Says cash will always be needed as back up, small transactions
Getting rid of much of the cash in circulation might be an effective way to reduce inequality.
The world’s poor stand to be among the “biggest beneficiaries” of the changes that would follow should cash become almost obsolete, according to Kenneth Rogoff, a Harvard economy professor and the author of “The Curse of Cash.” Benefits include less crime and a reduction in the kind of off-the-books labor that hurts society’s weakest members.
But weaning societies off cash requires the right infrastructure, and here there’s inspiration to be found in Scandinavia, a region that Rogoff says is at “the cutting edge” of the cashless experiment. The Nordic nations all rank among the least corrupt and most transparent in the world. Cash accounts for less than 5 percent of the money in circulation, making them the least cash-reliant group of countries on the planet.
“If you do financial inclusion the way you’ve done it in Denmark for example, where you give everyone free debit cards, it would help a lot of problems,” Rogoff said in an interview in Copenhagen on Thursday, after speaking at a Skagen Funds conference. “I think the poor would be among the biggest beneficiaries.”
Rogoff, who has also worked as an adviser to the Swedish central bank, says he’s picked up “a lot of nuances and ideas” on how near cashlessness works from visiting the Nordic countries. The region, which pioneered negative interest rates and boasts the world’s highest income equality levels, provided some of the inspiration for Rogoff’s ideas on how societies might function with hardly any paper money, he said.
Dodging the tax man is virtually impossible in the Nordic region, and digitization is fairly ubiquitous. Some places, such as Sweden’s Abba museum, have stopped accepting cash altogether.
Read more: Scandinavia is making cash vanish
Scandinavia’s efforts to rely less on cash have been gradual, and backed by a well-functioning digital economy. A larger experiment in India has proved considerably rockier. Prime Minister Narendra Modi in November invalidated 86 percent of circulated currency in order to curb the black economy. Despite sudden chaos and long bank lines, the shock ban remains popular with India’s poor, who think it will hit rich tax evaders.