Home > Archives (2006 on) > 2008 > May 24, 2008 > Gresham’s Law in Present-day India

Mainstream, Vol. XLVI, No 23

Gresham’s Law in Present-day India

Wednesday 28 May 2008, by Girish Mishra

If one looks at India’s post-independence scenario in political, social, cultural, academic, literary, journalistic, religious or any other sphere, one comes across the phenomenon of the inferior elements pushing out, by and large, the superior competent ones.

To understand the change, let us take, for example, the politics of the Nehruvian days and cite a few representative instances. A Member of Parliament was thrown out by unanimous vote because he had, knowingly, given a false statement. Acharya Narendra Dev, a leading Socialist leader, voluntarily resigned his membership of the UP State Assembly as he had left the Congress on whose ticket he was elected. The Acharya fought on the Socialist Party ticket and he was defeated by the Congress candidate. He had no regrets because his was a principled stand. One must remember that, during those days, it was not legally binding on the Acharya to resign his seat in the Assembly as there was no law making it obligatory for a defector to quit. Take another instance: Harihar Nath Shastri, the President of the Indian National Trade Union Congress and an MP, was killed in an air crash soon after the first general election. Nehru and the Congress offered to make his wife, Shakuntala Devi, their candidate in the by-election, but she refused because she was a member of the Socialist Party and not willing to desert it for a sure win. She contested as a Socialist candidate and lost, but had no regrets for turning down the offer from Nehru.

Look at the present scenario. Members of Central and State legislatures frequently defect from one party to another but do not resign their seats. They try to cling on to them by exploring some loophole or the other in the anti-defection law. The instances of mass defection by members of the Bihar legislature, led by B.P. Mandal, in 1967-68, and by the Haryana legislators, under the leadership of Bhajan Lal, are widely known. In both the cases, the defectors formed the government and ruled over their respective States. Only recently, when K. Natwar Singh, a former Foreign Minister of India, was thrown out by the Congress as his and his son’s names figured in the “food-for-oil” scandal concerning Iraq, he did not resign his seat in the Upper House of Parliament and lobbied for a seat from the BJP, after his term expired, notwithstanding his self-proclaimed loyalty to secularism and the Nehruvian thinking. H.D. Dev Gowda, a former Prime Minister, who heads a party called Janata Dal (Secular), entered into an alliance with the BJP that has never taken kindly to secularism, just to make his son the Chief Minister of Karnataka, but when the turn of the BJP for heading the government came, he, all of a sudden, woke up to the fact that his party was secular while the BJP was not! Only the other day, a Congress MP, after being dropped from Ministership, crossed over to Mayawati’s party, as if ideology was just a shirt to be put on according to one’s convenience. The same can be said of a number of politicians who don the secular or Hindutva caps, according to expediency.

During Nehru’s days, K.D. Malaviya, the Minister for Oil and Natural Gas, had to resign from the Cabinet because he had openly recommended the name of a Muslim freedom fighter for some assistance to a nationalist businessman. No quid pro quo was involved. Around the same time Lal Bahadur Shastri, the Railway Minister, resigned, owning moral responsibility for railway accidents.

Those days are long past. Today, Ministers cling to their positions even though there are corruption cases against them going on in courts of law. There are Members of Parliament and Assemblies, convicted in cases involving heinous crimes like murders, thefts, robberies, human smuggling and so on; yet none to them has quit her /his post. The list is too long.

Very few parliamentarians and legislators have any interest in reading and writing. The latest report from UP points out that the legislators rarely visit the rich library of the legislature. If one goes through the records of the Parliament Library showing the books borrowed by honourable Members, one will not reach any different conclusion. The declining standard of debates is another indicator.

If one turns one’s attention to the academic and literary world, one reaches the same conclusion. By and large, inferior elements, pushing aside the qualified and meritorious ones, have come to occupy dominant positions. If one prepares the lists of all those persons who have been occupying positions of importance in academic institutions or have been nominated to the Upper House of Parliament or State legislatures as “distinguished persons” or awarded literary prizes or Padma decorations, the point will be obvious. The proximity to the people in power, sycophancy, corruption etc. have been playing no mean role. To give a concrete example, the list of “literary” people, sponsored by various government and semi-government organisations to attend the World Hindi Conference last year, contained quite a sizable number of inferior and fake writers. Pulls and pressures had played a significant role in the preparation of this list.

Lately, by floating two fashionable nonsensical concepts, namely, bazaarwad (marketism) and global realism, some inferior writers have been trying to climb up the ladder of eminence. In fact, bazaarwad has been brought in to replace capitalism so that its exploitative character is covered up. Bazaarwad cannot have any place for exploitation because unrestrained market forces assign every commodity, whether material or capacity to labour, its true value and no one is cheated. Obviously, the champions of this concept serve the interests of capitalism.

If one observes carefully the quality of programmes on electronic media and the character of comments, articles and despatches in the print media over time, the deterioration becomes crystal-clear.

THE phenomenon or tendency, illustrated by the above examples, is not a novel one. It was first mentioned two-and-a-half centuries ago in Greek literature. Aristophanes (456 BC = 386BC) in his well-known comedy, The Frogs, underlined it. The play tells the story of the god Dionysus who despairs the plight of Athens as a result of the disastrous Battle of Argiusae. Athens was defeated because the inferior, dishonest, and unqualified people had become dominant after pushing aside the superior ones.

To quote the relevant lines:
- The course our city runs is the same towards men and money.
- She has fine new gold and ancient silver,
- Coins untouched with alloys, god or silver,
- Each well minted, tested each and ringing clear
- Yet we never use them!
- Others pass from hand to hand,
- Sorry brass just stuck last week and branded with a wretched brand.
- So with men we know for upright, blameless lives and noble names.
- These we spurn for men of brass.

Centuries later, in 1858, British economist Henry Dunning Macleod termed this phenomenon “Gresham’s Law”. Since then this has been in common parlance. In his book Elements of Political Economy, Macleod claimed to have brought to light “a great and fundamental law of currency” that showed the disappearance of good money from circulation with increasing preponderance of bad one. He christened it as Gresham’s Law on the basis of a letter by Sir Thomas Gresham to Queen Elizabeth I. Sir Thomas, an English merchant, was working as the Crown’s financial representative in Antwerp. He informed the Queen that gold coins were disappearing from circulation as a result of the entry of debased coins, introduced by Henry VIII. The latter had reduced the gold content of coins from six ounces fine to three ounces fine of gold.

History shows that the phenomenon—that bad money drives good money out of circulation—was widely known during the earlier periods too. For example, it occurs in the writings of astronomer Copernicus (1473-1543).
In the course of time, it has been found that Gresham’s Law may be applied to other fields too. People accept inferior goods in place of genuine ones for lack of correct information or the deception created by high voltage advertisement. In the market for second-hand cars, lemon automobiles that are analogous to bad money drive out the good cars. Similarly, it is quite dominant in management science. While honest and devoted managers and business leaders take a long time to bring in tangible results, the sly ones show good results by employing all kinds of tricks and manipulations. Thus, in the short run, investors and clients are lured by them. It is a different matter that they, ultimately, come to grief when such companies collapse. In India, non-banking financial institutions, only a few years ago, duped a large number of gullible investors and then vanished into thin air.

In India, even in civil and police administration, a number of incompetent and dishonest people have risen by manipulation and nexus with corrupt politicians. One may look at the startling facts that have emerged after some of them have been caught indulging in corrupt practices and brought before courts of law. One senior officer of the civil administration has been found to have a huge real estate besides tens of bank accounts all over the country. In political parties, too, manipulators have risen pushing out the loyal and competent workers and leaders. The Samajwadi Party, led by Mulayam Singh Yadav, is a typical example where racketeers with no ideological and political commitments have pushed aside the old ideologically committed workers and leaders.

The author, a well-known economist, used to teach Economics in Kirorimal College, University of Delhi before his retirement a few years ago. He can be contacted at:

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