You have been warned

Demonetisation politics unfolds as a vast morality play. Its imagination unleashes the state on you, in the name of protecting your own virtue.

Written by Pratap Bhanu Mehta | Updated: November 17, 2016 3:38 pm
 Demonetisation, Demonetisation politics, currency ban, rs 500 ban, rs 1000 ban, cashless economy, re monetise, economy, world economy, nipfp, 2 g scam, vijay mallya, jan dhan account, atm closed, banks queue, world bank, federal reserve, indian express column, india news There is a shocking degree of callousness about the hardships these measures impose.

The so-called demonetisation is a watershed event for India. It signifies the arrival of a new kind of politics that will redefine the relationship between citizen and state. The scale of this event is so unprecedented that we are struggling to see where all the chips will fall.

It has to be acknowledged that, in many quarters, reactions seem to be driven less by the force of reasoning, but on prior assumptions, how much we trust this government to know what it is doing. But this much can be said. A major move was required on black money. But the government itself has taken a gamble, without any reasonably rigorous reasoning on the costs and effects. Much will now depend on how quickly the economy will re-monetise. Second, the measure has failed two reasonable administrative tests. There is a shocking degree of callousness about the hardships these measures impose. But equally importantly, as Suyash Rai of NIPFP, has argued in a wonderful analysis, the policy falls short on one test: Were there more reasonable, less risky, more predictable policy measures that would have yielded as much benefit as this one? The answer is: Yes.

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But it will take a moment’s reflection to recognise that demonetisation is not about the calculus of costs and benefits. In fact, that is why there is lack of clarity over objectives. Its distributional consequences are an afterthought. Nor is it about politics in an opportunistic sense.

It would be churlish not to recognise that it comes from the prime minister’s depth of conviction and sincerity. But that is exactly its danger. What it threatens to institutionalise is a new kind of politics. This is politics as a vast morality play whose three central elements are personification, puritanism and punitive imagination. A new state is emerging and it is not what you think it is.

Just as a matter of political analysis, the sheer audacity of this move is breathtaking. To dismiss it as a characteristic piece of propaganda or theatre would be to miss its significance. When was the last time there was a policy measure that required, in a manner of speaking, the total mobilisation of society on this scale, where literally every citizen is being enlisted (or conscripted, if you prefer) in a policy cause?

When was the last time literally every citizen is being inducted into a behaviour change, albeit temporarily? As the consequences of these policies unfold, the backlash against the government will grow. But for a very short window, at least, the very performance and sweep of the idea is being taken as proof of its sincerity. This ability to translate a policy measure into a national project is unprecedented.

But this is exactly the danger, since this move is premised on dark institutional undercurrents. The personification of policy works at different levels. To work as a national project, all individuality, all questions of distributive consequences, have to be effaced. Every citizen will appear, alternatively, as a patriot or a criminal: The histories of their individual life worlds, whether they have bank accounts, how much cash they use, how far they live from an ATM, all these questions pertinent to the distributive consequences of these actions will be immobilised. This personification has been present in the prime minister’s speeches, the construction of the figure standing in line as a 2G scamster. It is evident in the undifferentiated account of “hardship” and “sacrifice” where distributional consequences again don’t matter. But most of all, it is evident in the premise of this exercise: The perfidy of the few can justify imposing hardship on all. We are all criminals, who through the process of this dialysis, by the mere act of standing in lines, will come out patriots.

With personification comes a punitive imagination. The state is telling you that the honest have nothing to fear. But there is every sign of unleashing the worst aspects of the Indian state on even ordinary citizens. The culture of raids on small shopkeepers and business engaging at best in marginal perfidy of getting rid of undeclared stocks has been reopened. The threat to audit cash injections into Jan Dhan accounts is silly in the extreme. Even if a few poor are lending their accounts to launder a lakh or two for commissions, it will probably be a net redistributive gain.

Investigative energies are best concentrated elsewhere. But in any case, you get more than a sense that this whole chain of events will now be a pretext to bring back a Seventies-style domination of punitive tax imagination on citizens. As always, it is not directed at specific big targets, but indiscriminately in a perverse equality: The Jan Dhan account holder and Vijay Mallya on the same plane.

The state may want our patriotism.

But it still does not trust us. The state is still the font of virtue that stands above us. It is not an accident that we are now reintroducing indelible ink marks on those who try and withdraw even their own money more than once.Thebasic paternalism and suspicion the state has of citizens will not go away. That was the philosophical basis of the punitive imagination of the Indian state, now remobilised under the guise of cleansing.

There is also a moral puritanism in this: As if the world is entirely black and white.

It is manifested in this odd distinction between black and white money, forgetting the elementary fact that whether money is black or white depends on where it is at in the cycle of circulation. Hence they have perpetuated the illusion that we can extract the black, without hurting the chain of circulation of the white. It is not an accident that this measure will largely be a wealth tax on those not sophisticated enough to launder; those who have laundered will go unpunished.

Will this succeed politically? The answer will depend on the degree of economic and institutional regeneration. I suspect the measure of this that will matter to most people is not crony capitalism, but whether government officials at mid to lower levels stop asking for cash bribes. With a measure of this magnitude we will learn quite a few things about economic ingenuity and institutional adaptation. There will be some benefits. Economists can give a better account of demonetisation. But be very wary of the institutional imagination that underlies it. It will again unleash the state on you, in the name of protecting your own virtue. What starts as a morality play will end in more statism.

The writer is president, CPR Delhi and contributing editor, ‘Indian Express’

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  1. S
    Sathhitu
    Jan 22, 2017 at 1:17 pm
    We would have said "all is well that ends well ". But this is not ending well. I only hope this would not form a bad preciden.
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    1. P
      prakash gotimukul
      Nov 17, 2016 at 5:49 pm
      This article hardly speaks of what needs to be done to reduce the difficulty.It is as bad as kite flying and wild imagination. For any measure one has to plan. We do not have a perfect situation or a fool proof means. We are living in a country where main opposition and media never wants the govt to succeed. There are even spies inside who are detrimental to nations interest. But still the govt has succeeded in manyways and many areas. So simply giving a sermon with negative tone is of no use. Morality has come up as a narrative bcs of a desperate main opposition who has got so degenerated that it is devoid of any new ideas and their only survival weapon is immoral acts through use of black money. Most elections are also decided by filthy politics of black money. So a strike on BM although it is one of the objectives, more important is fake currency, use of BM by terrorists, maoists, smugglers, big business especially of dubious nature. So a drastic reduction of black money even by 50% in one go goes a long way in cleanup. Other measures and cleaning and testing the banking system is also taking place. It is an indirect stress test for banks too. Opposition parties are not interested in any of this. Their main concern is their own survival and protection of their target vote banks. Some are making huge noise bcs they seem to have been harmed personnally...............If there is a devastating calamity of nature like floods or earthquake, what do people do. No electricity for several days, no water supply, no economic activity, no communication............they still bear it and it soon forgotten..................this is not so bad. Every thing is going smooth but may be we hv to forego a few luxuries.................it will get normal in a couple of days.....
      Reply
      1. K
        Krishnamurthy
        Nov 17, 2016 at 8:26 am
        Verbose !!! Tell me which insution runs or goes without personification ? Such matters are best left to the Government of the day whose success or otherwise will be known only after some time and which will be put to 'people's test in due course. We have slept over black money for decades so let us give this government a fair chance. Let us not hurry to criticise without offering a good plausible and "PROVEN" (which is what the author seems to want !!!) alternative.
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        1. A
          Ajay Brahmnalkar
          Nov 17, 2016 at 3:54 pm
          When someone requires so many words in twists and turns to tell his 'point' usually what is being said is pointless.
          Reply
          1. A
            Auro
            Nov 18, 2016 at 10:19 am
            Statements like " Even if a few poor are lending their accounts to launder a lakh or two for commissions, it will probably be a net redistributive gain" makes me wonder. For the author, it's okay to be corrupt... everybody should be allowed to be corrupt and launder a lakh or two.
            Reply
            1. R
              Rajesh
              Nov 17, 2016 at 6:46 pm
              The Government has made few mistakes. What was needed could have been achieved by taking following steps:lt;br/gt;1) Payment from one person to another should have been made compulsory by mobile SMS for any purchase of vegetables, auto rickshaw etc for even small amounts.lt;br/gt;2) No need to print ₹ 500 / 2000 noteslt;br/gt;3) All old ₹500 and 1000 notes to be deposited in banks. lt;br/gt;4) No tax on white money deposited in banklt;br/gt;5) 45% tax to be paid for all black and unaccounted money till Dec 31lt;br/gt;6) No cash withdrawals above Rs. 2000 since amounts to be transferred from mobile phonelt;br/gt;By doing this all the black money would become white and come into economy. No more black money transactions since no₹500 or higher denomination notes available in circulation lt;br/gt;No charges on transactions through mobilelt;br/gt;Bank to offer 1% less interest on savings bank account to cover the transaction costlt;br/gt;Government would have received around 5 Lakh crores of rupees in tax and avoided cost of printing new currency noteslt;br/gt;Movement of money possible only through bank and hence terrorist/ politicians/ beurocrats cannot have money or demand bribes
              Reply
              1. D
                Dungal
                Nov 17, 2016 at 3:05 pm
                If you are a fair critic of the present Modi Govt and not a paid agent of scamgress, then please write an objective opinion on the issue instead of showing solidarity to your masters thru National medialt;br/gt;lt;br/gt;Agreed if the system has checks and balances that can work at 50% efficiencies, then the present govt has alternatives to go about to curb black money. But the previous govts have carefully the w system to pay their pockets and keep them powerful and benefit there coterie to stay in power until the end of the world.lt;br/gt;lt;br/gt;Not only in India, people world over are disgusted by these lobbyists surrounding seats of power and media failing to give voice to these very peoplelt;br/gt;lt;br/gt;The economists PM who ruled us for 10 years, corruption grew sky high and with that black money. If there is an economist way of bringing black money why didn't he do that. Because he chose to serve his masterslt;br/gt;lt;br/gt;MGNREGA for which the congress wants to take credit for, if it was to help poor people in rural areas with money, was it done thru cash deliberately then, to leak into their pockets. If bank accounts were properly set and money disbursed thru checks or electronic payments they would not be left out now or face hardship in currency exchange nowlt;br/gt;lt;br/gt;The number of rights based laws that Manmohan singh govt ped knowing fully well what it is worth because Raghul wanted it so, thinking people will then vote for him, what a great govt that waslt;br/gt;lt;br/gt;Modi's mistrust of the lobbyist surrounding him in Delhi is perfectly understandable, and within 5 years if he feels it is difficult to make benefits reach to the people thru the system then he is within his rights to get the people on streets and gain his support for themlt;br/gt;lt;br/gt;I can understand as a masters/Phd research scholar your ego would not let you accept any benefit out of this step then you would be a common man but that is not cl for you
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                  Dungal
                  Nov 17, 2016 at 4:34 pm
                  If your masters scamgress had been in power in any of the States, they would have incited violence on innocent people for their narrow benefits. Since that had not happened, I am very much satisfied with the implementation as well. But now congress is mobilising to get that power thru drama baazi and start rioting soon and create an emergency like situation to discredit our PM Have good thoughts for the country
                  Reply
                  1. F
                    FAITH UNDETTERED
                    Nov 18, 2016 at 3:51 am
                    how will you stop counterfeit notes coming into the country from Bangladesh thro (Malda port ) the present didi government is active distributor Nepal border , stan , DUBAI jandk . And terror funding was so easy .
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                    1. D
                      Dj
                      Nov 18, 2016 at 7:34 am
                      Look at Kashmir , north east and other naxalites . Results can be seen . Forget about economy . Clearing bad things is most important one.
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                      1. E
                        Ezhilan
                        Nov 17, 2016 at 10:48 pm
                        Equivalent to the advise Rajiv was whispered by Brahmin dogs and he has to pay with his life. This time though the same is happening inside the country. I would love to see the devastation.
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                        1. Y
                          Y
                          Nov 17, 2016 at 6:42 pm
                          Will wait and sure modiji will ask their department to return vat claim money to each and every honest businessmen and companies . We hope and expect this from our the great leader of the era the living legend Shree NARENDRA MODIJI .it will help liquidity in the market
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                          1. G
                            Ganesh K
                            Nov 17, 2016 at 11:01 am
                            What is there to fear if you are honest ? lt;br/gt;Verbose english does not give you intellectual high ground...!! People who have been paying taxes on their ry through TDS were feeling all he while that they were being unfairly focussed on. All those filing returns on business incomes always found ingenious ways to conceal or even under declare their incomes.lt;br/gt;So whoever has lost cash value ; it is natural justice now that they lose proportionately !lt;br/gt;This write up is just hog wash !
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                            1. G
                              Gururaj Narayan
                              Nov 17, 2016 at 10:10 pm
                              The writer ignores the fact that demonetisation is not just about black money only but also about fake Indian currency and terrorist financing. On both fronts, this measure has yielded rich dividends. Only worrying factor is that another PM, who is a lesser mortal than Narendra Modi may use it as political tool. The writer is alarmist. We are not living in George Orwell's "1984".
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                              1. I
                                Illaria
                                Nov 17, 2016 at 8:31 pm
                                I agree with you on the statisim angle but disagree this this was not a PR move as well. APCOWorldwide trained Modi ji well. The timing of this was chosen specifically to weaken the monitary reserves of the opposing parties during elections.
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                                1. K
                                  Kaka
                                  Nov 17, 2016 at 5:01 am
                                  Bravo
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                                  1. M
                                    Mahesh
                                    Nov 17, 2016 at 3:52 pm
                                    Ordinary people are waiting in queues from morning to evening at the cost of daily earnings. Modi and co should have planned it better. Like over a 6-month time, people exchange old currency to new. Black money holders are still doing illegal activity. In telanagana districts, like warangal etc..going rate is rs. 800 to 1000 old curr. gold at 45-50k per 10gm. Invest in liquor stock, and make it white. Nothing reduced; it is just daily wagers are struggling. State control of life is stiffling in india. everyday every thing a person does, state is involved. It increased more during modi rule.
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                                    1. M
                                      manohar sharma
                                      Nov 18, 2016 at 8:37 am
                                      Dear Mehta lt;br/gt;Why is FICN market in Malad has stunned silence and zero activity.Why are hawala operations,drug mafia,middle men,D family n other terrorists financiers stilled to numbness. Your write up is extremely one sided and biased. Never expected from you
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                                      1. A
                                        Ajit
                                        Nov 17, 2016 at 1:08 pm
                                        Secrecy was important. Any other way would have raised question about integrity. Without proof Kejri is creating ruckus any other way you would had more belief in BJP or Modi to say that that BJP did not know or informed friends.
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                                        1. D
                                          Devi Prasad
                                          Nov 16, 2016 at 11:54 pm
                                          It is in an issue of small 'change' with a big impact! So, what is the problem in the decision to destroy illegitimate private wealth? Why the author enlists ordinary citizens to present the problems of individuals generating, channeling and holding illegitimate private wealth in the form of Rs. 500 and Rs. 1000 notes? Yes, like any public policy decision this decision too comes with costs. In this decision the ordinary people pay relatively small costs- in the short-term, in exchange for large benefits in the long-term. The real costs are on those holding illegitimate private wealth. They need to learn to live with small change that makes a big impact.
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                                          1. R
                                            Raju singh
                                            Nov 18, 2016 at 5:33 am
                                            Akhir kahna kya chate Ho....? Thoda simple language main Bhi likh Sakte the....
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