[Air-L] Franco Berardi: "Towards a monetary holocaust?" Text written as an introduction to MoneyLab #3

[Ueberschlag Leila]

Telegram from Bologna: Towards a monetary holocaust?

By Franco Berardi, November 30 2016  /  Text written as an introduction to MoneyLab #3 Conference: <http://networkcultures.org/moneylab/2016/11/30/towards-a-monetary-holocaust/ <http://networkcultures.org/moneylab/2016/11/30/towards-a-monetary-holocaust/>> 

 <>In a booklet published in 2014 with the title Capitalism a ghost story Arundathy Roy tells some interesting stories about the evolution of India in the neoliberal age:  <>“When those who had been evicted went back where they came from, they found their villages had disappeared under great dams and dusty quarries. Their homes were occupied by hunger and policemen. People returned to live on city streets and pavements, n hovels on dusty construction sites, wondering which corner of this huge country was meant for them… In the drive to beautify Delhi fro commonwealth games, laws were passed that made the poor vanish, like laundry stains. Street vendors disappeared, rickshaw pullers lost their licenses, small sops and businesses were shut down. Beggars were rounded up tried by mobile magistrates in mobile courts, and dropped outride the city limits. The slum that remained were screened off, with vinyl billboards that said DELHIciously yours.”

In the ‘90s the capitalist globalisation promised to pave the way to a future of prosperity for everybody, or at least for the majority of the world population.

Then it became clear that the universal mobilisation of the energy of labor was not leading to prosperity for the majority, but only to huge enrichment for a small minority, a life of precarious exploitation for many, and marginalisation for the rest. Now globalisation is rolling back, stagnation is the likely prospect for the near future. So what is going to happen? What is the destiny of that 50% of the world population who have received nothing of the advantages of globalisation, but are now exposed to the effects of environmental devastation and social impoverishment that the current stagnation is going to provoke?

The year 2016 has been marked by the sudden awareness that the process of neoliberal globalisation is failing, and is showing the emergence of a new alliance of neo-liberal extremism and conservative nationalism. The worst of two worlds that once upon a time appeared in opposition: anti-global reaction and simultaneously acceleration of the most destructive tendencies of the market.

Norendra Modi, a hindu nationalist and a neoliberal extremist, is the Premier of India, a country of 1.2 billion humans. Modi, who makes part of this new brand of nazi market-worshippers who are winning the elections in many countries of the world, few days ago started an experiment that sounds as a turning point in the history of the world economy. It is called demonetisation but it may result into a great leap forward in the process of digitalisation of money.

Steps towards the digitalisation of money have been taken in the last decades, (credit cards, digital payments…) but so far the economy of the countries of the world has been integrating physical money and online money, so allowing the survival of those people who are unable to deal with the digital technology. No more. The move of Modi seems to be intended to accelerate the pace of digitalisation in a country where, notwithstanding the expansion of IT technology in the last ten years, the digital divide still excludes a majority of the population from the possibility of entering the online economy. A wide part of the population is going to be pushed out of the economy like those poor people hidden by the DEHLIciously yours billboards that Arundathi Roy is talking about.

Are we witnessing the first glimpses of the expulsion of half of the planetary population from the cycle of economic exchange? Is this the beginning of a sort of economic extermination? Is this the hidden mission of the dawning Trump-age?

Actually the reasons that Modi has put forward to motivate his act of demonetisation seem quite weak: he speaks of a move against tax evasion and financial criminality, but in fact he is hitting hard on the average people, whilst tax evaders are notoriously investing their money abroad, and do not go around with packs of small banknotes.

“This is like curse of God on us,” said Gian Prakash Gupta, 60, a soft-spoken paper wholesaler “We do not know how to use computers, how to do online transactions, how to use card-swiping machines.” The business of traders like Mr. Gupta, whose operations lie partly in the vast informal economy that makes up around 20 percent of India’s gross domestic product and more than 80 percent of its employment, has been virtually paralyzed since Nov. 8, when Prime Minister Narendra Modi announced a surprise ban on the country’s two largest currency notes, the 500-rupee bill (worth about $7.30) and the 1,000-rupee bill.” (Geeta Anand, Hari Kumar: NYT 29 november 2016). 

Some of the comments in the Indian press, particularly in the newspapers that represent the pro-financial circles are joyful: India will enormously accelerate the race of growth. How so? getting rid of the dead weight, the majority of the population that is unable to dance at the rhythm, pushing them out of the economic circuit, throwing them down from the racing train. 

“The problem for many is they do not know how to do without cash. In the Chawri Bazar, generations of traders have bought and sold paper, from wedding cards to calendars to packing material, mostly in cash. Their customers paid cash, and they used it to pay their suppliers and workers.”(Geeta Anand Hari Kumar: NYT 29 november 2016)

From the point of view of economic history the move of Modi seems inexplicable. It is not the first time that demonetisation is experimented: in November 1923, the German government introduced a new currency — the rentenmark — and declared all old reichsmark notes to be no longer legal tender, as domestic prices, already 14 times their 1913 levels in mid-1921 and 1,475 times towards end-1922, had skyrocketed to 1,422,900,000,000 times by November next year.

As the currency lost value by the minute, people rushed to spend their wages the very moment they received them, fuelling further inflation. The only way to deal with this situation was demonetisation: purging the system of all existing notes and launching a new currency backed by solid assets — in this case, land belonging to the state. With credibility restored, inflation fell and the run on the currency, too, ended.

On January 1, 1998 Boris Yeltsin changed the name of Russian currency, with a ‘new’ rouble being made equal to 1,000 ‘old’ roubles. with the intention of addressing rampant inflation. But the ‘new’ rouble’s exchange rate, which was 5.96 to the dollar on January 1, collapsed to 20.65 when the year ended, with consumer price inflation also soaring to 84.5%.

The Narendra Modi demonetisation of Rs 500 and Rs 1,000 banknotes — constituting over 86% of the total value of currency in circulation — hasn’t been undertaken in response to any hyperinflation or loss of confidence in the rupee. The rupee has actually been quite strong and annual consumer price inflation was just 4.2% in October. That implies that the Modi demonetisation does not follow the conventional logic of a currency ‘stabilisation’ measure, but is a ‘structural reform’, targeted at fostering cashless economy. 

The present demonetisation triggers spurt in digital payments paving the way for India towards cashless economy.

The demonetisation which initially paralysed the economy is now acting as a catalyst towards digital payment ecosystem. This seems to be the beginning of an economic transition. Indian newspapers relate that payment processing companies are overloaded and are racing the devil to accommodate the immense spike in traffic. But in India, most economic transactions take place in cash outside recorded market channels and hence go largely untaxed. This is fostering a parallel ‘black’ economy but this allows the majority of Indian population to survive. The brutal transformation of the currency system has already provoked panic, and casualties, but in the long run it may pave the way to a radical redrawing of the monetary field in the direction of radical digitalisation, and consequently to the expulsion of a majority of society. The digital divide may be turned into a tool for the elimination of the “non competitive” section of the human kind. Modi came to the fore fifteen years ago as responsible of the assassination of more than thousand Muslims in the city of Ayodhya. Now his projects are more ambitious, and he seems aimed to become the vanguard of a possible monetary Holocaust.



Best regards,

-- 
Leila Ueberschlag | Intern MoneyLab#3
Institute of Network Cultures
Amsterdam University of Applied Sciences | HvA
MoneyLab <http://networkcultures.org/moneylab/> | 1&2 Dec 2016 | Pakhuis de Zwijger, Amsterdam
www.networkcultures.org <http://www.networkcultures.org/> 
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