Partial Transcript Below!
Episode 85 of The Seen and the Unseen is about Demonetisation — and a lot else. First, host Amit Varma launches into an angry monologue about how economic benefits can never justify moral costs. Then he is joined by economist Shruti Rajagopalan, who elaborates on all the things wrong with DeMon. They discuss the predatory Indian state, how Indians are forced into jugaad to cope with it, and that this jugaad might seem to be a good thing, but represents the enormous cost that all of us pay.
1. Most of Amit Varma’s writing on DeMon, collected in one Twitter thread.
2. ‘Narendra Modi Takes a Great Leap Backwards’ — Amit Varma
3. ‘The Landscape of Freedom in India’ — Amit Varma
4. ‘The Humanitarian Cost Trumps Any Economic Argument’ — Amit Varma
5. ‘What the RBI data on demonetization tells us’ — Shruti Rajagopalan
6. ‘Demonetisation and Welfare’ — Shruti Rajagopalan and Larry White
7. ‘Formalization of the economy is a form of coercion’ — Shruti Rajagopalan
8. Episode 2 of The Seen and the Unseen, on Demonetisation, with Suyash Rai
9. Episode 18 of The Seen and the Unseen, on restaurant regulations, with Madhu Menon
Dear Leader’s Bold Policy Move
This is a transcript of Amit Varma’s monologue at the start of this episode:
Let me begin this episode of the Seen and the Unseen with a scenario for you. Let’s say an important politician, let’s call him Dear Leader, takes his car out for a joy ride, and callously runs over a family of beggars, all of whom die. Crowds gather around the car. Oddly, most people in the crowd are not angry at all. Instead, they are congratulating Dear Leader on his bold policy move. A journalist attempts to ask a critical question, but is shot down for his impertinence, and called anti-national.
A team of economists now emerges, and says that Dear Leader’s visionary action will be a net-positive for the economy. One of them says that now that these poor beggars with no recorded income are dead, India’s per-capita GDP will go up. Another economist says that as all of the victims were unemployed, India’s unemployment rate just went down, all thanks to Dear Leader. Another calculates the productivity gains for all those who would have spent a couple of minutes interacting with these beggars, and now will not have to. These economists give themselves high-fives, and tell Dear Leader that he should kill more beggars.
Meanwhile, the journalist manages to whimper, but how can you do cost-benefit analysis in a situation like this? What economic benefit could justify the moral cost? They immediately arrest the journalist for being an Urban Naxal, and one of them bends down to massage Dear Leader’s foot, which is aching from pressing the accelerator so hard. All for the good of the nation.
Welcome to The Seen and the Unseen. Today’s episode is about Demonetisation, a subject on which I’ve done a couple of past episodes: you can look for them in our archives at seenunseen.in. This episode is sparked by the RBI finally releasing the data on how much of the demonetised currency came back into the banking system: 15.3 trillion rupees, or 99.3%. That basically is one final metric of the policy failure of DeMon – as if we needed any more – and my guest to talk about this today will be Shruti Rajagopalan. But before I get to my conversation with her, allow me a small rant, because this is a subject I feel very, strongly about.
Right after demonetisation was announced, I wrote a bunch of pieces about how it was a blunder: they will all be linked on the page for this episode at thinkpragati.com or seenunseen.in. It was evident to me at the start that DeMon was wrong from both a moral and an economic lens. In a piece I wrote for the Times of India shortly after Demon was announced, I pointed out the economic problems with it:
One, Modi claimed it was an attack on black money, but this was nonsense: the government’s own estimates showed that only 6% of black money was kept in the form of cash: the rest was in the form of Gold, or real estate or foreign accounts. Two, Modi said it would help fight counterfeit currency, but the government’s own estimate showed that only one in 4000 notes was fake, which was normal by standards across the world, and which government usually fight by phasing out old notes. Three, Modi said that terrorist activities would be hurt by this, but cross-border terrorism has actually gone up in this time, leave alone domestic terrorism by gaurakshaks. Four, Modi later said that this would help digitalisation, but data since has shown that digitisation has followed the trend that it was on before DeMon, and people are now back to using cash. Also, it unclear why digitisation is such a good thing anyway.
So none of the economic benefits were going to pan out anyway. Now, what about the costs. There are two kinds of costs here: economic costs and moral costs. The economic costs were quite obvious: if you remove 86% of the currency in use where cash transactions are 97% of all transactions, the economy will be crushed. There are numerous estimates and description of the damage that Narendra Modi did, and I will point out one specially striking figure to you: as my friend Nitin Pai once pointed out, every 1% rise in the GDP brings two million people out of poverty. The opportunity cost of DeMon is probably much more than this.
And naturally, the rich were hurt the least by this. They used their connections to launder their money, and one indication of this is automobile sales in the months following DeMon. They fell for two-wheelers and three-wheelers, but remained steady for high-end SUVs.
But forget the economic cost. Let’s talk about the moral cost. When millions of people find that much of their money is worthless, and they have to queue up outside banks for hours and days for their own money, what else is that if not theft? What else is that if not violence? More than a 100 people died because of Demonetisation, and I consider them people murdered by Narendra Modi. These include Jagdish Panwar, the tea-seller from Sikar in Rajasthan who had a heart attach brought on by the fact that he suddenly did not have money for his daughter’s wedding. These include halke Lodhi, the farmer from Chhatarpur in Madhya Pradesh, who killed himself because he didn’t have money to buy fertiliser and seeds in time for the sowing season. These include the unnamed 55-year-old woman from Telengana who killed herself because the 54 lakhs she had saved over the years, her lifetime savings, was now worthless. These include the newborn child who died in Mumbai because the hospital refused the accept the newly demonetised notes. And so on and on and on.
These are human beings, not statistics.
Beyond these deaths, businesses shut down in the informal economy because it runs mainly on cash. Livelihoods were destroyed. Years of hard work wiped out in one evening. I call it the largest assault on private property in human history. It was a crime on humanity.
And there were people who tried to do a cost-benefit analysis of this? They claimed that the economic benefits justified the moral cost? Leave aside the fact that there were no economic benefits, and that this was an economic disaster as well. But even if there were, can you play with the lives of people like this? Would it be right to use even one person in this manner, as a means to an end? Narendra Modi did this to the whole damn country.
Modi is a delusional megalomaniac, and there is nothing new to say about him. What really makes me angry is the supposedly respectable economists and public intellectuals who supported DeMon. Many of them were rewarded for this, with positions in the prime minister economic advisory council, in Niti Aayog, and so on. I personally know different economists who worked in government and were ordered to defend DeMon, even though they personally thought it was a disaster. They should have refused, but they defended it.
And all these people who defended this crime on humanity, with its massive moral and economic costs, how can we describe them? Are they bad economists? Well, duh! And are they also bad human beings? Which is the more charitable explanation?
I view DeMon as a litmus test for both sound economic thinking and basic human decency. DeMon was indefensible, but I won’t rant any more about it or I might burst a vein or something, something Dear Leader would not mind at all! I have a bunch of links on the page for this episode, do check them out. In the meantime, it’s time for me to bring on my guest for today’s episode, the brilliant Shruti Rajagopalan. But before that, let’s take a quick commercial break.