Sometimes it can be difficult to wrap your mind around an exorbitantly large number like US$462 billion. Global Financial Integrity’s research shows that developing and emerging economies are losing astronomically large amounts of money to crime, corruption, and tax evasion each year. Indeed, our November 2010 report on India by GFI’s Lead Economist Dev Kar revealed India had lost $462 billion in illicit outflows.
This week’s massive poweroutages across the subcontinent—plunging half the country, or about 680 million people into darkness yesterday—are just one horrifying manifestation of the damage caused by poor governance and illicit outflows.
According to The Wall Street Journal:
India suffered the world’s biggest-ever power outage Tuesday as transmission networks serving areas inhabited by 680 million collapsed, putting the nation’s ramshackle infrastructure on stark display.
The grid failure, the second massive blackout in as many days, happened around 1 p.m. local time and affected 18 states and two union territories in north and eastern India, grinding trains across large swaths of the country to a halt, forcing thousands of hospitals and factories to operate on generators, temporarily stranding hundreds of coal miners underground and causing losses to businesses estimated in the hundreds of millions of dollars.
Certainly, as The Guardian highlights in an editorial this morning, the political classes in India—from all political parties—bear a large responsibility for failing to adequately invest in the nation’s infrastructure. However, the role of Western economies and offshore financial centers cannot be ignored either. It is the opacity in the financial system built upon tax haven secrecy, anonymous shell corporations, and trade-based money laundering techniques that facilitates the outflow of roughly $1 trillion per year from the developing world. And it is this opacity that robbed $462 billion from the India economy since its independence. This is nearly half a trillion dollars which could have been used to develop the Indian economy, invest in the nation’s infrastructure, and stabilize essentials like the electrical grid.
Instead, today, nearly 10% of the world’s population is without power.
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