craig jeffery directors note

Director’s Note: Banknotes

craig jeffery directors noteWhen I first visited the village of Bemni in the Indian Himalayas in 2003, I had a conversation with an old man about banknotes. He looked to be in his eighties but was keenly interested in my wallet.

“That banknote” he said in a low voice, pointing to a 100 rupee note peaking out of my wallet. “No one trusted it at first.”

“What do you mean?” I asked.

“We didn’t believe that a piece of paper could be worth quite so much,” he said. “I mean: a piece of paper – worth a hundred rupees?!”

“But you must have used them…” I pointed out.

“Oh yes, we used them,” he said. “But they only traded at about 80 rupees in the village.”

“But it says 100 rupees on it!” I exploded.

“We thought it might be some trick,” he replied. “We trusted them up to 80, but no one would give you two fifties for a hundred.”

“So what happened to convince you that it was worth 100?” I asked.

“I don’t know, but it increased its value. Now it’s worth 100 rupees”

I have carried on thinking about this conversation. I can’t help imagining how a 100 rupee note might have been worth 80 rupees one month, 85 the next, then 90, 95 and finally the day came when real value and printed value aligned and it acquired its ‘true worth’.

The rising value of the note through time could have been a way of measuring how the village was drawn into the wider economy of the region.

This story should not come as any great surprise to those with knowledge of the history of money. When banknotes were first introduced in Great Britain there was a cartoon in a national newspaper. Various large pieces of paper were shown in a shop window. “This is a pound by order of the king”, noted one piece of paper. “This is a baby by order of the king,” said another. The point was that it was rather ridiculous of the government to simply state that a piece of paper had value. Money is about trust.

But what would happen if a banknote actually advertised itself as being worthless? An NGO in India called Fifth Pillar has tested this by printing a slew of ‘zero rupee notes’.

At first glance, the zero rupee note looks like a 50 rupee note – there’s a picture of Mahatama Gandhi and it’s a similar colour to the fifty rupee note. But look again and you see that it’s worth zero. There’s a nought in the centre of the note. This must be the first bank note in the world that literally – and by design – isn’t worth the paper that it’s printed on.

But the NGO activists claim that the zero rupee note has a strategic and symbolic value. It can be used as a type of secret weapon in the battle against corruption.

If someone demands a bribe for a service that is legally free, the canny member of the public, armed with a stock of the notes, offers the bureaucrat zero rupees. “You have requested a bribe”, the action says, “I am insulted. And this is all you’ll get: a zero rupee note (or several of them, which would of course amount to the same thing).” It is a way of reminding the official that the service they are providing is supposed to be free. The pledge “I will neither give nor receive a bribe” is printed at the bottom of the note.

According to Fifth Pillar, officials have been shamed through the action and the zero rupee note has actually changed practices in some government bureaucracies, at least for a while and to some extent. There are apparently 2.5 million zero rupee notes in circulation in India.

The idea has now spread to other countries. Places as diverse as Ghana and Yemen are now trying their own versions of the zero note.

Indeed, in a curious development, some people in India have started to pay to get hold of the notes.

In the country that did so much for modern mathematics, 100 rupees is sometimes worth 80 and zero can be priceless.