Origins of the ‘Cashless’ Idea And the Imperialist Connection
Origins of the ‘Cashless’ Idea and the Imperialist ConnectionSome of the information used in this chapter are from various articles by Dr. Norbert Haering, a German business journalist and blogger. His best-selling book on “Abolishing cash and the consequences” was published in 2016 by Bastei-Luebbe (in German).
THE less-cash thing is by no means Modi's brainchild. The campaign for cashless society originated in the developed economies – the Scandinavian countries in particular – in the late 1990s as a spontaneous, gradual progress towards digitalization of money. It was spurred by development of productive forces (advances in technology and management techniques) and was more or less welcomed. It also started spreading to developing countries without opposition.
Forced Digitalization: A New Subterfuge of Finance Capital
The push for a rapid and forced transition to cashless economy arose in the 2010s as yet another product of the growing convergence of the economic interests of capital in crisis and the political concerns of an increasingly malicious intrusive state in the neoliberal era. As always, the task of aggressively marketing the strategy in the name of people's interests was taken up by the state, with capital keeping a low profile. In early 2012 Michael Snyder reported that, for various reasons (e.g., cash is expensive to print, inspect, move, store and guard; most important, a cashless society would give governments more control) “most governments around the world are eager to transition to a cashless society. They are increasingly viewing cash in a negative light. In fact, according to the U.S. government paying with cash in some circumstances is now considered to be “suspicious activity” that needs to be reported to the authorities.” (A Cashless Society May Be Closer Than Most People Would Ever Dare To Imagine, The Economic Collapse, 29 March 2012).
The coercive element was further intensified with the rise of the idea of negative interest rates on bank deposits. When lowering of interest rates down to or even less than 1% failed to induce people consume more and save less (which was necessary to pull the developed economies out of the stagnation/recession lingering since 2008) bankers started thinking of crossing the “zero lower bound”, i.e., charging negative deposit rates. Denmark’s central bank was a pioneer when it first cut its deposit rate below zero in 2012. The process was accelerated when in June 2014 the European Central Bank (ECB) reduced its deposit facility rate to -0.1% to address stagnation and deflation in the region. By now the trend has spread to the Eurozone and Japan. At present only in a few countries banks are charging negative interest rates (often in the name of sundry bank charges) but others also are prepared to go that way if need be. However, the problem is, few people are willing to keep money in banks at a cost. The only way to force them is to abolish cash and make digital payments the only available option. This course would benefit both the banks (augment their scale of operation and earnings) and the state (helping it keep watch on the details – such as amount, time and place, purpose, persons/entities involved, etc. – of each transaction and use the data thus collected for taxation, terror watch, and various other commercial/political/policing purposes).
The political groundwork for ushering in the absolute rule of digital money is now going on in full swing in many developed countries, with economists and the media being roped in. A relatively more convincing and moderate route map toward cashless society has been presented by Kenneth Rogoff, a former chief economist of the IMF and author of the influential 2016 work The Curse of Cash, who proposes slow phasing out of all cash starting with what they call big bills (high denomination notes) even as other experts suggest more radical measures.
Against the Intrusive State: Voices in Defence of Cash
The whole idea of depriving citizens of the right to hold cash has come up against vigorous opposition from concerned citizens. Writing in The American Thinker, Mike Konrad tells us how he thinks governments will handle the situation arising out of the people's preference for keeping cash at home rather than paying a negative interest:
"Don't worry. Governments will rise to the occasion and soon will be making cash illegal. People will be forced to put their money in banks or the market, thus rescuing the central governments and the central banks that are incestuously intertwined with them. …
“Beyond that, cash is probably the last arena of personal autonomy left. … It has power that the government cannot control; and that is why it has to go.
“Of course, governments will not tell us the real reasons. Might provoke a reaction. We will be told it is for our own "good," however one defines that. It will be sold to us as a benefit. …
“Side stories will inform us that mugging is down. Crime is finally being defeated. What won't be reported will be that hacking will shoot up. Bank fraud will skyrocket. … Poor people … will be told that the rich can no longer hide their money and will be forced to pay their fair share.
“…… we will be told that criminal enterprises will have been hurt badly. Their mountains of cash are irredeemable. Don't you believe it. Rather, there will be a spike in the price of Bitcoins during the conversion. Bitcoin's anonymity has already spawned major illicit franchises on the darknet. These will grow.
“The real purpose of a cashless society will be total control: Absolute Total Control….
“However, it will be sold to us as expedient simplicity itself, freeing us from crime: Fascism with a friendly face.” (Here Comes the ‘Cashless Society’, February 8, 2016)
Similar apprehensions have been voiced by many others. Thomas DiLorenzo, economist and Mises Institute Senior Fellow, observed in course of an interview:
“The state will make more and more use of “threats of terrorism” to seize financial assets. It is already talking about expanding the definition of “terrorist threat” to include critics of government like myself. The American state already confiscates financial assets under the protection of various guises such as the PATRIOT Act. I first realized this years ago when I paid for a new car with a personal check that bounced. The car dealer informed me that the IRS had, without my knowledge, taken 20 percent of the funds that I had transferred from a mutual fund to my bank account in order to buy the car. The IRS [The Internal Revenue Service – Ed.] told me that it was doing this to deter terrorism, and that I could count it toward next year’s tax bill.”
Interestingly, even in the official circles in the richest countries one sometimes hears voices of dissent. In Germany, where nearly 80% of transactions as per Bundesbank Survey 2014 were conducted in cash despite the country being one of the world’s most advanced nation, the Bundesbank (German Central Bank) CEO Carl Ludwig Thiele in a talk on 14th April 2016 strongly opposed the trend of blocking the use of cash and argued for keeping cash as a mode of payment. “‘Cash is Coined Freedom’ – this modified Dostoevsky quote has not lost its validity”, he asserted.
We in India certainly do not face such a situation at this moment, but the portents are clear. Already banks have reduced the numbers of free withdrawals in a month, forcing you and me to either move over to online banking and plastic money or bear the cost of cash withdrawals. Such indirect pressures, which are bound to increase in the days to come, must be resisted and reversed now if we are to avert an Indian version of the digital dictatorship currently haunting Europe and America.
The Empire Orders ‘Financial Inclusion’
The ‘cashless’ idea was given a solid shape and powerful propulsion in 2012 at the instance of the lone surviving superpower. President Obama issued an executive order installing the “President’s Global Development Council” (GDC) at USAID, which he tasked with advising him on how to increase American power by means of development policy. The document is quite frank in its statement of purpose:
“To help protect national security and further American economic … and strategic interests in the world, it is the policy of the Federal Government to promote and elevate development as a core pillar of American power and chart a course for development, diplomacy, and defense to reinforce and complement one another. As stated in the 2010 National Security Strategy and the Presidential Policy Directive on Global Development, the successful pursuit of development is essential to advancing our national security objectives.” (Emphasis added)
And what course did the GDC chart out? It came up with a push for “financial inclusion”. The President was advised to make this a top priority for the US development work, and that he should reallocate aid-money in favor of the financial inclusion effort, to be conducted in partnership with and mostly by the private sector. It also recommended that the US government use its significant influence on the World Bank and on the G20 to get them to issue and pursue ambitious financial inclusion agendas.
The other major initiative taken in the same year was the formation of the “Better Than Cash Alliance” (BTCA) for pushing back the use of cash globally. Based at the UN, it is “a partnership of governments, companies, and international organizations that accelerates the transition from cash to digital payments in order to reduce poverty and drive inclusive growth.” Its founding members include the Bill and Melinda Gates Foundation, Visa, Mastercard, Citigroup, Omidyar Network, the Ford Foundation and the US government’s development agency USAID. It is easy to see that most of these are ‘world leaders’ (read ruling monarchs) having a direct stake in the digital payments sector, or to use a more fashionable term covering both emerging technologies and firms driving change in this sector, the fintech ecosystem.
India joined the organization on September 1, 2015, a year after the launch of Modi’s flagship financial inclusion program Pradhan Mantri Jan Dhan Yojana, which saw 175 million new bank accounts created. According to the BTCA, its new partnership with India is an “extension of the Indian Government’s commitment to reduce cash in its economy.”
In 2014, as part of the Spring Meetings of the World Bank Group including the Consultative Group to Assist the Poor (CGAP) and IMF, a session on digital finance was held on 14 April. The forum was inaugurated by the CEO of International Finance Corporation and other participants included big names like Walt Macnee, president of the MasterCard Center for Inclusive Growth. Speaking on the occasion, Sandhya Rani, postmaster general of Andhra Pradesh, emphasized the huge potential of digital finance on rural development and the role the India Post can play with over 155,000 post offices, most of which are in rural areas. It is to be noted that such involvement on India’s part in global initiatives on financialization predated the installation of the Modi Government.
The Focus on India and the Great Philanthropist
The US-inspired push for digitalization of exchange and finance soon came to be concentrated on the third world, especially the bigger economies like India, with the state and the private business interests in US taking the lead role. In 2015 USAID announced a formal partnership with the Indian finance ministry to advance digital transactions in India. In January next year, USAID presented a report titled “Beyond Cash”.
In December 2015, the US Treasury Department and USAID organized a Financial Inclusion Forum in Washington. The world’s richest person -- a miracle-maker whose wealth grows and grows the more he spends for the poor –said on behalf of the Bill and Melinda Gates Foundation:
“Full digitalization of the economy may happen in developing countries faster than anywhere else. It is certainly our goal to make it happen in the next three years in the large developing countries. ……We worked directly with the central bank there [India]
Gates was really excited that Aadhaar was “becoming pervasive throughout the country” because that ensured everybody would be “well tracked and served.” Indeed, that’s the point – every citizen will be tracked 24x7 -- wherever she goes, whatever she does with her own money! Forget the profits made by the fintech firms, is this not absolutely essential for the holy war against terror, in which every citizen is suspect and needs to be tracked?
In his speech Gates also stressed that a government’s assistance to the poor and needy should not be delivered by the “incredibly inefficient” method of providing cash or grain to the recipient. “Digitalization helps targeting”, he said, if payments are done via mobile banking. The idea endorsed by Gates and the financial inclusion “community” at the forum was to steer poor people into participating in the digital payment system by making it a condition for receiving state support.
He made another interesting point. One of the major reasons why countries like India can go over to full digitalization faster than the USA, is that there are much less restrictions from legal mandates to protect people’s privacy and data. He was right. The Indian government has always been adamant in ignoring these concerns. At a hearing in July 2015 pertaining to various petitions challenging the validity of the Aadhaar project, Attorney General Mukul Rohatgi told the Supreme Court that the Indian Constitution does not guarantee a right to privacy and this view has indeed been endorsed by the Court.
WEF and the War against Cash
Like the World Bank, USAID and other agencies/forums of finance capital, the World Economic Forum also is actively involved in the promotion of digitalization. It runs a project called “Promoting Global Financial Inclusion” aimed at “accelerating financial inclusion through public-private collaboration at national, regional, and global levels”. Here also the India connection is very strong, with Natarajan Chandrasekaran -- CEO and MD of Tata Consultancy Services (TCS) who is also on the board of the RBI – serving as Chairperson of the IT Industry at the World Economic Forum, Davos.
The Forum’s “Strategic Partners” (leading TNCs) operating in the IT/telecommunications sector are very aggressive in the international campaign for digitalization of transactions and finance. Their position was very clearly spelt out, at the 2015 financial inclusion summit, by Dan Schulmann, CEO of PayPal: “Until it [the world] goes fully digital, there will be a need to have a way to transfer money from the digital form into a cash form.” Since in his view this is a costly nuisance, he added: “The major competitor we have is cash. Right now, 85 percent of the world’s transactions are done in cash. That is really what we are trying to attack right now.” Expressing the same hostility, Strive Masiyiwa, Chairman and Founder of Econet, a large African Mobile Phone company with a payment platform, said “Cash is what we seek to eliminate.”
2016: Speeding Up Digitalization in India
In July 2016, the RBI, still under Governor Raghuram Rajan, came up with a document titled “Payment and Settlement Systems in India: Vision 2018”. It charted the road map towards a less cash economy to be achieved in two years by promoting digital modes of payment. While recommending much more extensive use of POS, ATM etc., the report specifically recommended UPI (Unified Payment Interface) and Aadhaar Enabled Payment System (AEPS). In fact, almost all that is being done now for the promotion of digitalization under Modi-Jaitley-Patel, were conceived or started under Manmohan-Chidambaram-Rajan (of course, there is now a much greater urgency as expressed in the carrot-and-stick approach for promoting non-cash transactions). A perfect consensus was actually built up over the years under the aegis of global – mostly American – finance capital, only to be temporarily punctured by Demonetisation, which was a rash partisan decision with hardly any economic rationale (except for slightly accelerating the transition to the digital world).
The same month, a report titled “Digital Payments 2020” (one of many such reports from various US institutions) was prepared by the Boston Consulting Group and Google with “guidance” from Visa and the National Payments Corporation of India among others. It was remarkable for leaving out all the usual niceties about financial inclusion etc. and instead talking of India’s digital payments opportunity as a “$500 billion pot of gold” and of what was to be done to “grab” it.
Then in September 2016, McKinsey Global Institute issued a report titled “Digital finance for all: Powering inclusive growth in emerging economies”. It estimated that widespread adoption of digital finance can boost the GDP of all emerging economies by as much as $3.7 trillion by 2025, a 6 per cent increase compared to a business-as-usual scenario. “India could see a boost of $700 billion, an 11.8 per cent increase by 2025. This additional GDP could create up to 95 million new jobs across all sectors, 21 million of them in India,” it said.
On October 14, 2016, the partnership between USAID and the finance ministry to advance digital payments was "taken to a new level" by the creation of the “Catalyst” at a conference in Delhi. It was decided that the project would be implemented in a single city as a pilot to increase digital payments before it is taken to other cities. “India is at the forefront of global efforts to digitize economies”, USAID Mission Director to India Jonathan Addleton said on the occasion.
After three weeks, Narendra Modi gatecrashed into the digital arena in his characteristic style with the 8 November announcement.
Thus the process of digitalization (including Aadhaar, a vital link in the chain of the proposed mass digitalization program) was initiated during the UPA regime. There was a broad consensus in the ruling elite, the bureaucracy and the major parties, so the BJP found it easy to carry ahead with the work started by the Congress. Come November 2016 and Modi broke the unity and cracked the long whip of Note Ban to shove the entire population and the whole economy of India into the willing arms of big banks, payment gateways, internet and mobile service providers and other stakeholders in digital finance. In the process the so-called 'informal' sector, actually the mainstream social and economic lifeline of "we the people of India", was subjected to yet another cruel bout of what Marx called the primitive accumulation of capital, as it has always been in the past.