Prime Minister Narendra Modi’s assertion that the people we see queuing up for withdrawing money from the banks and ATMs is “a line to end all lines”. This perception is of a piece with what Sir Karl Popper once called “utopian social engineering”. Utopians attempt to establish an ideal state in which two acts are performed simultaneously ~ (a) conflicts in social life are resolved satisfactorily; and (b) some presumed ultimate human ends are met. The crux of the problem arises when any such scheme calls for a radical overhaul of the existing edifice. It calls for decisive intervention in the interests of a societal whole and the intervention is to ‘lessen the birth pangs’, to quote Marx. Popper contends that such utopian social projects are only superficially attractive as they lead to several unintended and negative consequences.
The reason for a wide gap, as we have noticed in the present demonetisation drive, between the expectation and the consequences, is because the social world is extremely complex and our knowledge of the same is incomplete, in spite of one’s best efforts. It is this inherent limitation that renders an untested grand design normally ineffectual. Popper observes: “The greater the holistic changes attempted, the greater are their unintended and largely unexpected repercussions forcing on the holistic engineer the expedient of piecemeal improvisation” or the “notorious phenomenon of unplanned planning.” Even the most carefully planned action is fallible; which is why Popper once asked, “Who plans the planners?”
The inherent assumption is that individuals are pawns in a larger social system and are subordinated to social forces beyond their control and this inevitably leads to the emergence of authoritarian regimes. Centralised planning leads to concentration of power in the hands of a few or even in one person, paving the transition from democracy to authoritarianism.
There is a certain hostility to public criticism, which stops the essential flow of feedback and the real impact of policies. This further curtails the effectiveness of such policies. Popper says that a such a situation makes the utopian planners totally indifferent to miseries that such plans can cause. Suffering is assumed to be an essential part of such a process as the undefined utopia would justify such hardships for the present. The line to end all lines surely falls in this category.
While developing this impressive theory, Popper changed the important question ~ Who should rule to a novel one: “How can we so organise political institutions that bad or incompetent rulers can be prevented from doing too much damage. This institutional design is only possible within democracy as problems can be solved by providing a non-violent and institutionalised mechanism of change to get rid of bad rulers.”
For Popper, the intrinsic value of democracy is not the sovereignty of the people as ‘the people do not rule anywhere, it is always governments that rule”. In the mass democracies of today the role of the people is to get rid of incompetent, corrupt or abusive leaders at regular intervals.
Narendra Modi’s demonetisation scheme perfectly matches Karl Popper’s prescriptions of utopian social engineering. It has been a futile attempt to achieve a grand transformation within 50 days, marked by different and often contradictory clarifications in 40-odd days to the scheme that was announced on 8 November 2016. Formal institutional and parliamentary channels were bypassed. Subsequent changes left enough scope to legalise black money. From a crusade against black money the goal post was changed to cashless economy and digital payments reducing the policy from a tragedy to a farce.
It never differentiated between black economy and black money, the latter always a small portion as the tax evaders keep a small amount in cash and the rest is invested in real estate, bullion, foreign currency and accounts in tax havens beyond the reach of law. It has not stopped the generation of black money in new currency notes. The limited demonetisation of the Morarji Desai’s government was no deterrent to accumulation of black money.
The unintended consequences of demonetisation are the deaths of many people who stood in the queues for hours, loss of jobs in the unorganised sector, slowing down of demand, sluggish economy, fear of substantial fall in growth rate, foreign investments and tourists and above all erosion of faith in cash. The BBC observed that India received 8 million tourists in 2016 and predicted that next year, it would be half of this number and the many who came this year would never ever revisit India. Before invoking demonetisation, the reasons for which were more political than economic, the Modi government should have analysed our own capacity to replace such huge currencies and the costs involved in doing so.
The US, whose currency is the most sought after, has never thought of demonetisation. It faces considerable problems while dealing with black money and dirty cash especially when a large chunk is held outside the US. But it has never declared its own currency illegal since the introduction of currency notes in 1862. The US knows that its currency is the essential basis of its financial strength and credibility, on which the entire world has unshakeable confidence.
Many have commented on the rise of an invasive and a maximalist government as there is an attempt to undermine the citizen’s right to privacy and choice about the mode of payments. The crux of the matter is that a currency note is a solemn promise which under any circumstances is to be honoured. Demonetisation by the Modi government has undermined that one cardinal principle, thereby denuding our position on the comity of nations, specifically as a democracy which is far from perfect. It is a setback that will take decades to heal, if it is totally healed ever.

(The writer is retired Professor, Department of Political Science,
 University of Delhi)