Demonetisation and Utilitarianism: A Critique

Demonetisation and Utilitarianism: 

A Critique

AUTHOR: Manmeet Singh Monga,
3rd year,
Rajiv Gandhi National University of Law, Punjab.

Abstract

The Prime Minister of India conducted the surgical strike on November 8th 2016. This surgical strike neither used any weapons nor there was any physical harm done but this was done to curb the menace of black money, corruption and counterfeit notes. Demonetisation was done, withdrawing Rs 1000 and Rs 500 as a legal tender money. In India, this demonetisation cum surgical strike has been done thrice. The first one was in 1946 which had no impact as such. The second one was in 1978 which also didn’t have a great impact. But this time it had a great impact because the 98 percent of the transactions in the economy were based on cash. Problems were faced by the people especially in rural areas and also persons with disabilities. Now, talking about the concept of utilitarianism. Originally, the concept was given by Francis Hutcheson who defined it as “that action is best, which procures the greatest happiness for the greatest numbers; and that, worst, which, in like manner, occasions misery.” Now correlating the surgical strike with utilitarianism, the policy was formulated through the veil of ignorance given by John Rawls. The government made no difference between rich and poor and so on. But they kept in the mind the right to life, right to travel and also the grace period was given to people. So utilitarianism was kept in mind as the objective was to curb corruption and the menace of black money but in the end it failed as the objective was not fulfilled. Talking about the demonetisation held in Venezuela, the country was already stuck in the loop of hyperinflation. So it had a great impact on the lives of the people there and in the end chaos reigned.

Both the countries showed that the governments were reluctant to serve for the pleasure but only caused pain in the end. Indian side was still better as the move got support from the citizens as there were some good points in favour but in Venezuela, the move was not welcomed by the citizens and hence, it was a complete failure.

Introduction


The following project will try to cover the concept of demonetisation was conducted by the government of India on 8th November 2016. It was a surgical strike which had the motive of curbing the black money and also the menace of corruption. India has done this surgical strike three times but this time it left a great impact on the economy. The project will try to discuss the concept of “Utilitarianism” given by Francis Hutcheson which talked about the greatest good and greatest number, i.e. the maximum pleasure and minimum pain. The project will also try to cover the concept of “Hedonic Pleasure”

The concerned project will focus more on the concept of rights given by John Shue because in the end the concept of Utilitarianism talks about the individual rights and their aggregates so as to calculate the maximum pleasure as well as the pain. It will also cover the “circulation of money” as a subsistence rights and how it was affected by the surgical strike cum demonetisation which was conducted by our government. The project will also try to compare the healthcare problems in the two countries, i.e. India and Venezuela.

The project will compare the demonetisation conducted in two countries, i.e. India and Venezuela and will also try to find out that which country was able to satisfy and give more pleasure to the people in terms of their basic rights with minimum pa
in in terms of the violation of their rights and less casualties.
The project will also try to compare the healthcare problems in the two countries, i.e. India and Venezuela.

Demonetisation


India’s GDP is around 18 percent which brings it in the category of the developing countries. The reason mentioned by the government in the Union Budget 2017-2018 is that the country is a tax non-compliant country as a result it acts as a deterrent to the economic growth of the country. Tax evasion and the corruption act as a deterrence to the economic growth as a result India tried to avoid this situation by conducting the surgical strike cum demonetisation on November 8, 2016 so as to tackle the menace of black money and corruption. The fight against the black money was further reflected in the Union Budget of 2017 where the government made restrictions on the funding of political parties and also on the cash transactions. Also in the Union Budget[1] of 2018, the government focused more on the infrastructure for promoting digitalisation. The decision of the government has helped in educating the masses regarding the benefits of doing transactions through digital methods so that the people can see the transparency and how their money is channelizing from one source to the other.

Initially, the surgical strike cum demonetisation had a two- fold objective, the first one was to curb the menace of black money and to prevent corruption and the second one was to stop the black money from funding the militancy and terrorists activities. In India, black money accounted the 10 to 30 percent of the country’s national income in the year 2016. The total currency circulating in the economy as on March 31, 2016 was Rs. 16,145 billion of which Rs.1,000 denomination account for 38.6 per cent (Rs. 6,326 billion) and Rs.500 account for 47.8 per cent (Rs. 7,854 billion). The total amount of Rs.500 and Rs.1,000 notes amounted to Rs.14,180 billion as compared with India’s GDP of Rs.1,35,761 billion in 2015-16 or about 11.5 per cent of GDP, increasing nearly threefold from 2.8 percent in 2001.

The history of Rs. 1000 note is quite fascinating. It has been demonetized twice before being demonetised for the third time on November 8, 2016.In India, demonetisation has been done twice. The first one was conducted in the year 1946 in which the currency notes of Rs. 1000 and Rs. 10000 were demonetised. Since the higher currency was not accessible to the common people, it had a very less impact on the lives of people. It only had an impact on the functioning of the State Bank of India because at that time there were only 71 bank offices. As a result, there was a burden on the employees of the bank.

Another demonetization was conducted in the year 1978. This time, the government demonetised the currency notes of Rs. 1000, Rs.5000 and Rs.10000. The decision was kept highly confidential. The move had a political motive because the newly elected Janata government wanted to target some of the alleged corrupt elements in the government. The impact of this surgical strike on the lives of common people was very less as the demonetised notes formed only a small portion of the total money supply during that time.

The government of India conducted the surgical strike for the third time in the year 2016 so that the country can protect itself from the menace of counterfeit notes and corruption. The government kept in mind about the fundamental rights of the citizens and so acknowledging the constitutional provision of right to life, the government allowed the use of old notes for medical treatment and buying medicine with doctor’s prescription, and making payments for milk and utility bills. To ensure convenience and freedom of travel within the country, purchase of tickets for railway, bus and air travel were permitted with old notes, and toll on highways was exempted so that the lives of people are not affected that much. The aim was not to disrupt the lives of common men but to curb the menace of black money and corruption which acts as a deterrent to the economic growth.

Reasons Of Demonetisation


Black Money

Demonetisation[2] of 2016 was a bold move by the government of India so as to curb the menace of black money. pockets of the rich businessmen, property dealers, jewellers, foreign currency dealers and politicians which were filled with the unaccounted income could be easily identified with this move of the government. The unaccounted income in their pockets had created the parallel economy in the country and as a result India was still considered to be among the developing countries.

Counterfeit Notes

Counterfeit notes have been wasted by the surgical strike conducted by the government of India in 2016. Withdrawing high currency notes from the country had a great impact on the counterfeit notes in the economy and as a result it will put an end to the terror funding in the state of Jammu and Kashmir and naxalite hit north- eastern states. Demonetisation has converted those counterfeited notes into a mere piece of paper having no value.

Promoting Digitalization

The main objective of the surgical strike cum demonetisation was to encourage the cashless transactions which can bring more transparency in the economy. More digital transactions will lead to more disclosure of income and as result the direct tax collection would be easier.

Ending The Maoists Activities

The main purpose of the demonetisation was to hit the currency which was available with the Maoists so that the activities detrimental to the lives of people could be preventedMaoists at Baster Chhattisgarh had hoarded over Rs. 7000 crores with them. All such currency with them after the surgical strike is nothing but pieces of paper.
Rise In The Gdp

Although demonetisation had a very negative impact on the sectors such as real estate and property, construction etc. it was believed that the long term benefits for GDP growth will outweigh the short term problems created by the surgical strike of 2016.

Utilitarianism


Jeremy Bentham[3] and JS Mill talked about the concept of utilitarianism. According to them an action is right if it tends to promote happiness and an action is wrong if it tends to promote the opposite of happiness and causes
pain. The theory is basically the opposite of the theory of egoism in which an individual tries to work for his own self- interest and is not concerned with the rights and happiness of others. Utilitarian approach on the other hand has an altruistic approach which is generally concerned with the welfare of others. An individual basically will end up doing things which cause more happiness to others and laso less pain. Utilitarianism also 
differs from ethical theories that make the rightness or wrongness of an act dependent upon the motive of the agent, for, according to the utilitarian, it is possible for the right thing to be done from a bad motive. Utilitarians may, however, distinguish the aptness of praising or blaming an agent from whether the act was right.  

Utilitarianism generally tries to offer an answer to the practical question “What ought a person to do?” the answer given through the Utilitarianism approach is that an individual ought to act so as to produce the best consequences possible which brings maximum happiness with least possible pain.

In assessing the consequences of actions, utilitarianism relies upon some theory of intrinsic value: something is held to be good in itself, apart from further consequences, and all other values are believed to derive their worth from their relation to this intrinsic good as a means to an end. Bentham and Mill were hedonists; i.e, they analyzed happiness as a balance of pleasure over pain and believed that these feelings alone are of intrinsic value and disvalue.

They also think that it is pragmatic to compare the intrinsic values produced by two alternative actions so that the conclusion can be drawn that which action is better and what an individual ought to do.

Actions which bring more pleasure, maximum happiness with the least pain involved, that is the action which an individual sought to achieve.
 Such precise measurement as Bentham envisioned is perhaps not essential, but it is nonetheless necessary for the utilitarian to make some interpersonal comparisons of the values of the effects of alternative courses of action.

Rights Of An Individual

Henry Shue has talked about the concept of a moral rights which seeks to provide a rational basis for a justified demand and that the actual enjoyment of a substance be socially guaranteed against standard threats. Rights are not merely considered to be gifts that are given on account of gratitude or something motivated by love or pity. A right is something that can be demanded or insisted upon without being embarrassed or ashamed. Right is one’s due which is given to them on demand.

The substance of a right is whatever the right is a right to. Right does not mean to enjoy right but to enjoy something else like food, shelter, liberty. Also being socially guaranteed is the most important aspects which necessitate correlative duties. One’s right is always other’s duty to perform. And a right has been guaranteed only when arrangements have been made for people with the right to enjoy it.

Now looking at “circulation of money” as a right which was breached due to the surgical strike conducted in the economy on November 8, 2016. Circulation or velocity of money is the average number of times a unit of currency passes from one hand to another. For example a farmer spent Rs. 100 for the repair of his tractor. The mechanic gets Rs 100 for the repairing work. The mechanic gives salary to his workers and the money passes from the hands of mechanic to workers and now workers from that money purchase vegetables directly from the farmer. Hence money spent by the farmer circulates in the economy and comes back to the farmer as his revenue thus holding the Say’s law as true.

Now the government demonetised the higher currency notes as a result the
circulation of money got hampered and rights of the individual was affected a lot. Demands of the consumer goods fall down; the production by the producers decreased as a result. Ultimately it was an individual who had to face adversaries and the most impacted were those who solely depended on the cash transactions. The surgical strike affected their right to life, liberty and property.

Demonetisation And Utilitarianism In India


The surgical strike cum demonetisation which was conducted by the government of India on November 8, 2016 had an impact on the lives of the people  but the pleasure and the happiness outweighed the pain and the sufferings. The main purpose of the demonetisation was the prevention of black money and also to choke the counterfeit currencies which were considered to be the main contribution to terrorism. The agriculture sector mainly depends upon the credit and as a result the amount of sufferings due to demonetisations were less and also the large scale industries depended more upon the banking sector than on the cash so they suffered less and they got more pleasure as the government was trying to promote digitalisation more. Also the amount of consumption in the total economy was not affected that much as the consumption pattern mostly depends upon the level of current income and demonetisation had a very little impact on the amount of income earned by an individual. The main aim was to unearth the black money and not to cause the sufferings to individuals by lowering their consumption level.

Now, talking about investment in the economy. The amount of investment in an economy depends upon the interest rate prevailing in an economy and now since demonetisation was expected to result in lower interest rates, eventually there should be a boost in investment.

Also, the incident of stone pelting in the state of Jammu and Kashmir has reduced because of the note ban. No stone pelting has been reported in Kashmir since the withdrawl of highest currency notes from the economy. As reported by the Intelligent agencies around Rs 1000 crores are sent annually by Pakistan to the separatists for creating chaos in the valley. The incidents have reduced and as a result the amount of sufferings has been reduced.

There were deaths due to the demonetisation because people were asked to stand in long queues so that they can exchange their currencies but the casualty were very less as compared to the amount of pleasure and gain received by the people of the country due to the surgical strike cum demonetisation, the government has kept in the mind the principle of utilitarianism and hence as a result the amount of pleasure was more than the amount of pain caused to the people.

Demonetisation In Venezuela


Month later when India conducted a surgical strike to curb the menace of black money and corruption, Venezuela too conducted the surgical strike on 11 December, declaring the country’s largest banknote, i.e. 100 Bolivar bill, to be not a legal tender within 72 hours. The news demonetisation was also kept confidential as it was kept in India giving no time to the people so that they can go away with their unaccounted income and which can help the government to unearth the black money.

In Venezuela, the step was taken to curb the hoarding of cash by international mafias. The move was highly criticised as the country was already facing the problem of hyperinflation. And the demonetised currency was actually the most valuable note in the circulation, which accounted around 77% of the country’s cash supply in the economy.

The government decided that they will start supplying the new bank notes of 20000 Bolivars but the major problem was faced by the people who were retired as they were paid in lower Bolivar denominations.

Following the decision, the International Monetary Fund projected that the inflation rate in the economy will rise to 475%. The decision was not welcomed by the citizens of the country and they started protesting. The crime record was already at its peak and after the decision the citizens started plundering shops as they were in the middle of cash crunch.

The Maduro government thought that they will promote digitalisation but the problem was that the half of the Venezuela’s population didn’t have bank accounts so it was not possible for the government to switch instantly from cash based economy to cashless economy.

The demonetisation in India was based on the Utilitarianism approach so it was welcomed by the people of the country. The move brought fruitful results to the economy but the same didn’t happen in Venezuela as people protested there as the decision was causing more pain to the people going against the utilitarianism approach as suffering was more than pleasure.

Conclusion


The above project has tried to relate the surgical strike conducted by our country with the concept of utilitarianism. The utilitarianism tries to justify the actions on the basis of the pleasure and pains they caused. Actions which cause more pleasure and less pain are the actions which individuals should try to seek. The surgical strike conducted in India brought fruitful results for the people with less casualties while the surgical strike conducted in Venezuela caused more casualties and as a result the decision was taken back because it led to chaos and destruction. People came on the road to protest as the country was already dealing with the problem of hyperinflation and the shortage of basic necessities as a result.



[1] Available at, https://www.iimb.ac.in/sites/default/files/2018-06/Demonetisation.pdf, last accessed on 22 December 2019).

[2] Available at, https://www.researchgate.net/publication/324952991_Impact_of_Demonetisation_on_Indian_Economy_A_Critical_Study, (last accessed on 28 December 2019).

[3] Available at, https://www.britannica.com/topic/utilitarianism-philosophy, (last accessed on 25 December 2019).
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