Demonetization and the Bigger Picture

I have held myself back from writing a blog on demonetization all this while feeling stating the short term problems it created was, well, just stating the obvious. On the other hand, the question of whether the move would yield long term benefits, well, couldn’t be evaluated until much later anyway. But the slew of left leaning/ what-has-it-done-to-the-poor articles forces me to write…

I am not the least bit sympathetic with the middle class (or rich) folks who criticize demonetization by pointing out the problems it has created for the poor. It’s time we, the middle class, got selfish, and said that we’re going to evaluate demonetization and what it does for (to?) us:

-         Does it create nightmarishly long waits to get small amounts of money? Obviously.

-         Do people like us have alternate ways of paying for almost everything other than our maids, the newspaper guy and their likes? Absolutely.

-         Does it hit many of the hoarders of black money? Yes. Whining that the super-rich will find ways to get away is irrelevant: isn’t the shop down the road who trades in cash, and never pays taxes going to lose money? Are the baby step in a bottom-up clean up worth it, that’s the real question.

-         Was it worth it even if it fails in doing much about black money? How big was the counterfeiting problem? Did it hit that menace hard? Did we bother to check on that aspect at all?

-         If it moves the electronic/cashless transactions needle a bit farther, was that worth the other pain and failures?

-         Finally, get real: no one step can solve black money at one shot. Stop having idiotic metrics of either Complete Success or Unmitigated Failure. What shade of gray is the overall outcome is the real question. And is it the first of many more measures in that direction?

What Santosh Desai points out is reassuring (to me, at least):

“In spite of this, demonetization is an extremely popular move, at least as of now.”

He is also right in pointing out as to how this would have played out if a different Indian government had attempted such a thing (this is just a thought experiment: UPA/Manmohan Singh didn’t attempt anything in 10 years):

“Immediately after the announcement, there would have been calls to roll back some key provisions, and the chaos that followed in this would have become, in all probability a political mess. Some face saving half hearted ‘compromise’ solution would have been found, and the proposal would have in been effectively withdrawn.”

But now, with the BJP Modi?

“In this case, what we see is the opposite- once Narendra Modi announced the move, there was no question of rolling it back… It is a testimony to Mr Modi’s leadership abilities that this move is still popular.”

Extending his scope, Desai next wonders if the general frustration world-over with existing political systems is boiling over, and any radical change is considered better than the status quo:

“It is almost as if it does not matter if demonetization works or it does not; what matters is that it looks like a very serious attempt that appears to be unmindful of the costs that it attracts. This is the key to its popularity- the signal of a new intent to shake things up, to do the unimaginable, and not worry about consequences, for only then it seems, can one plausibly believe in the possibility of change.”

And while disgust and frustration with existing systems is the common theme from Modi to Brexit to Trump, there is a key difference. I can’t articulate it as well as Desai, so I’ll just quote him instead:

“In this context, it is important to acknowledge the phenomenon that is Narendra Modi. Very few politicians in the world, let alone India, have the earned power that he commands today. Unlike Donald Trump, he is a conventional politician, and has emerged through the ranks of his party. Like every other politician, he could have been weighed down by the inevitable burden of compromise, and while he has been tainted in many other ways, he has always managed to radiate an air of uncompromising strength.  This more than anything else is the key to his success- he is able to stand above and beyond the politics that has produced him. The ability to separate himself from his context, and come from somewhere else in terms of his motivations, gives him an aura that no other politician in the country has.”

No surprise then that Modi won the online vote for TIME’s Person of the Year in 2014 and 2016… And then that wonderful traditional media institution subverted what the people voted for, both times.