Guest post by BAIDURYA CHAKRABARTI
- The demonetization drive of Modi is neither new in content nor in form. In India, it has been done earlier by Morarji Desai; the initial conversion to Euro in the European Union happened within a month’s span. Currency is routinely taken out of circulation. What is significant about Modi’s demonetization is the amount of sensation he has generated out of an otherwise insignificant move. What is routinely done through phasing out denominations is being done in an extremely abrupt manner. He is dressing up a withdrawal and issuing of currency notes as a revolutionary move, and it is being executed in the manner more suited to currency change. What we need to thus ask ourselves is this: why is a routine monetary policy being enacted in this—which I shall later call ‘terroristic’—manner? Clearly, the answer is not economic; even the government does not pretend it to be a strictly economic issue (when they harp on the ‘terror’ factor).
(But before we move on, an aside. This demonetization exposes how the nostalgia for socialist development has fuelled the rise of Modi. Disenchantment with neoliberalism has produced an obscene amount of nostalgia for the pre-liberalization days among the Indian middle class, especially among the left-leaning ones. However, now that a gesture right out of those hoary days have returned to our world, it turns out to be a nightmare.)
- Let us state the obvious things first: demonetization will do next to nothing to the so-called ‘black money’, which are routinely converted into fixed assets or foreign currency. This move dis-incentivizes hoarding of cash, but not speculation, all sorts of accounting practices that can produce the so-called ‘black money’ while bypassing the level of cash transaction altogether. Demonetization is simply an old-school, brute-force monetary policy to curb hyperinflation. The Head of European Central Bank in Europe and Larry Summers, US treasury secretary, has proposed demonetization of their high-currency notes this year. But none of them dream of doing it within a notice of 4 hours!
The only rationale behind demonetization relies on the idea that high-currency notes are essentially used for hoarding and not for circulation. However, RBI statistics shows that 80% of monetary circulation in India consists of Rs 500 and Rs 1000 notes. Demonetizing Rs 500 or Rs 1,000 in India is not the same as demonetizing the 500 euro note; Modi’s demonetization would have made sense if it was accompanied by devaluation of currency. In other words, Modi’s demonetarization is announcing more than 80% of this country’s monetary economy to be suspect and henceforth made pariah. If the 80% of a country’s (monetary) economy is ‘unaccounted-for’, is in all probability ‘black’, then can that really be called ‘black money’? Lest we start calling the largest economic sector of India—the Informal sector—‘black’, we should give up on this absurdity of ‘black money’. Black money, like all parts of capitalism, is primarily about profit, and thus about circulation. Hoarded money does not grow, and is thus anyway a by-product and not the mainstay of the black economy. Modi’s demonetization has a very different aim than to curb black money.
Consider the simple paradox of the Rs 2,000 note: if you in principle believe that high-currency notes lead not to circulation but to unaccounted hoarding, why would you introduce an even higher denomination? Ergo, this has nothing to do with black money or hoarding. The effort is to create a sudden scarcity, an abrupt disruption, in the cash economy—the economy of the ‘common man’—where everybody must once again look solely to the state for recovery.
- Thus we arrive at the first irony: The move against ‘black money’ is instituted in the name of the mass and at the same time affects nobody more adversely than the mass. Democracy’s economic face wants to redefine it as a rule of the few by the few. It even has an aspirational avatar: digital ‘money’.
- There are more obvious questions nobody is asking at the moment. Why is this disinflationary measure of demonetization not accompanied by other measures at the level of fiscal management? Why is nothing other than ‘cash’ being dis-incentivized? However, these questions are moot, because the very ‘fact’ of inflation is being denied. Statecraft here is entirely about performance: one does not need to do anything substantial as long as one can make the action ‘tangible’ through dramaturgy. It is pretty obvious that Modi chose demonetization in its most dramatic form precisely due to its value as a spectacle. Again, something other than economic logic is at play here. Same logic applies to the argument about fake money. If currency substitution is about phasing out fake notes, why can’t it be done gradually? There is no answer to be found in the government’s discourse, because they are excuses that do not want to acknowledge the spectacle they are trying to produce and the terrible politics behind it.
- What will Modi’s demonetization then do? First of all, it will create an imposed but promised-to-be-temporary scene of monetary scarcity. This much is clear. They want cash to be deposited in the banks (exchange of notes being strictly limited) and to be withdrawn only in extremely limited quantities. (The idea that this potentially enormous inflow of cash will be monitored and properly taxed is ludicrous without an overhaul of the current tax machinery of the country). This, for the next few months, may dramatically increase bank savings. Given how the government has been frantic to increase bank savings in India, this amounts to literal arm-twisting. Whether this effect can be made more long-term will depend on future actions of the government. There is a distinct possibility that this enforced saving will amount to nothing in the long-term. However, when we take into account the nature of this government, it is not unimaginable that they will use this sudden increase in savings for propaganda purposes.
- The crème-de-la-crème of Indian economy are not only inured from this change, they are also being given a signal to enjoy the fact that they have gone digital much before the nation has done so. Arvind Rajagopal analyses an Emergency-era Amul ad—‘We have always maintained compulsory sterilization’—as a self-enclosing ‘humour’ of a ruling elite who can at once laugh at the absurdity of compulsory sterilization and announce that they reside at a safe distance from the state actions. In a hauntingly similar manner, the elite of India will ‘disinterestedly’ observe this new move by Modi and enjoy—with more than a touch of classist sadism—their class status. Modi’s demonetization does not affect people universally, but in a class-determined manner. One of the real aims of Modi’s monetization is social engineering.
- Modi’s demonetization is a device of surveillance. It works on the presumption that all citizens worth consideration must have things like Voter ID or Adhar Card and certainly a bank account. If you do not have these, you will be proscribed from many normal activities. Unfortunately, most of India’s economy can still function without recourse to the mediation of banks and such institutions. The only way to bring them into the ambit of surveillance is to produce the effect of a brutal ‘primitive accumulation’. Much like de- and re-territorialization, the effort is to de-liquidate cash flow and then assume control over the re-liquidation of it. The medium of the economic activity of the largest section of this country’s people have been made illegitimate overnight. The only way they can re-legitimise it is through the mediation of the state apparatus (banks, RBI and the Income Tax departments, for instance). There exists many ways of formalising the informal sector, but this must be one of the most brutal methods of doing so. This not only increases the precarity of the precariat, but qualitatively changes their nature. They can now either live under the gaze of the state or through extra-state mediations (which I shall come to soon).
This is a continuation of the Last-Mile strategy of the Indian government. While Adhar Card was and is an effort to render the entire population enumerable and perhaps traceable, Modi’s demonetization wants to achieve that in an even more coercive manner. It is important to note here that while Modi’s demonetization might end up bringing a large part of India’s informal economy under the tax regime, it will not extend any rights whatsoever to this economy. The marginalized will be further pauperized to satiate the ‘collective conscience’ of a select few.
- This is the reason why Modi’s monetization had to come in a unilateral, abrupt, draconian manner to us. It is designed to produce the affect of terror, but a terror that the citizen must enjoy. There is a bomb ticking at every ATM, and you have four hours to defuse it! Compete to draw as many Rs 100 notes as you can before anybody else can! Terror triggers a festivity of survival—everybody in-the-know enjoyed last night’s dash! And the terror emanates from a voice, which can command you at will.
That voice not only belongs to Modi in this instance; that voice is Modi.
- We have arrived at the second irony: the terror of the abrupt transition at midnight had to be enacted so that the citizenry can be made to conform through enjoyment. The bodies that stood in front of the ATMs last night were not humans, but machines under the imminent threat of running out of fuel. The majority will accept all the fatuous morals and logics of Modi precisely because the alternative forces them to acknowledge their own machinic, controlled nature, to acknowledge the illusory nature of their belief in being a ‘free agent’. We will accept and support Modi because our bodies have been made to accept him long before we had the chance to even pretend to think. It is thus revealing that Modi used the ‘terror’ rhetoric to justify his move. It is at the threat of being terrorized that you must conform to this reboot of India’s monetary economy. You must live under the looming threat of being called a person with ‘black money’ once you deposit your stashed cash at the bank (which, like all surveillance, will only be applied selectively). You must live under the threat of extinction in a country where possessing a bank account has, one fine day, become as mandatory as possessing a functional heart. Since the so-called crackdown upon ‘black money’ will be decided through one, single parameter of depositing cash in banks, it will offer many legal and para-legal ways of extortion and blackmail to the state.
The masochistic boasting by the middle-class of ‘sacrificing for the nation’ is underlined by their usual guilt and overlaid by their obnoxious righteousness.
Terror produces conforming citizens. 9 September 2016 is the Kristallnacht of Nazi India, and we have thoroughly enjoyed it.
- The government obviously is not going to mark the vast population of this country as pariahs. However, the re-boot of the monetary economy will force them to enter into new, para-legal mediations with the political apparatus. In the near future, politicians from the ruling coalitions may have the monopoly over facilitating all transformation of stacked cash—of dubious nature—into white cash. They may also have monopoly over distributing hard cash in the old, time-honoured manner before the coming elections, while the other parties will go berserk trying to convert their stash of black, hard cash into white. However, this is a minor effect of this change. The re-boot of the monetary economy will also force a huge number of people—till now largely independent of the formal structures of regulating the economy—to begin negotiating with state-enforced legality under unequal odds. One may even expect a new group of mediators to come out of it. This, again, will not be a new thing. It simply takes a large group of people to the ground zero; they must start again.
- Thus we come to the third irony: the drastic nature of Modi’s demonetization is designed to produce no change at all. Seemingly, nothing will change. For the class with digital money, very little of this will matter. Even for the vast number of people affected, their life of para-legal negotiations will only restart, once more. The isolated nature of Modi’s demonetization will make sure that it will have limited disinflationary effect in the long term. However, what will be remembered is the singular, omnipotent voice of Modi, who ushered in the change overnight. It will be remembered as the voice of the nation. Modi has triggered the most unitary demonstration of national ‘solidarity’. In a further irony, this unification now comes neither in the name of a culture nor a motherland. It comes in the name of money. The ultra-patriotic posture about ‘countering terror’ is a way to hide the entirely un-patriotic nature of the people’s conformity with the monetary re-boot.
- Since demonetization is a mandatory part of change from one currency to another, let us conclude by saying that last night, India changed its currency from Rupee to Modi.