Through India's current demonetization crisis, in which the government cancelled the validity of most banknotes in the hope of making the entire economy digital, an interesting case study has arisen. What is being kept in mind in the reform, and what should be kept in mind? Whom is this reform for? Increasing economic performance is pointless, if not dangerous, if it puts the lives of the poorest at risk.
Modi’s shockwave reform was intended to tackle the country's corruption and tax evasion. Immediately after, lines started forming at the country's banks, people were unable to conduct their daily business in a country in which most transaction are made in cash, and all operation were put on hold, due to the market instability.
Despite the middle-class resorting slowly to online payments and electronic money, with smartphones and computers, most transactions are still carried out in cash in India – including large ones such as rent payments or even real estate investments. Some small businesses have lost up to 90% of their income in the demonetization reform, which they call “the worst crisis they have ever been hit with.”
The publicly stated goal was ethics: to protect the poor and humble citizens from the tedious effects of corruption. But if the reform brings more hardships than ease, then clearly the reform is a failure – a clear-cut case of remedy killing the patient. But the point wasn't ethics, it was economic.
Citizens with some wealth already opted long ago for the advantages of electronic payments, without being forced into it by the state. The most they will endure is an increase in their taxation levels, now that all their money is visible by the state, and a severe loss of democratic freedom, with a government which now almost completely controls their lives. The upper class will, as always, simply adapt to the new situation and find a way to protect its wealth. Those who will, in the end, suffer the most are the poor. Those whose fate was invoked to justify the reform.