Vol. 80/No. 46      December 12, 2016

 

Indian gov’t attack on access to cash blow to workers

 
Indian Prime Minister Narendra Modi abruptly voided 500 and 1,000 rupee notes Nov. 8 ($7.30 and $14.60) — some 86 percent of cash in circulation. He claimed the move would deal a blow to the “black” economy, increase tax revenue and fight crime and corruption. The move caused a crisis for millions of workers and farmers whose family savings are kept outside the banking system in cash and gold.

The Indian rulers’ reduction of cash is aimed at advancing the development of a modern capitalist state, sweeping aside vestiges of pre-capitalist social relations. Two-thirds of the country’s 1.27 billion people live in the countryside and most function solely with cash. The informal or underground economy that operates with cash or gold involves 80 percent of the workforce and produces about 45 percent of the gross domestic product.

This keeps capital out of the hands of the banks and prevents the state from collecting taxes. Modi’s government seeks to get control of these massive funds, allowing for infrastructure development that can expand production, commerce and investment.

Indians can deposit banned notes into bank accounts until the end of the year, but tax officials said they will take a close look at all deposits above 250,000 rupees ($3,650). Only small amounts may be exchanged for cash.

Modi’s steps come as the government pushes greater use of banks. Between September 2014 and February 2015 bank accounts increased from 53 million to 128 million. But 84 million of them had a zero balance.

The government announced Nov. 21 that $80 billion of the $220 billion in outlawed notes had been turned in.

Reducing cash in workers’ hands is a popular idea among capitalist planners worldwide. Former U.S. Treasury Secretary Lawrence Summers and European Central Bank chief Mario Draghi are on the bandwagon. They argue that big bills are overwhelmingly used by criminals, terrorists and those who employ workers lacking immigration papers.

But the rulers’ real objective is to prevent workers and others from hoarding cash to avoid paying taxes, bank fees and credit card companies’ steep interest rates. Forcing workers to put their money in the bank strengthens the hands of central banks like the U.S. Fed, the big private banks and the propertied rulers’ government.

“What the government fears is that if people use cash, they’ll be able to act privately,” Seth Lipsky wrote in a New York Sun op-ed earlier this year. “It’ll be harder to impose on them the sky-high taxes the government likes.”  
 
 
Front page (for this issue) | Home | Text-version home