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Wednesday, November 30, 2016

Demonetization - come December

If only there weren’t so many elements of avoidable tragedy in it, the demonetization drive could have been enjoyed as a gigantic farce. It’s becoming more like that with every passing day.

On a serious note, Dr. Manmohan Singh (with whom Narendra Modi won’t dream of comparing himself in terms of either economic knowledge or governmental experience) has categorically condemned the whole thing in Parliament as an instance of monumental mismanagement, as well as of organized loot and legalized plunder. Which, except to the determined zealot who will look at black and call it white, is becoming more and more apparent. And now, what with government functionaries being caught taking bribes of lakhs in new 2,000-rupee notes (and that too in Gujarat of all places) and terrorists being found dead with the same kind of notes on them – where did they get it from, so soon after the release? – banks giving out notes printed in a hurry which are so badly made they are themselves refusing to take them back until the RBI orders them to, government being increasingly forced to relax initial rules because distress of common people and chances of looming economic disaster are becoming apparent (as with the Nov. 23 announcement that Rs. 21,000 crore are going to be distributed to farmers, even through co-op banks and post offices so that they can buy seeds), people trading jokes about how they can use internet transactions to modernize bribe-taking, a Union Cabinet minister wondering aloud how much the common man must be suffering if someone like him can be harassed for asking to pay a hospital bill in old notes, an erudite and stern governor of the Reserve Bank being shunted out with undue haste only weeks ago and replaced with someone who has been ordered to keep his mouth shut, the fact that all the fat-cats of the country are carrying on with their high living as though nothing untoward has happened (which, it is highly probable, hasn’t for them), the prime minister acting like a village nautanki performer (mujhe jinda bhi jwala diya jaye…) and shedding tears every other day telling his acolytes how much he is agonizing over the plight of the poor whose service is his only aim but refusing to participate in parliamentary debates, even to explain how his scheme is ‘helping the poor’… one thing is clear, whatever else the whole thing was meant for, it was not meant to ‘fight corruption’, or to serve as an example of how efficiently our government can handle a vast undertaking to earn the admiration of the world. It would be a very quick war indeed if, God forbid, they have to fight one against any country more significant than Bhutan with this kind of preparedness. The tanks wouldn’t move and the planes wouldn’t fly because they had ‘forgotten’ to stock up on fuel.

Here is another media essay which at least gives him the benefit of the doubt, and those of you who remember Yes Minister and Yes Prime Minister will find reason to think that it is highly probable – perhaps the PM, naïve, attention-hungry and obsessed with destroying the Congress as he is, was quietly taken for a ride by shadowy people in high places for their own great long-term advantage. I have long known that the truly powerful do their damnedest to pull strings from behind the scene, and let those in public prominence take the rap if things go badly. Perhaps they assured him only too well that this way the country would experience a painless miracle, and he would go down immediately into the history books in a blaze of glory…

I have talked and written about and against corruption since long, long before it suddenly became fashionable, briefly owing to the nationwide ‘movement’ launched by Arvind Kejriwal and friends, and then Modi and Co. hijacked it. Most people do not have long memories and attention spans, nor the ability to comprehend involved arguments (imagine, after reading the last two posts, a student was actually stupid enough to ask me ‘Sir, do you think black money can be controlled?’!), nor indeed the desire to think about and understand any serious issue – all they are looking for is excitement of the football and rap music variety, or opportunities to assert their ‘opinions’, and they don’t even understand that opinions need to be buttressed by fact and logic. And this, I have found, alas, is as true about average teenagers as their parents – which is why I hardly talk in public about anything but the weather. But for the microscopic few who still appreciate good reasoned argument and the great need for it, here are a few things.

Remove ‘corruption’? First, one man’s tradition can be another’s corruption (think of idol worship and marrying among relatives) – who is to decide? Second, corruption is hardly coterminous with money and economics: kaamchori is corruption, cheating in exams is corruption, making a faulty diagnosis of your patient through carelessness is corruption, adulterating food and using false weights in your shop is corruption, favouritism with students is corruption, littering the streets is corruption, spreading nasty rumours about people is corruption, praying to God for material favours is corruption: who on earth is a mere prime minister that he even imagines he can stop it, especially when he isn’t even remotely interested in bringing about a social revolution? Gandhi and Stalin tried and failed, remember? And they were titans.

Third, if we are to limit the whole discourse on corruption merely to a ‘war’ on black money, is the country seriously interested in it? I have been laughing up my sleeve reading a lot of ignorant young people fulminate with righteous indignation in support of the PM’s crusade, blissfully unaware that many of their dads would lose their jobs and perhaps even go to jail if the broom really began to sweep clean: in the public sector, so many people have got their jobs and promotions only through greasing palms, and grown fat on bribes (and so many people have been drawing salaries from companies which have piled up gigantic losses and should have been wound up long ago to stop draining hardworking taxpayers’ money – corruption of the most disgusting sort!), while in the private, so many so-called jobs essentially involve swindling people into buying things they don’t really need, or can’t benefit from, at vastly inflated prices! My God, I wonder sometimes, do most people stop growing once they are five years old? And these are technically speaking educated people, too…

Funnily, not one person who is supporting the current crusade has read, understood and agreed with me that merely a one-time demonetization scheme will do virtually nothing either to destroy the existence of the current stock of black money or to stop its generation. Which makes me surer with every passing day that most Modi-supporters (except, of course, those who are making large gains from his project) neither know what this is all about nor care – they are just thrilled to bits that ‘something exciting’ is being done. Especially since they have been lucky enough this time round not to be seriously hurt. I wonder what they will say if and when the government takes away their mothers’ entire undeclared stock of gold jewellery next, because it is all ‘black’? Or are they secretly assured that nothing really drastic like that will ever happen, because the whole thing was designed just for people like them to have a bit of fun?

Thinking people, even those broadly sympathetic to our current PM, are now agreed that this man likes grand ideas far more than the nitty gritty of the implementation process, and so he keeps sending up one rocket after another, hoping some of them will reach their targets – someone has very aptly quipped ‘shoot first, aim later’. My own street bears loud testimony, for instance, to just how stillborn the great Swachh Bharat campaign has been; we can all see how many MNCs have become suddenly enthused by the Make in India slogan; the much publicized ‘surgical strike’ across the border has definitely and abruptly increased the death toll of Indian soldiers through cross-border firing; so also the much tomtommed Jan Dhan account project, millions of empty accounts created under which have suddenly filled up with thousands of crores this month, certainly not the money of ‘poor’ account holders. How many people needlessly suffer does not bother him, as long as he can console himself that he has several lakh supporters on his mobile app: the next elections, after all, are a comfortable two and half years away. Or maybe not… the people have borne the burden more or less uncomplainingly this last month, but December begins tomorrow, and all government employees (that includes soldiers, policemen, IAS officers and taxmen!) expect to get their salaries on or before the 10th, and if they cannot withdraw more than a small fraction of the money they want – their own money, mind you – the public mood might sour very very quickly indeed (it cannot be a coincidence that the November announcement was made after most of them had already got paid for the month). And the silly craze about suddenly becoming a cashless society will deepen the rural-urban divide far more than the Nehru-Gandhi zamaana ever did, because plastic cards and e-wallets need basic literacy, electrical power and fast internet connections, and it will be a long, long time yet before such things are available in all 700,000 villages in India.

Be that as it may, I can put this much in writing: this entire episode in the history of our country has eroded my faith in democracy as nothing could ever do since the time I learned to observe and think. With so many uninformed, bigoted and foolish people around who claim to be educated, and whose enthusiasms are as gross, superficial and ephemeral as those of any illiterate slum dweller, it is no longer a system that can claim my respect. An exasperated George Bernard Shaw condemned it as a ‘haphazard mobocracy’ almost a century ago, and today I cannot think any better of it any more. Which hurts me so badly that I am still holding on to a faint hope that Mr. Modi will finally pleasantly surprise me by delivering on his promises. I never was fundamentally prejudiced against him, as this blogpost and this one will bear testimony.

P.S., Dec. 01: 1) That one of my worries was spot-on is confirmed by this news item in one of the Bengali dailies today. 2) People are already going around with large amounts of fake 2,000-rupee notes. I myself wouldn't have believed it could be done so fast! And we apparently don't need subversives from across the border to do this, either. So much for another of the PM's tall claims...


Aakash said...

Dear Sir,

You've made some very pertinent points here, especially about corruption and its nature. We've been fortunate enough for the bank came to our office to hand us Rs 2000 and another thousand in change on separate days. It helps matters a great deal!

Around me I have seen mass confusion as well as general warmheartedness of the common man. Standing in ATM queues has now become a new way of making friends. We talk, we argue, we share WhatsApp forwards, but have never fought. At least that's been my experience. There is genuine anger as well as concern for someone who needs the cash and immediately.

The situation has reminded me time and again of a story by Vijay Dan Detha, which was narrated to me by a friend. So please bear if any liberties have been taken with the original story. It goes like this.

Once upon a time in a jungle, the monkeys come to power and form a government. They rule from the trees, suitably perched above other creatures dispensing governance and justice.

The tiger, however, is a tiger and manages to carry away a fawn. The Deer folk go to the monkeys to seek justice, and to see that action is taken. On hearing the plight, the leader of the monkey pack is enraged and vigourously starts shaking the branches of the tree he sits on saying, 'main kar raha hoon...Main kar raha hoon...'

I think that sums it up!



Subhanjan Sengupta said...


This is an interesting article.


Suvro Chatterjee said...

Thank you, Aakash and Subhanjan.

Let me parry with an article broadly sympathetic to Mr. Modi's cause: http://bit.ly/2gOjzf7

I have linked it because Mr. Dasgupta, though a known long-time BJP sympathizer, normally writes in a sane and balanced fashion. In this article, he acknowledges the mistakes and pitfalls, and also that Mr. Modi is taking an enormous risk. Like him, I too am keeping my fingers crossed.

Abhishek Anand said...

Dear Sir,

This-http://swarajyamag.com/economy/the-three-goof-ups-that-modi-government-could-have-avoided-in-demonetisation-is an article published in a magazine that calls itself "a big tent for liberal right of centre discourse" and its inclination towards the BJP is pretty well known. The fact that alarm bells are being rung even in such circles shows that the government is quickly losing support on this front.

Here are two more of Mr. Dasgupta's articles:
The point worth noting is the gradual change in his tone. In the immediate aftermath of demonetization, Mr. Dasgupta had hailed it as a great move. Then, he turned slightly watchful. Now, he is beginning to acknowledge the pitfalls in this entire exercise.

But Sir, do you agree with Mr. Dasgupta's last line, where he writes:"If he pulls it off, he will elevate himself to a different league of leaders"? What does the country stand to gain even if Mr. Modi "pulls it off"?

Finally, with all due respect to the economist in Dr. Manmohan Singh who could be spot on when he calls this exercise a "monumental mismanagement", I don't think that he has any moral right to use the words "organized loot". A decade of his leadership cost the country several lakh crore rupees in the form of those mega scams. I am growing more and more disenchanted with politics.

Abhishek Anand

Suvro Chatterjee said...

Oh, I agree absolutely with you, Abhishek, that Dr. Singh's is a case of the pot calling the kettle black. You might remember that in May 2014, I expressed gladness and relief that the Congress had been soundly trounced at the hustings. I was quoting him only to make the point that from an economist's point of view, this scheme is silly or worse. Dr. Amartya Sen, Ashok Desai (in this month's Reader's Digest) and the writer of the article in The Economist linked by Subhanjan above seem to agree entirely.

Right now, I only wish that a) the public had not been made to suffer so needlessly on such a vast scale, and b) that the Rs. 250,000 limit on bank deposits had not been imposed, for reasons I have explained. I am now waiting to see how soon the currency crisis fades away, and what more steps the government takes to really crush the 'black' economy.

Don't grow disenchanted so soon with politics. It's the only thing that keeps us from descending into barbarism.


Subhanjan Sengupta said...


Talking about what we may see next, I liked Swaminathan Aiyar's presumption that before budget and UP elections, it may so happen that our honourable Prime Minister trickles down the entire black money in the form of Rs. 5000 to Rs. 10000 deposits from the Modi Government in all the Jan Dhan accounts (in addition to what may have already accumulated in this time period), which are close to 200 million accounts across the length and breadth of the country. I have a gut feeling that something like this is definitely going to happen. And this 'aha' moment of these 200 million would be a game changer for him to secure another tenure. Not to mention, there is little of opposition that can match up to his political rhetoric and convincing power; thus giving him the playground to destroy Congress (as you have rightly said).

You have formed an opinion on democracy post-demonetization. Though you have not shared much. I would request a separate article on that. I am interested to read.

I also have a question which is bothering me and I am not able to think of a possible reason. Where is Kanhaiya Kumar and why is he, and others like him or associated with him, so silent? Afterall they had been very active in their remarks against the current power at the centre.


Subhanjan Sengupta said...

This would be relevant for our discussions.


Rajdeep said...

"Bad Economics Can Bite"

Editorials Updated: Dec 22, 2016 07:52 IST
Abhijit Banerjee


Abhijit Banerjee is Ford Foundation International Professor of Economics, and director, Abdul Latif Jameel Poverty Action Lab, MIT.