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The drive to rid India of black money

Will the state’s gamble with the economy pay off?

What happens when the government suddenly declares that the money in your pocket is worthless? The people of India found out at midnight on 8 November 2016, when Prime Minister Narendra Modi made a surprise television announcement to the effect that 500 and 1,000 rupee notes (worth about £6 and £12) were now illegal tender. Anyone holding undeclared money would either have to put it in a bank account to make it “legal”, or destroy it. Predictably, chaos ensued.

Modi presented this move towards demonetisation as a shock measure to destroy the widespread circulation of so-called black money, the catch-all term for illegal or unaccounted-for income. In India, some see black money as a barrier to economic growth, because it is untaxed. It is also hard to measure the GDP of a country when so much of its financial activity happens off the books.

Citizens were given a small window of time to spend the old currency on approved things, such as hospital bills, travel tickets and fuel. From 9 November banks were closed and cash machines were shut for two days, after which withdrawal of legal tender was capped at 2,000 rupees a day. A new 2,000-rupee note was introduced on 10 November. Residents could exchange their old currency at the banks until the end of December.

The bank queues stretched for miles and the price of gold rose by 40 per cent. Rural India suffered particularly badly, as access to supplies of the new notes was limited, and farmers reportedly suffered bankruptcy in the ensuing liquidity crunch.

Things have settled somewhat in 2017. Cash is more readily available, though reports of empty cash machines continue to surface. Official economic growth predictions have been revised down from 7.5 per cent to between 6.5 and 7 per cent. Even so, this doesn’t appear to take in the full, as yet unknown impact of demonetisation on India’s huge informal sector.

The annual Mumbai Derby is the premier horse-racing weekend of the year, and cash is vital to the sport. Where better to gauge the effect of demonetisation than among bookies at the Mahalaxmi Racecourse? So one recent afternoon I put on a suit and panama hat and went to find out.

Gambling is illegal in India, except in horse racing, and because of the danger of discussing illegal money in public, everyone I spoke to requested that I use a false name for them. After I placed my first bet (500 rupees on Undisputed – I lost) Sanjay told me that he bets on behalf of other people, often placing well over a lakh (100,000 rupees) on any given horse.

“Black money returned to the races immediately after demonetisation,” he said. “When the move was announced, all the horse racing was cancelled for a week, but as soon as it reopened people came and spent big . . . I’d say at least 70 per cent of the money here is black.”

During my third punt (300 rupees on Aspen – it lost), Rahul told me that the big problem India faces is tax collection. Rahul works in the aviation industry, an official employer that is compliant with income-tax rules. Yet between only 1 and 2 per cent of Indians pay direct income tax.

“If there is a loophole,” Rahul said, “we will always take it. Traditionally, going back to the British Raj and the rulers before that, tax has been used to punish people. There’s still no faith in government or banks among normal people here, so there is no desire to pay income tax.”

In a recent report, Bloomberg claimed that just 6 per cent of black money in India is in the form of cash. The rest is in property, offshore accounts and commodities such as gold. The economist Prabhat Patnaik and others have said that demonetisation will do nothing to eradicate black money and will lead to recession.

Sanjay told me that he did know of big-time racing clients who had been asked by the government to explain where their post-demonetisation cash deposits came from. But, he said with a wink, “It’s very easy to pay an accountant to work out where it came from on your behalf.”

The government rhetoric has since moved on from eradicating black money, and there is now talk of moving to a digital future. Jokes about the new “cashless India” being more like “less cash India” abound. A group of lads at the bar told me that the “cashless” system was just a Big Data collection – a way for the government to acquire digital records for more citizens.

With the exponential growth of Paytm (a form of mobile money transfer) and the Jio network (which offers three free months of unlimited phone data for Indians with registered identification), it’s easy to see the origins of these quips. Furthermore, India’s controversial mass surveillance project, known as “CMS”, will become fully operational this year. Add to this the recent statement by the country’s attorney general, Mukul Rohatgi, that “violation of privacy doesn’t mean anything because privacy is not a guaranteed right”, and it becomes even more evident that this is a popular conspiracy theory in the making.

I placed my final bet on the last race of the day, throwing 600 rupees on Allora, a hot tip from Sanjay. Allora came from behind to win, leaving me jumping for joy and finally in profit. But the real winners of demonetisation are yet to be revealed. Will Modi’s great gamble with India’s economy pay off? Only one thing is clear: the odds are fluctuating every week.

This article first appeared in the 09 March 2017 issue of the New Statesman, The return of al-Qaeda

Photo: LYNSEY ADDARIO
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What Happened reveals Hillary Clinton as a smart thinker – unlike the man who beat her

Those asking why she blames everyone but herself for Donald Trump clearly haven't read the book.

Hillary Clinton is smug, entitled, dislikeable, hawkish, boring. She was unable to beat a terrible Republican presidential candidate. Why doesn’t she just shut up and sod off? Bernie would have won, you know. Sexism? There’s no sexism in opposing someone who left Libya a mess and voted for the Iraq War. Also, she had slaves.

This is a small sample of the reactions I’ve had since tweeting that I was reading Clinton’s memoir of the 2016 campaign. This is one of those books that comes enveloped in a raincloud of received opinion. We knew the right hated Clinton – they’ve spent three decades furious that she wanted to keep her maiden name and trying to implicate her in a murder, without ever quite deciding which of those two crimes was worse. But the populist candidacy of Bernie Sanders provoked a wave of backlash from the left, too. You now find people who would happily go to sleep in a nest made out of copies of Manufacturing Consent mouthing hoary Fox News talking points against her.

One of the recurrent strains of left-wing criticism is that Clinton should apologise for losing to Trump – or perhaps even for thinking that she could beat him in the first place. Why does she blame everyone but herself?

Perhaps these people haven’t read the book, because it’s full of admissions of error. Using a private email server was a “boneheaded mistake”; there was a “fundamental mismatch” between her managerial approach to politics and the mood of the country; giving speeches to Wall Street is “on me”; millions of people “just didn’t like me… there’s no getting round it”.

Ultimately, though, she argues that it was a “campaign that had both great strengths and real weaknesses – just like every campaign in history”. This appears to be what has infuriated people, and it’s hard not to detect a tinge of sexist ageism (bore off, grandma, your time has passed). Those who demand only grovelling from the book clearly don’t care about finding lessons for future candidates: if the problem was Hillary and Hillary alone, that’s solved. She’s not running in 2020.

Clinton marshals a respectable battalion of defences. Historically, it is very unusual for an American political party to win three elections in a row. The Democrats (like Labour in Britain) have longstanding problems with white working-class voters outside the big cities. Facebook was flooded with fake news, such as the story that the Pope had endorsed Trump. And besides, Clinton did win three million more votes than her Republican rival.

Added to which, it is now hard to deny that Russia interfered heavily in the US election, with Trump’s approval – “Russia, if you’re listening, I hope you’re able to find the 30,000 emails that are missing,” he told a press conference in July 2016 – and perhaps even with the active collusion of his campaign. The next Democratic candidate will have to reckon with all this.

The election outcome would have been different if just 40,000 voters in three key swing states had flipped, so there are dozens of potential culprits for Clinton’s loss. But perhaps one of the reasons that many in the US media have been so hostile to the book is that it paints them as such villains. Even now, it is common to hear that Clinton “didn’t have an economic message”, when a better criticism is that no one got to hear it.

In their mission not to be accused of “elite bias”, the media desperately hunted for bad things to say about Clinton, when none of her offences came close to the gravity of a totally unqualified, unstable man with no government experience going on a year-long bender of saying mad shit and boasting about sexual assault. In both the primary against Sanders and the general election, she was treated as the obvious next president, and held to a different standard. (Incidentally, there is surprisingly little criticism of Sanders in here; she credits him with helping to write her policy platform.)

The book is at its best when it reflects on gender, a subject which has interested Clinton for decades. She calculates that she spent 600 hours during the campaign having her hair and make-up done, as “the few times I’ve gone out in public without make-up, it’s made the news”. She writes about the women she met who were excited to vote for a female president for the first time. She mentions the Facebook group Pantsuit Nation, where 3.8 million people cheered on her candidacy. (Tellingly, the group was invite-only.)

Yet Clinton was never allowed to be a trailblazer in the way that Barack Obama was. That must be attributed to the belief, common on the left and right, that whiteness and wealth cancel out any discrimination that a woman might otherwise suffer: pure sexism doesn’t exist.

The narrative of the US election is that Clinton was deeply unpopular, and while that’s true, so was Trump. But where were the interviews with the 94 per cent of African-American women who voted for her, compared with the tales of white rage in Appalachia? “The press coverage and political analysis since the election has taken as a given that ‘real America’ is full of middle-aged white men who wear hard hats and work on assembly lines – or did until Obama ruined everything,” she writes.

Clinton faces the uncomfortable fact that whites who feel a sense of “loss” are more attracted by Trump’s message than Americans with objectively worse material conditions who feel life might get better. That is an opportunity for the left, and a challenge: many of those Trump voters aren’t opposed to benefits per se, just the idea they might go to the undeserving. Universal healthcare will be a hard sell if it is deemed to be exploited by, say, undocumented immigrants.

Yes, What Happened is occasionally ridiculous. There’s a section on “alternate nostril breathing” as a relaxation technique that a kinder editor would have cut. The frequent references to her Methodism will seem strange to a British audience. The inspirational stories of the people she meets on the campaign trail can feel a little schmaltzy. But it reveals its author as a prodigious reader, a smart thinker and a crafter of entire sentences. Unlike the man who beat her. 

What Happened
Hillary Clinton
Simon & Schuster, 494pp, £20

Helen Lewis is deputy editor of the New Statesman. She has presented BBC Radio 4’s Week in Westminster and is a regular panellist on BBC1’s Sunday Politics.

This article first appeared in the 21 September 2017 issue of the New Statesman, The revenge of the left