Good Ol' Cash We Don't Trust
is the case for most of us, I went to my bank on the first working day of
this month to withdraw money for the household. Being an old account holder,
I enjoyed the luxury of chatting with the manager, while someone else
withdrew the money and politely gave it to me in an envelope. Like a dutiful
husband, I deposited the envelope with my wife. Four days later, hell broke
In a bundle of hundred Rs 100 notes, seventy-five were perfectly usable,
un-torn notes. The only problem was that these were pretty old notes - ones
without the picture of Mahatma Gandhi which were issued at the time when I.G.
Patel and M. Narasimham were the venerable governors of the RBI. Since most
people, especially shopkeepers, had forgotten what the 'pre-Gandhi' Rs 100
notes looked like, nobody was willing to accept any of them as legal tender.
Not a single note was remotely torn, nor was any significantly soiled. It
was just a bunch of unfamiliar notes.
The household grocer did not accept them, neither did our maids, nor our
driver. My wife painstakingly recalled all the notes and counted them out,
after which I went to the bank and got them replaced by more contemporary
notes. My bank manager was terribly apologetic, though she had no reason to
be. She had, after all, given me perfectly valid legal tender.
This episode made me think on a topic that I have mulled over in the past -
on what constitutes 'trust' in different societies. With apologies to
Francis Fukuyama, who has written a brilliant treatise on the subject, here
is my hypothesis. There are two forms of trust: one that involves trust
between known people, and another which is of a far more anonymous form.
"I trust my daughter", "My wife trusts me", "I
trust my colleague, Vishal", "Gujarati diamond merchants trust
each other" are examples of personalised trust where A trusts B because
A knows B as a part of the family, or a small organisation in which they
belong, or as parts of close kin-linked businesses or occupational groups.
India has very strong bonds of such personalised trust. Developed societies,
however, go beyond the personalised form of trust to create and sustain
credible institutions that foster anonymous trust. "I trust our
judicial system" is a very different fiduciary statement than "I
trust my wife". Unfortunately, this is where India fails quite
abysmally - and there is no greater example of this than our steadfastly
refusing to accept slightly torn or soiled currency notes.
At the end of the day, a Rs 100 note is only a piece of intricately printed,
watermarked paper, which has a unique number and a declaration that "I
promise to pay the bearer the sum of one hundred rupees". It is not
backed by any gold or precious metal. It works only because of anonymous
trust. I give it to you as a payment for lunch; you accept it because you
trust its validity as a medium of payment.
In no country that I have been to, which includes quite a few developing
nations, have I ever seen a shopkeeper or a taxi driver refusing a partially
torn or soiled note. I remember asking an Egyptian taxi driver once if he
would accept a half-torn note. He looked at me as if I was demented, and
couldn't understand why I asked such a question. Egypt is no great shakes as
far as public institutions are concerned, but clearly its people trust its
currency more than we do. Perhaps we, in South Asia, have lesser faith in
our currency than others.
That brings me to another experience in 1978. I was doing some fieldwork in
the backwoods of the Garo Hills in Meghalaya, at a time when the state had
virtually no electricity whatsoever. The Garo tribals grew succulent
pineapples. In the interiors, there were three prices for pineapples: the
lowest if you paid by coins, somewhere in the middle if you paid by fresh
notes, and highest if the notes were considered soiled. We have progressed
since then. Now we have only two sets of prices - the quoted one, if the
notes are acceptable, and infinity if they are torn or soiled. That's some
trust for you!
Business World, September 2004