary Origins of Dirty Money
  Amiya Bagchi (Size : 70.9 Kb, App. Download Time : 1 mins @ 28 kbps)
   
  In a comprehensive historical survey going right back to the fifteenth century to a detailed analysis of contemporary times, the author proposes that the genesis of dirty money is deeply connected with the operation of neoliberal imperialism itself and only a struggle for an alternative global economic order can begin to address the root causes of their continual outpouring to the detriment of living conditions of the majority of the world's poor.
  
  
• Money Laundering and Capital Flight
  Kannan Srinivasan (Size : 80.8 Kb, App. Download Time : 1 mins @ 28 kbps)
   
  In this paper the author argues that conventionally money laundering is used to describe drug and terrorist money whereas it should be properly seen as the concealment and transmission of funds involved in any crime in any jurisdiction. In particular, the major business of money laundering is capital flight which involves taking criminal and tax evading money out of the jurisdiction of the sovereignties where the money has been made into safe tax havens. It is the theft of the resources of countries in a state of crisis where citizenry is helpless; where democracy is inadequate and there is insufficient control of the machinery of the state by the people and is as true of India as Nigeria as Russia or China. Such capital flight is in different ways the proceeds of theft: either tax evasion by the rich in a country such as India where the tax base is derisory; or bribes, agency commissions and other corrupt earnings which are so important in the fortunes of third world elites. Curiously, flight occurs because flight capitalists apprehend government action to seize assets but can only take place if the threatened action never takes place; illegal capital flight and tax evasion does occur in advanced capitalist countries but much less than in Third world countries that can neither institute effective controls nor simply transfer surplus openly as the colonial administrations of those very countries once did. Those who facilitate money laundering and capital flight services and employ such funds constitute a significant lobby, and include many of the world's largest banks, law firms and accounting firms. Opposition to intervention would also include many important multinationals, especially the oil companies, large contracting and engineering firms.
    
• Other papers will be uploaded soon.
  

May 1, 2006.