Demonitisation and the politics of shock doctrine

There is an aura of ideological mystification over the Indian Government’s recent demonitisation policy, where old 500 and 1000 rupee notes — which account of 86% of the currency in circulation — were stripped of their value on November 8, 2016. This mystification is based on, or more likely draws on, questionable economic reasoning coupled with patriotic and moral fervor. It’s a mystification that conflates the morally righteous and high-pitched fight against “the menace of black money,” and terrorism and counterfeit currency, as well as a massive social engineering and biopolitical project of remaking the populace into a “cashless,” consumerist society.

It’s been over two weeks now, and the “small inconvenience” that the Finance Minister Arun Jaitley said the demonitisation would cause — first, for 2–3 days, then 2–3 weeks — clearly is continuing. But it’s all in the name of the country, and seemingly at the cost of democracy.

The move has not been without controversy or critique: most commentators have argued against the sloppy implementation and logistics, or the arbitrary guidelines and rules. There is also some amount of consensus that this “bold move” — or as some call it, a “masterstroke” — will indeed do something to curb the “menace of black money.” I’ve heard the same from taxi drivers, vegetable vendors, and office clerks, usually when we were queued up outside ATMs.

As Sanjay Srivastava notes in his article on Scroll, demonitisation effectively uses the moral rhetoric against black money to create some sort of consensus among the public, despite the lack of economic logic or the visible disruptions to the daily lives of citizens. Shoaib Daniyal’s coverage of the issue in Uttar Pradesh finds similar consensus among working class people, who have been hit hardest by demonitisation (veritably, this is an outcome of manufacturing consent by the news media and the state, the latest being the NaMo app’s sham survey on demonitisation, with questionable privacy concerns).

It’s no secret that I’ve been critical of this demonitisation policy since day one (which is, at 8:05 PM on November 8). Not in the least because of my ideological and political differences with the Modi Sarkaar. I am in complete agreement with the many criticisms of this policy, like on the how cash accounts for a low percentage in black money flows; or how introducing higher denomination notes seem paradoxical to the larger objectives curbing black money; or that banks have written-off bad corporate loans to the tune of several lakh crores, thus transferring more wealth from the rich to the poor.

I don’t wish to reiterate those criticisms here.

Instead, I wish to understand the government’s demonitisation as a variant of what Naomi Klein calls the “shock doctrine” of free-market capitalism, and situate this move within the larger process of neoliberal transformation and Hindutva politics over the last two years.

In Shock Doctrine: The Rise of Disaster Capitalism (2007), Klein offers a scathing critique of the free-market capitalist doctrines of Milton Friedman and his followers in the Chicago School of Economics, and their militant and violent application by the US Government and institutions like the International Monetary Fund and the World Bank across the world.

Klein observes a relationship between the CIA-sponsored experiments in the 1950s and 1960s during the Cold War, which sought to use electric shock treatments as brainwashing techniques (experimented on innocent civilians in the US and Canada), and the similar kinds of economic shock treatment that the US government and US-based corporations advocated in the Southern Cone of Latin America in the 1970s — from the Pinochet-led military coup in Chile, to the US-backed junta rule in Argentina — to the invasion of Iraq in 2003.

The underlying, and chilling, rational behind shock treatment, Klein explains, is to use shocks — military and economic — to disorient the body politic, suspend democracy, and remake societies on the basis of free-market principles of deregulation, privatization and cutbacks to social spending, the hallmarks of the Chicago School’s free-market ideology. She traces how this system evolved over thirty years, from Latin America in the 1970s, to South Africa and Soviet Russia in the early 1990s, and finally in post-9/11 US and Iraq under Bush rule — where such shock treatments were accompanied by a phenomenal increase in unemployment, poverty, dismantling of the welfare state, and most of all, unprecedented political violence. Later in the book, Klein also looks at how the shock doctrine gave rise to the “disaster industrial complex,” where similar shock treatments were applied in disaster hit zones like Sri Lanka after the 2004 tsunami and New Orleans after Hurricane Katrina — dismantling of state spending, profiteering by private companies and displacing the poor.

The basic doctrine behind such shock treatment — which is a term used by Friedman and his cohorts — is that this would expedite the transformation of previous welfare states and mixed economies into free market capitalist utopias. Essentially, it meant treating entire sovereign nations and populations as a laboratory without any regard for socio-political consequences. Much like how shock therapy wipes out previous patterns of behaviors in individuals, economic and political shock therapy would wipe the welfare state’s slate clean and allow for the creation of a true free-market system.

It would be unwise, and to an extent, unfair, to see the Indian government’s demonitisation as strictly the kind of shock treatments that Klein brilliantly and mercilessly exposes. But the parallels are striking, and thus hard to ignore.

The most obvious has been the conflation of the objectives of demonitisation.

There have been no clear estimates about how much black money it would unearth, or what impact it would have on structures that produce corruption. At best, it is estimated that only 4–6% of unaccounted money is in the form of cash. Moreover, there has been a surge in exploitative systems in rural areas that convert old notes at a great cost; and even the ever-changing and arbitrary RBI policies, like the discontinuation of exchanging old notes on November 24, are giving shocks to the population. It’s no surprise then, as Rashmi Venkatesan writes, that demonitisation is essentially a political move in the guise of an economic (and thus, seemingly neutral) one.

Analogous to private corporations’ profiting from shock treatments (most notably, companies like Halliburton and Blackwater in post-invasion Iraq), albeit in a milder but highly problematic fashion (given concerns with data privacy), there has been a huge surge in online payment applications like JioMoney and PayTM — the latter featuring a full-page advertisement in national newspapers with Modi’s face on them (not to mention the incessant spam on Twitter).

It would almost appear that an unintended consequence of demonitisation — encouraging society “to go cashless” — has actually become its primary objective, rather than curbing black money; one that is most argued and defended by right-wing positivists on social media timelines and opinion pieces, which actually advocate shock treatment and big state intervention to promote “going cashless.”

Funnily enough, these are same people that accuse Leftists for condescension towards the poor — “Why can’t you trust the poor to use smart phones or PayTM?” — while being completely ignorant of facts like nearly half of India’s population still lacks functioning bank accounts, or that a significant majority lack ID cards, which are structural issues and cannot be solved by being on PayTM, or accepting cheque payments.

Essentially, this is a reworking of the conservative condescension that penalizes the poor…for being poor.

As Aditya Nigam writes on the relation between demonitisation and the Modi government’s social engineering efforts

…the distress that people are put through is calculated to effect a transition among more and more middle class people to the corporate world of malls, superstores, retail chains and transport aggregators. At one level, this is the most cynical part of the vision of contemporary capitalism and the political elites that work for them: it basically considers a large part of the world population entirely dispensable. But there is another equally cynical aspect to it: if only the wealth produced and saved by the poor can be brought into the formal banking system, then that too can be made available to the predatory corporations.

Similarly, Usha Ramanathan points to the alarming possibility that pushing through demonitisation may actually have implications for data privacy, given how promoting cashless economies via the UID program can compromise the security of financial data.

Another parallel with Klein’s Shock Doctrine is the role of ideological think tanks. Neoconservative Friedmanite think tanks have been at the forefront on developing such programs for shock treatment. The idea of demonitisation, too, has been credited to similar conservative think tanks in India, like the Pune-based Arthakranti Pratisthan — which has, however, been disappointed with the present demonitisation policy.

A brief look at Arthakranti shows that while they may not be as hawkish as neoconservatives in the US, who have a penchant for exploiting crises, they are a part of a larger conservative movement that’s advocating for reforms that fit well with the BJP’s neoliberal Hindutva agenda, which include cutbacks to social spending, or advocating technocratic solutions like mobile phone applications to structural issues like poverty. Ironically, this relies on a bigger role of the big state, not less (Arthakranti’s plans of withdrawing currency and implementing the “transaction tax” essentially require an interventionist state, despite their problematic proposal of withdrawing the entire taxation system).

You see, this is the fundamental paradox of the Modi Sarkaar’s election slogan of “Minimum Government, Maximum Governance”: the process of social engineering, which is a crucial part of its Hindutva politics, requires a strong, masculinist intervention state — what I have previously described as a patriarchal moral-political economy. Even at the height of Friedmanite “experiments” in Chile, Poland, South Africa, Russia and Iraq, neoliberalism required an exploitative state, mainly to arm twist to implement devastating cutbacks and open the economy for privatization.

The issues that the BJP and its associated Sangh outfits have been continually raking — cow vigilantes, quashing of dissent at FTII, HCU and JNU, or terming any sort of dissent as anti-national, banning Pakistani artists, the pumped-up patriotism after the Uri attacks and the “surgical strikes,” and now demonitisation — signify a deadly cocktail of neoliberalism, populism, and nationalism.

It essentially hijacks the moral rhetoric of Anna Hazare’s 2011 anti-corruption protests, which itself grossly oversimplified the issue of corruption, and the myth of a magic bullet solution (in 2011 this was the Jan Lokpal Bill), which the BJP managed to translate into a “surgical strike.”

This is why, I suspect, there is more of a boorish, militant moral-political rhetoric backing demonitisation, instead of any clear rationale or communication by the government (perhaps this is why much of the defense of demonitisation has been left to right-wing commentators, rather than the government itself). This is also why many who criticize just the implementation but not the larger politics behind demonitisation are misses a crucial point.

Much like the previous issues I mentioned, being critical of demonitisation has become another qualifier to being called “anti-national” in Modi’s India. In fact, his latest statement — about the criticisms of demonitisation coming from those who “were unprepared” (i.e., with black money in their mattresses) — betrays this agenda. It assumes that only opposition parties are being critical, not honest working class people who have been queuing up before banks and ATMs, incurring losses to both their finances and their health. It betrays the people whose deaths have been linked to demonitisation; they are perhaps the new, forgotten martyrs in the government’s ideology and social transformation.

Using Klein’s notion of “shock doctrine,” more than anything, provides for a useful metaphor to make sense of the social and economic destabilization that demonitisation produced, especially when one puts demonitisation within the broader neoliberal and nationalist politics of the BJP/Sangh (indeed ‘shock treatment’ has been used by both supporters and critics of demonitisation; read Gautam Bhan’s similar critique of ‘welfare shocks’). Again, this isn’t to insinuate that demonitisation is the latest “crisis” proposed by Chicago School-style neoliberal policies, or that any efforts to curb corruption are inherently dubious or counterproductive. As Bhan writes, there are real costs that black money has on equity and growth.

However, we must remember that we live in a context where the top one percent of India’s population owns 58.4% of its wealth, making it the second most unequal country in the world; where the names of prominent Indians feature in the Panama Papers leaks; where government agencies sit on incriminating evidence of corruption against political leaders; where 50 million people are displaced in the name of development or progress. In such conditions, the shock treatment of demonitisation is extremely suspect and cannot be uncontested.