Raghuram Rajan raises valid point as Panama 'Canal' floods nations

Reserve Bank of India (RBI) governor Raghuram Rajan on Thursday warned against a dangerous trend of questions being raised about legitimacy of even 'entrepreneurial wealth of selfmade people'.

Stating that the debate on illegitimacy of wealth has varied from crony capitalism and the illegal acts of bankers to that about passive and inherited wealth, Rajan said, "Now, increasingly there is a talk about whether entrepreneurial wealth is illegitimate, whether self-made people should have what they have and whether that's something a fair game. I think this is dangerous. And the fact that there are occasions when people are found to be hiding their wealth, as in the Panama allegations, essentially contributes to this process of de-legitimisation."

The 'Panama Papers', which presumably leaked documents of Panamanian law firm Mossack Fonseca detailing offshore tax haven entities set up by people from across the world, including Indians, have triggered a worldwide debate.

 

During an event organised by the Confederation of India Industry, Rajan said that improving opportunities across the board is extremely important to sustain the legitimacy of wealth. "If whole sections of society don't feel they have opportunities, then focus is going to be on those who have it and who have made it and say that is illegitimate."

Rajan added that one of the most important sources of concern "which you have seen with some of these Panama reports and so on is in-built into this notion of illegitimacy of wealth".

"Earlier, the crisis built up the idea that the bankers were illegitimate, that crony capitalism was illegitimate all of which makes sense. But that's moved on to passive wealth holding being viewed as illegitimate.

That if you're a coupon clipper who is clipping what your parents gave you as inheritance perhaps you shouldn't have so much and it should be redistributed," Rajan further added.

(In association with Mail Today Bureau)