Modi’s Great Leap Forward – India’s Currency Ban – Part VIII

by Jayant Bhandari, Acting Man:

India’s Prime Minister, Narendra Modi, announced on 8th November 2016 that Rs 500 (~$7.50) and Rs 1,000 (~$15) banknotes would no longer be legal tender. Linked are Part-I, Part-II, Part-III, Part-IV, Part-V, Part-VI and Part-VII, which provide updates on the demonetization saga and how Modi is acting as a catalyst to hasten the rapid degradation of India and what remains of its institutions.

India’s Pride and Joy

Indians are celebrating that their economy has surpassed that of India’s former colonial master, the UK.

So-called educated Indians have latched on to the above visual, with full support of the Indian government. It has been shared far and wide in the national media. When you remind them that India’s population is twenty-one times that of the UK and on top of that, the British pound has taken a huge pounding because of Brexit and associated fear in the financial markets, expect to be ignored. You will be seen as anti-Indian.

Given the underlying irrationality and tribalism of India (read earlier updates for more on this), selected numbers are used to rationalize feelings and emotions. You see this everywhere in India: Science — very ironically — is used as a tool to rationalize superstitions and irrationalities.

Who needs reality when we can exist in illusions? But even this illusion—that India has superseded the UK — might disappear once the reality of India’s demonetization sinks in and the rupee falls, which it likely will once the international media recognize that Modi went for demonetization not to reduce corruption, but to transform India into a police state.

Modi’s interest was to increase tax collection, for the sake of tax collection, an approach in which rulers start to see themselves as all that matters, where citizens come to be seen as mere cogs in the service of the state.

In Modi’s imagination, if you are not a part of the formal economy — as is the case with the vast majority of desperately poor Indians, perhaps close to a billion people — you don’t count. As they are not recorded as part of the formal economy, their pain and suffering does not count either. Indeed most of their suffering and pain goes unseen and unheard — it has for the last two millennia.

The Indian stock market continues to fall, despite the fact that people know that selling their shares makes no sense, as their cash in the bank is effectively frozen. Could the stock market fall even more if bank accounts were to be unfrozen? Could the Indian rupee then fall as well, unless serious capital controls are instituted and gold-buying is restricted?

It is hard to predict the future, but those owning Indian assets from which money can still be repatriated will likely soon start to discover that India’s stock market and the rupee are possibly overvalued. Could an exodus start once money managers in New York and London start arriving at their desks at the start of the new year, after sobriety kicks in with the end of socialization and partying?

Scuffles have broken out between desperate clients and bank staff. Historically, it is commanders, kings and politicians who get all the blame. But these rulers and elites sitting in their ivory towers would never get their way if those on the front lines refused to obey unethical orders. Banks are required to provide cash to their clients when asked to do so. Their staff should have declined to accept Modi’s instructions to ration cash distribution. They should have stepped aside and let Modi deal with their clients, passing the responsibility where it belongs. Having not done that, they have become the face of Modi, or at least the face clients will take their anger out on. Banks employees are now starting to worry.

The Last Gasps of Disintegrating Institutions

These updates are not just about demonetization. They are an attempt to dissect the deeper, underlying cultural issues of India (and similar backward countries in South Asia, Middle East, Africa and South America) and why with the disappearance of the last vestiges of colonial institutions, India is starting to crumble. They are also an attempt to see what future might hold.

These updates are a story of why without the British to run them, western institutions implanted on India did not work and have mutated into something horrible. For example, education has become a tool for propaganda.

Nationalism without underlying values, is perceived by Indians as a mere geographical concept — and with indoctrination in schools it is rapidly weaving Indians into a dogmatic collective no different than those found in the Middle East. In a decade or so, India might become the Middle East on steroids.

Given its culture, which probably cannot change for centuries or perhaps millennia, India must ideally get heavily decentralized. India’s tribalism is entrenched and unchangeable, which is creating massive pressures to devolve India into its natural constituents, namely tribes. This will happen. The earlier the underlying forces are recognized, the less painful the process will become.

But as last gasps, there is a massively increased tendency toward intensifying centralization, toward instituting a police state. Increased militarization and equipment purchases, centralization of taxes, and now demonetization — all failing — are those last gasps.

Bulandshahr, Uttar Pradesh: a cop fires in the air to “calm down” agitated women outside a bank How long can they hope to control the situation if people are not getting the money that belongs to them?

A Life of Queuing: Pain for no Gain

While people in the rich world are in the cozy comforts of their homes, celebrating Christmas and the arrival of the New Year, Indians are lining up outside banks in utter cold to take out their own savings. Most are numb to why they are doing this. To a rational foreign bystander, their lack of revulsion has a certain spiritual element.

Indians have almost no history of revolting against oppression — they simply adjust to new situations. With respect to the demonetization policy, they have sheepishly accepted their predicament. As we discussed in earlier updates, this is a result of Indians’ utter lack of rationality, their failure to see what is wrong, their fatalism, the absence of revulsion against oppression, and their lack of moral instincts.

The caste system finds its roots here, where might-is-right is the governing principle, with both oppressor and oppressed failing to see anything wrong with their situations. The oppressor feels no empathy and the oppressed feels no revulsion. At best — given the lack of reason — the oppressed strives to become the oppressor.

Giving in to their predicament, many want to believe that they are queuing for some greater cause — akin to how the freshly decked out soldier feels on his way to battle — fooling themselves that this battle is needed. Of course there is no real higher cause they are worried about.

This facade of moral superiority is merely a cover for their boring and unfulfilling lives, and perhaps an unconscious expectation to get something for nothing — since Modi has offered them a windfall once the unaccounted money has been deposited. In the face of reality, however, the initial euphoria is fading.

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