This week’s column is about Sweden’s cashless economy, the link between mobile wallets and expanding waistlines and how a man hid $400 million.
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Sweden’s cashless economy
In Sweden, shop fronts have signs that say ‘We Don’t Accept Cash’, bars are cash-free, the vegetable and fruit vendors accept American Express; a recent mugging involved two people beating someone up and making him give them cash – through a money transfer app.
Had I read the New Yorker’s ‘Imagining a Cashless World’ when it was published in October, I would have been fascinated by the idea, but it’s December now and I no longer need Sweden to show me ‘what life without paper currency might be like.’
According to the article, as of 2012, only a fifth of all transactions in Sweden were conducted in cash and those – like the elderly, poor or residents in the rural north – who do still prefer to deal in physical money have to put up with the inconveniences of travelling miles to find a bank branch that still accepts cash deposits and must make concerted efforts to learn how to use smartphones and the numerous transaction apps that have populated the market in recent years. Cards, of course, are also popular.
Although the move has been a gradual one, driven more by citizens themselves than a top-down government order, the general consensus seems to be that paper money is not only cumbersome, but also a security risk (the author partially credits this to a bank heist in Sweden when several million dollars in cash were stolen and still remain untraced).
Even India gets a shoutout in the article – perhaps a bit of an early warning that we all missed – as the author, Nathan Heller discusses the difficulties of maintaining an underground economy in a cashless society.
“India, whose underground economy is thought to swallow up four hundred and sixty billion dollars annually, has considered capping cash transactions and cash holdings; in a recent radio address, Prime Minister Modi exhorted citizens to turn their backs on cash.”
Who knew what shape that exhortation would end up taking.
Weighing Sweden’s idyllic cashlessness against our floundering efforts to achieve it seems way too easy, but asking what this cashlessness may do to our identities and our social interactions is a lot more complicated.
Out in Stockholm one night, Heller is approached by a man named Henry, who is gathering a group of men as his ‘friends’ in a bid to impress a “Superhot Girl” who is on her way to meet him at the club they’re all at.
Sebastian, one of the assembled posse, tells Heller, “He [Henry] likes to make up these complicated stories to try to impress the girls,” Sebastian said. “For example, I am supposed to say that he’s a Russian spy.”
Nathan himself gets introduced as “Nitch,” the “Italian lawyer.” Henry’s attempts to create an impressive, fantastical group of men to impress a girl led Heller to observe the ways in which a cashless economy will fix our identities, preventing us from getting away with concocting new personas like Nitch, the Italian lawyer.
As Heller writes, “With a pocket of cash, you could be anyone: a Russian spy, a birthday celebrant, an avvocato out for a night on the town. With a cashless trail, you were fated always to be what you had always been; you couldn’t flee far from your name, your purchases, even your network of friends. You were always, by your cards or cell phone, outed as yourself.”
Money is essentially what enables us to do things – it doesn’t just correlate with where we live and work but also the clothes we wear, what we do with our spare time, the food we eat, the friends we do all of these things with. It shapes who we are to an alarmingly large extent. And money, for most of us – unless you’re a Nordic teen reading this for some reason – is inextricably linked with its physical form, that is, “cold hard cash”.
Towards the end of the article, Heller asks, “What do we want from money?” To him, this question opens up a possible explanation for why Americans are unlikely to adopt cashless transactions with the ease of the Swedes. He says, “So far, the U.S. still embraces cash, because our concept of wealth is material: we collect it, handle it, hoard it.” And then goes on to say, “Sweden has embraced cashlessness more readily in part because it finds the value of currency in the transfer and velocity, the social path it follows, the bonds it traces. It’s social: a network conception of wealth.”
Like Americans, Indians too seem to believe in collecting, handling and hoarding material forms of wealth. And Heller is probably correct in attributing this trait to a lack of faith in our institutions. And honestly, why would we put our faith institutions, given the abruptness with which demonetisation was brought on and the alarming debit card information fiasco from a couple months ago.
Going cashless then is not just about having the right infrastructure in place, phasing out notes, creating apps for easy transactions; but also about enacting a cultural shift in how we think about money itself and the role we think it plays in our lives.
What does gaining weight have to do with going cashless?
Tom Standage, a deputy editor at the Economist, hits on the same proclivity to possess our wealth materially, but in an entirely different way. Standage thinks switching to cashless transactions is responsible for the recent expansion of his waistline.
He made the switch from cash to phone transactions to make it easier and quicker to pay for things like public transport, but the unintended consequence was that this also made it easier for him to buy himself vanilla lattes – something he indulged in once or twice a week has now become a feature of his daily routine. Taking out the change for small payments was usually the barrier that limited such purchases but with a smartphone, it’s only a few mindless clicks or swipes and very little hassle.
An increase in spending, brought on by removing “friction from payment” as Standage puts it, is not a new phenomenon. Economists discovered it with the introduction of credit cards. People are known to spend 12-18% more, on average, if they use a card instead of cash.
As Standage explains, “Having to get out your purse or wallet, and then hand over physical notes or coins, ensures that you feel the cost of a transaction in a way that you do not when swiping a credit card.”
The experience of frictionless payments is summed up pretty well by Standage, “Take a cab, for example, and you still have to get out cash or a credit card, register the cost and decide whether to offer a tip; but take an Uber, and the payment slips so imperceptibly out of your bank account that it might never have happened.”
As we move to making payments via our phones, consumer spending will go up, aided by the fact that banks and other companies will be able to levy transaction fees. So what’s going to stop us from spending too much?
For Standage, the answer lies in technology, apps that will monitor our expenses and keep tabs on us for ourselves. According to him, we could keep a check by getting messages like, “Your water bill is higher than usual this month. Perhaps you have a leak. Do you want to call a plumber?” or “you seem to be buying more coffees lately”.
This is helpful but again involves ceding our right to privacy. Our consumption habits – everything from the amount spent to when and who it was spent with or on – would cease to be private information that would be stored away somewhere in the back of our heads, only to be examined under specific circumstances but otherwise never thought of at all. We rarely construct our own identities based solely on our monetary purchases – that’s the reductive work of data analysts and marketing executives. But we live in a society and capitalist structure in which the ways we spend our money says something about us and if this information, in its entirety, becomes available for scrutiny or exists in a codified, organised system, then will we become more self-conscious of our spending and change the things we spend on? As Heller anticipates, the cashless trail will go a long way towards fixing our identities in monetarily constructed moulds.
On the other hand, we live so much of our lives through social media platforms, posting, liking, retweeting material that culminates in the creation of a unique persona for ourselves – a reflection of who we are but also a performance that informs how we want to be perceived.
Hiding $400 million
Of course, these are the concerns of people whose wealth is directly connected to their bank accounts and physical property in their name. For the insanely wealthy, though, this idea of owning wealth in your own name becomes somewhat fluid – maybe to minimise, or evade, the amount they owe in taxes – and if the particular person is a Finnish multimillionaire named Robert Oesterlund then to hide his $400 million fortune from his wife and business-partner as he prepared to divorce her.
Off-shore bank accounts have a skeevy reputation, particularly given the public rhetoric surrounding them in India, currently resurgent thanks to #blackmoney. But the whole process of how exactly one moves money abroad and why exactly the government can’t retrieve it – despite supposedly having lists of the names of Indian account holders in countries known for their secretive banking systems – becomes clear in all its complexity in this New York Times piece that chronicles Oesterlund’s wife’s efforts to prove her husband’s real net worth and have the amount be accounted for in their divorce settlement.
Sarah Pursglove along with her American lawyer Jeffrey Fisher, fought the case with millions of dollars and across the legislative systems of at least 3 countries to figure out how Oesterlund hid his money and in doing so, revealed how the offshoring banking system actually works from the inside. Not an easy task, given that countries subscribe to different laws, money (especially digitally) can cross borders much more easily compared to our physical selves and that banks themselves have teams of lawyers in addition to the accountants and lawyers hired by the kind of wealthy clients who put their money such places, to begin with.
According to the author, Nicholas Confessore, the particular branch of the international banking system can be summed up so, “Created by lawyers, accountants and private bankers and operating out of a global archipelago of European principalities, former British colonies and Asian city-states, the system has one main purpose: to make the richest people in the world appear to own as little as possible.”
For instance, Oesterlund had something called a Cook Islands asset protection trust, the Cook Islands are “a self-governing state associated with New Zealand” and do not recognise American law and also require people to appear in court in person for cases based in/involving the Islands’ legal system. That in itself is a legal muddle, worsened by the sheer geographical distance. But a ‘trust’ itself is also a tricky hurdle. It basically means that wealth, in any shape or form, is put into the control of an organisation (like a board comprising three members, say) who get to decide how to mete out this wealth to a particular person, the benefactor of the trust. In Oesterlund’s case, finding his money, inside this trust, first involved figuring out what the organisation controlling the trust was called, establishing that the board members only appeared to be in control of the wealth and that it was actually Oesterlund’s and then somehow figuring out how much was in the trust, and doing all this without any particular help from the Cook Islands and all the defensive moves pulled by Oesterlund’s own lawyers.
Nationally determined legal systems essentially ensure that there is no universality in the law, and the loopholes generated by these mismatched laws that allow for immense wealth to be squirrelled away in these ways are not entirely solvable by converting to a cashless economy.
What I was struck by most, was that Oesterlund spent a considerable amount of his resources distancing himself from his own wealth – a counterintuitive step – as an attempt to keep more of it. Maybe going cashless also muddles up the concept of ‘ownership’ because, at least to me, it is difficult to imagine owning something if you can’t see or touch it and so moving away from physical money necessitates moving away from a tangible sense of ownership as well.
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