EFFORTS to convert societies into cashless economies gathered traction since the 2008 global economic crisis. Finance capital felt that this is a necessary transition to be made in order to overcome the deep-rooted crisis that is continuing in spite of, and in addition to, the various steps already undertaken. In order to ensure this transition, various financial institutions, corporates and governments have joined hands together.
Government of India, in partnership with USAID, Visa, Mastercard, Citi and various other corporates in 'Better Than Cash Alliance', shares their views on elimination of cash and its substitution with digital payments. USAID had piloted a research (July-September 2015) that focused on “increasing the use of digital payments at 'point of sale', particularly among low-income consumers”. This research was intended to serve as a 'resource to policymakers and business innovators as they work to accelerate the adoption of digital payments in India'. These indeed might be the elaborate preparations that went in, before the grand announcement made on November 8. And naturally, all these preparations or discussions focused on ensuring the transition in order to benefit the foreign multinationals and finance capital and not for mitigating the resultant hardships of the common people.
According to some economists, electronic monetary systems give the governments many 'new and potent steering tools' and are a step forward in ensuring a macroeconomic control, particularly in the aftermath of the 2008 global economic crisis. When banks and other financial institutions started collapsing during the financial crisis, people started withdrawing their money from the banks and started storing cash. Studies point to the increased volume of cash in circulation – Australia saw a 12 percent rise in demand for its currency in late 2008; Euro zone also registered a strong increase in the number of notes in circulation, equivalent to a value of €35-40 billion; similarly demand for cash increased during the 'Bankia crisis' in Spain where public demanded their money directly over the counter; in Cyprus and even in Italy in early 2016, this phenomenon was witnessed.
Money deposited in the banks is usually used to extend loans and is seen as a necessary instrument to spur economic growth. But if people lose their confidence and start withdrawing money from the banks, it effects the disbursal of credit. So, as a first step, all these monies have to be mopped back into the system in order to provide easy access to credit for the corporates. Moreover, it is with peoples money that many of the defaulting financial institutions are refinanced. 'Financial inclusion' through the banking system is a step towards the transfer of resources from the majority of the people to a few corporates. In our country, Jan Dhan Yojana is intended to serve this purpose. Financial inclusion is thus not about empowering people by providing them with means to earn money, but including them into the banking system to suck in their hard earned little money. Once money comes into the bank, they want to prevent a run on banks (panic cash withdrawals) and digital economy is a means to ensure this.
A former Bank of England economist, Jim Leaviss wrote in the London Telegraph (13 May 2015) that 'physical currencies and normal bank accounts' should be 'abolished' to give 'governments futuristic new tools to fight the cycle of 'boom and bust'. “And once all money exists only in bank accounts – monitored, or even directly controlled by the government – the authorities will be able to encourage us to spend more when the economy slows, or spend less when it is overheating...To boost spending, the bank imposes a negative interest rate on the money in everyone’s account – in effect, a tax on saving. Faced with seeing their money slowly confiscated, people are more likely to spend it on goods and services. What about the opposite situation – when the economy is overheating? The central bank or government will certainly drop any negative interest on credit balances, but it could go further and impose a tax on transactions. So whenever you use the money in your account to buy something, you pay a small penalty. That makes people less inclined to spend and more inclined to save, so reducing economic activity. Such an approach would be a far more effective way to damp an overheated economy than today’s blunt tool of a rise in the central bank’s official interest rate”.
It is these measures that are now put into practice, in order to lift the economy from the morass it finds itself in. Credit is made available to the corporates, but still consumer spending has not picked up. In order to push consumer spending, many banks are already pursuing zero-interest rate policies, which too are not yielding the desired results. So there is now a serious push towards pursuing a negative interest rate regime, where people will be charged to save money in their bank accounts. These policies can be effectively implemented only without currency in circulation. The Financial Times (August 15, 2015), writes: “The existence of cash – a bearer instrument with a zero interest rate – limits central banks’ ability to stimulate a depressed economy”. They believe that 'even a little physical currency can cause a lot of distortion to the economic system'.
With cash in circulation, people will not be tempted to deposit their money in banks paying interest (negative interest rates). They will prefer to stash cash in their houses or in some safe havens. Before the introduction of zero and negative interest rates, which is to its benefit, finance capital wants to plug this hole by fervently pushing for transition towards a digital economy. Negative interest rates are intended to forcibly push people towards consumption. Instead of increasing the purchasing power of the people, which is viewed as eating into its profits, finance capital tries to desist people from saving and pushes them to spend whatever they earn. In this manner they want to increase the flow of money, stimulate the economy, safeguard corporate profits and come out of the crisis. The Financial Times concurs: “No sense letting perfectly good money waste away in an expensive bank account”. With the salaries of everyone to be deposited in banks, people will have no other way but to spend their entire money, unless they intend to pay the banks charges for holding their deposits!
There is another added advantage of pushing people away from saving. People generally save in order to meet some unforeseen exigencies like illness, crop failure, death or even in some cases for celebrations like marriage, etc. But finance capital does not want to allow storage of cash even for these exigencies. Instead, it wants people to apply for loans to meet such expenditure, which is once again beneficial to it.
Sweden, one of the Scandinavian countries which is projected as a model cashless economy is already enforcing negative interest rates. Similarly, Denmark and even Switzerland have negative interest rates. Currently, interest rate stands at -0.35 percent in Sweden, but there the banks are not yet passing this onto their depositors as they fear depositors would simply withdraw all of their cash rather than leave it in banks. Till date it is banks that are bearing the costs of negative interest rates, but soon with the complete elimination of cash or forced push towards digital economy, they will pass on these negative rates to the people.
Another reason why finance capital wants governments to eliminate cash is because it does not leave any trace of its movement. Both the finance capital and governments want to know the details about how we spend our money and what we do with it. This is important for corporates as it gives them an idea of your spending patterns and can design their advertisements to mould your tastes to suit their production. Yes, it is never the other way round – production is not to meet our needs, but our needs are modified to meet the consumption of goods that earn maximum profits. Digital economy helps in the collection of this data.
M-pesa, the digital wallet in Kenya is touted as a hugely successful experiment in the transition towards a digital economy. M-pesa is a division of Vodafone and funds equaling to 25 percent of the country's GDP are transferred through it. Similarly in Nigeria, the government had introduced a Mastercard branded biometric national ID card, which also doubles up as a payment card. Through this 'service', Mastercard is gaining direct access to the personal and biometric data of over 170 million citizens or 'potential customers'. This is what is meant by possessing the 'users' spending habits', which is the 'last missing piece of information', that the corporates are after to boost their profits, particularly in these crisis times.
In India, this is sought to be achieved by the synergy between Jan Dhan accounts, Aadhar card and mobile connectivity. The USAID lovingly calls it as 'JAM' – where accounts will be opened for all to transfer cash in the form of bank deposits, Aadhar is used to collect the data and mobile is used to push for a digital economy – all at the service of corporates.
The governments too benefit from digital economy as they can trace the movement of money and can decide on the new taxes that can be levied through having a better feel of the 'pulse of the economy'. While the government subserviently bends before foreign corporates and finance capital in its push towards digital economy, all those holders of cash are branded as 'traitors', 'anti-nationals' or 'supporters of hoarders of black money', if not directly hoarding black money.
Digital economy hence, is now seen as one of the important means for the finance capital to come out of the current prolonged global economic crisis. Finance capital wants to mop up all the resources available for its service, forcibly push people towards consumption ie, spending and be dependent on loans to meet any or all exigencies. Finance capital feels that through the elimination of cash from circulation it can better form monetary and fiscal policies to subserve its insatiable quest for profits. The present solution – a push towards digital economy – is one of the many 'forcible solutions' that capital is trying, to wriggle out of the 'existing contradictions'.
Time and again history has proved that no amount of reform within the capitalist system can rid it of crisis. Capitalist system intrinsically is crisis ridden because of its primary contradiction between the social nature of production and individual nature of appropriation. Unless this basic contradiction is resolved, there can be no real way out of this crisis.
Engels writes: “On the one hand are immeasurable riches and a superfluity of products which the purchases cannot cope with; on the other hand, the great mass of society proletarianised, turned into wage-workers, and precisely for that reason made incapable of appropriating for themselves this superfluity of products. The division of society into a small, excessively rich class and a large, property-less class of wage-workers results in a society suffocating from its own superfluity, while the great majority of its members is scarcely, or even not at all, protected from extreme want. This state of affairs becomes daily more absurd and more unnecessary. It must be abolished; it can be abolished. A new social order is possible...” (emphasis added) This new social order is possible only through the actions of 'real living man' who 'possesses and fights' (class struggles) for the abolishment of the old order.