Digital Economy: Who Benefits?

R Arun Kumar

FIFTY days, that the Prime Minister Narendra Modi had asked of the people, were completed but with no signs of abatement of hardships. These fifty days have brought to light umpteen stories of hardships that the people had to suffer in order to access their hard earned money. These fifty days also witnessed the goalposts of demonetisation shifting continuously. First it started as a measure to combat black money and terrorism. Later it was championed as a necessary step for transition towards a 'cashless society', which yet again was subtly modified to a 'less cash society'. All through this 'campaign' for demonetisation, one thread that ran consistently is an appeal to the patriotic sentiment of the people to stand up for a just cause. In this background, it becomes necessary to understand whose interests are being served by the demonetisation drive, who has been urging this transition and why.
Organisation for Economic Cooperation and Development (OECD), in a report on the 'The Future of Money', had stated way back in 2002 that “money's destiny is to become digital”. The report commented with extreme foresight that this transition will not be painless. “The development of electronic money is unlikely to be a smooth, linear or harmonious process. In all probability, it will be a rough, meandering and contentious journey”. The OECD Report also states that the 'introduction of monetary systems where digital money predominates could achieve the goals of less crime and easier collection of taxes'. It is these very words that our prime minister and the government are parroting today.
In fact, it is not only our government that is parroting the benefits of 'cashless' economy as defined by the OECD. In the US, the central planners had defined their 'war on cash' as a 'war on crime, a war on terror, a war on drugs and a war on poverty'. Korea which also had started its move towards achieving the goal of 'cashless society by 2020', this year, declared the objective as to 'partly solve the problem of underground economy' and to curb 'tax evasion, drug transactions and bribery'. World Bank and McKinsey which are also encouraging many countries to shift to a digital economy also suggested these themes to sell their idea.
World Bank had advanced the idea of cashless society as a 'key strategy to fast track growth in Nigeria' in 2011 and also as a means to eliminate corruption. Exposing the fallacy of these ideas, Tajudeen J Ayoola, writing in 2013 on the effects of cashless policy of government on corruption in Nigeria, on the basis of a ground level survey, stated: “cashless economy will not bring any tangible results in the anti-corruption effort unless it is accompanied by other measures...With respect to the effectiveness of the cashless policy in curbing corruption, 48 percent of the respondents affirmed that the policy is ineffective in curbing corruption while 5 percent believed that it is effective in curbing corruption”. Similar is the experience of many countries.
Still, imperialist agencies like the World Bank and OECD, consultants like McKinsey and others continue to persist with this false propaganda and many countries have announced or are announcing their intentions to shift to digital economies. Apart from the Scandinavian countries like Sweden that are already at an advanced stage of 'digital economy', countries like Italy, Switzerland, France, Russia, Spain, Mexico and others have imposed restrictions on cash transactions. Many more countries are incentivising digital transactions. McKinsey in its report advices: “Governments may need to step in with incentives or other measures to promote adoption in the early stages of market development”. Following suit, our government too has, in its quest to encourage digital transactions, announced many incentives.
The intention for pushing our economy to digital mode was made clear by the finance minister in his budget speech last year (2015-16) itself. “One way to curb the flow of black money is to discourage transactions in cash. Now that a majority of Indians have or can have, a RuPay debit card, I therefore, propose to introduce soon several measures that will incentivise credit or debit card transactions and disincentivise cash transactions”. Further, the finance ministry in an open call on its website, asked for public opinions till June 2015, on its draft proposals for facilitating electronic transactions. So what is happening today in our country appears to be a well thought out plan.
A paper written by Elizabeth Kolar, titled 'Towards a Cashless Society', way back in 1993, hints at a link in the growth of ATM's, POS and in the higher denomination notes being circulated in large numbers in a society. She writes: “The transition to a cashless society involves an increase in cash usage prior to its disappearance for all but low-dollar and 'discrete' transactions”. Though there was a discussion on the transition towards a digital economy right from the invention of the credit and debit cards, the idea gathered velocity particularly since the 2008 global economic crisis. It is particularly post crisis that many countries are pushing towards digital transactions. This in itself should cause some consternation.
Immediately after the announcement of demonetisation in our country, it was the Visa and Mastercard who were among the first to welcome the move. Bloomberg had reported in late November that “The two networks (Visa and Mastercard) have been pushing for this kind of change in India, where a McKinsey & Co. study found that more than 90 percent of transactions are still conducted in cash”. An analyst at Credit Suisse Group had commented: “Visa and Mastercard both benefit as paper currency or cheques turn toward electronics” and “When we think about where they are investing, they look toward areas where there is the potential to accelerate that transition,” adding that the recent changes in India are “something they know how to move in on”. Accordingly reports indicate that “1.58 crore Mastercard debit cards were used during the period, up 76.84 percent over November 1-8. Mastercard credit card transactions went up by about 24 percent to 57.31 lakh. In the case of Visa, the increase in debit and pre-paid transactions stood at 93 percent”.
The OECD report quoted earlier states: “the shift to the predominant use of digital money could both facilitate the entry of new competitors into the financial sector and encourage the emergence of new revenue models for many intangibles, including intellectual property” and that “it will facilitate the development of new products and services, not only in the financial sector but also in various forms of electronic commerce”. McKinsey in a report on how digital finances boost growth in emerging economies, released in September 2016 details the 'benefits': “Digital payments could further enhance revenue by reducing the size of the informal economy...Over the longer term, digital payments can enable development of e-commerce and on-demand services...But digital payments can unleash more rapid growth, given their greater convenience. In turn, e-commerce can unlock consumer spending”. Further, “Like electricity or roads, a digital-payment network is part of the basic infrastructure of an economy that enables individuals and businesses to transact with one another seamlessly. It also can underpin a broader and more innovative array of business activities...the increased transparency and information about users generated by digital payments can spawn new types of financial services”.
Declaring that for emerging economies, the 'new frontier is finance', the report eggs the governments to transit for digital economies. It projects a GDP growth of 10 to 12 percent for India – a result of such a transition. For this, the report wants India and similar emerging economies to further open up their markets: “Beyond issues of regulation, countries also need to create an environment that is conducive to competition and encourages providers to offer a broad range of new products and financial services. Among the elements needed to stimulate innovation are a competitive market structure, business-friendly regulation for new entrants, financial markets open to foreign investment and talent, and financial capital available for innovation”.
McKinsey identifies India to be ready for such a transition. It states that at least three conditions should be met to ensure such a transition. One, establishment of a widespread mobile connectivity and ownership, two, a national digital-payment infrastructure and three, the existence of a well-disseminated personal ID system with chips or biometric identification. The neo-liberal economic policies since the 1990s have already fulfilled all these measures, with the latest addition of Aadhar card. Now the stage is well set for the next step – digitisation of the economy. As Daniel Höfelmann from the Innovation team of Credit Suisse Digital Private Banking states: “Finding out the users' spending habits is the last missing piece of information”, as “the next key battle will be about using the customer purchase data associated with the payments”. Barbara Lejczak, editor, Credit Suisse, states that the parties interested in customers' data are both the new players and the companies already active in the field of payments. McKinsey report finally lets the cat out of the bag: “This is a profitable business opportunity and the door is wide open”.
This move for demonetisation by the Indian government thus appears a calculated move to further open profitable business opportunities to the vultures of finance capital. The promise of the BJP government to usher in 'big-bang reforms' seems to be set in motion with this move.
The secretary general of OECD promised the governments initiating such reforms of all the help possible. He asked them to look ‘beyond elections’, which he calls as a 'downside of democracy'. He urges the governments to look beyond the next election in order to 'capture those issues of the future' for which the ground has to be prepared today. The BJP government seems to have taken his advice seriously and hence prepared the ground for the preying of finance capital. Indians are being sacrificed for the profits of foreign multinationals. On the other hand, for winning elections, it is fanning communal strife and unleashing authoritarianism. This is quintessential BJP mark of nationalism – kowtowing to imperialism, opening the economy to foreign capital and suppressing the growing dissent in the country with authoritarianism. This needs to be resisted and fought by combining our struggle against neo-liberalism and authoritarianism. Safeguarding the interests of the people and country is really what nationalism is all about.

Post Script: Indian government is a partner of The Better Than Cash Alliance which is an alliance of fifty governments, companies, and international organizations includes Visa, Mastercard, Citi foundation, Ford Foundation and USAID to accelerate the transition from cash to digital payments.

courtesy by : PD