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Samizdata, derived from Samizdat /n. - a system of clandestine publication of banned literature in the USSR [Russ.,= self-publishing house]

Why hawala is here to stay

Suman Palit on the Kolkata Libertarian has some interesting links and commentary about hawala, a system of trust based independent networks for transferring money across borders completely outside ‘official’ financial systems. I have touched on the subject of hawala in previous articles and Suman points out the absurdity of US (and other) efforts to try and stamp it out

Criminalising such a large-scale human endeavour that is rooted so deeply in history is laughable and idiotic. Like the failed drug war which penalizes consensual behavior and therefore can never be effectively enforced, stigmatizing hawala simply drives it deeper underground.

The fact is that there are millions of people who simply do not see why the state, any state, should have oversight over their business. The usual demands that people must simply ‘trust the authorities’ is seen as fundamentally irrational in many communities. Too many people have both direct experience and deep societal folk memories that such contentions are simply foolish, leading to a whole culture of economic activity occurring under the radar. The very essence of hawala is that of an audit trail-less trust within a closed and multiply redundant distributed network.

Not only do I predict the US will fail utterly to regulate hawala, I expect that their actions will once again prove the law of unintended consequences is alive and well and living in a town near you. The very actions of the financial regulators will reinforce support for it by proving why hawala is still as needed as it ever was: to enable genuine free trade when princes and policemen try to restrict it, and to avoid confiscation of the proceeds of that legitimate trade by the same people.

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