The small inner circle

KC Singh

SINCE the November 4 election of Donald Trump as US President and the Government of India’s demonetisation of high-value notes, domestic and international forces have menacingly challenged the existing domestic and international economic and political structures. There is an escalation of the process since Trump’s inauguration on January 20. The linkage was conceded by Finance Minister Arun Jaitley in his Budget speech that three factors conditioned his calculations: rate changes by US Fed; US shale oil as a balancer for moderating oil price; and anti-globalisation forces. All three are US related.  

The domestic developments can be examined first. The Modi government put India in long, and often, futile queues, for countering black money, corruption, counterfeit currency and the menace of terror financing. The unstated calculation was that nearly Rs 3 lakh crore, allegedly illicit money, would not get deposited, presenting a bonanza for government coffers. Since then, as pain multiplied and normalcy has been delayed, the goalposts got shifted repeatedly. 

Surprisingly, the issue is skirted in the BJP manifestos for the crucial state Assembly elections in UP, Punjab, Uttarakhand, Goa and Manipur, though the Budget speech on February 1 belaboured the point again. It is speculated that the demonetisation decision was taken by a small coterie of PM’s advisers and cursorily run past the Cabinet, held captive till Modi’s address to the nation. Poor preparation was immediately obvious as chaos reigned with re-monetisation hobbled by extremely inadequate supply of new notes. 

The January 27 executive order by President Trump, banning the entry of refugees from Muslim countries for 120 days and visitors with valid visas, or even green card-holders from Libya, Sudan, Syria, Iraq, Iran, Somalia and Yemen, smacked of similar ad hocism. The US, like in India, adopted a high strategic tone, but facts did not match the claims.  While 9/11 was cited, its perpetrators came mostly from Saudi Arabia, which was not targeted. Iran, which has never attacked mainland US, was listed although it is a principal antagonist of the ISIS and, along with Russian airpower and its own military advisers, has managed to stabilise Syria’s  Assad regime and rollback area controlled by the ISIS and other militant Sunni groups. Iraq has a friendly US government, though under Iranian influence, but nevertheless vital to countering the ISIS and radical Islam. 

The sacking of acting US attorney-general, a ‘dissent’ note by some senior officials of the State Department and the bypassing of the Department of Homeland Security mirrors Modi’s demonetisation decision. The decision making centred on a handful of Trump’s advisers, including his political adviser Stephen Bannon, a former publisher of Breitbart that is a platform for xenophobic, racist and anti-Semite ‘alt-right’ philosophy. 

This shift of power in the world’s largest democracy, India, and the most powerful, the US, to leaders who are populist, autocratic and driven by messianic commitment to purge their nations’ ills is a mushrooming pandemic that may soon spill beyond the UK into Europe, where elections are due in France and Germany. Pankaj Mishra’s book Age of Anger: A History of the Present examines this phenomenon against the rise of liberalism over centuries. He concludes that the progress towards liberal, democratic values has not been linear or uninterrupted. Today’s angst in the developed world is driven by globalisation’s eroding impact on the working classes and the dislocation of jobs due to mutated global manufacturing supply chains and technology and Internet-assisted new ways of commerce. North American Free Trade Area (NAFTA), which Trump wishes to renegotiate, has allowed Mexico to create one million additional industrial jobs in the last 10 years. However, most of them cannot be re-shored to the US as higher US wages make them uneconomic. Contrariwise, profits from the illicit drug trade from Mexico almost rival the profits that Mexican companies exporting to the US from their legitimate businesses. It is one among various paradoxes and complications not easily reversible by an executive fiat. 

Thus India enters 2017 amid two major disruptions. Within India, the impact of demonetisation on the economy is still moot, with estimates of GDP dropping by moderate to high figures like 2 per cent. State elections will become the litmus test of public perception of its success. If the BJP wins in UP, retains Goa and snatches Uttarakhand, it will declare it as a resounding endorsement of demonetisation. Otherwise, the two issues will be promptly delinked. Abroad, a pincer move by the US President and the Congress is under way to target H1B visas and thus Indian software exports to the US, totalling half of over $100 billion global exports. This challenge to Indo-US relations should hardly be a surprise as Trump, even in his inaugural address, called for ‘buy American, hire American’. 

The UP and Punjab elections are critical to redefining electoral agendas in those states and beyond. The success of AAP in Punjab, led by a Haryana-born Hindu, would take Punjab beyond identity politics of a Sikh-majority state created after much acrimony in 1966. Similarly, the success of the Akhilesh Yadav-led SP in UP could transition UP to post-Mandal politics. This could shape opposition consolidation against the Modi-led BJP. While the AAP’s rise is in keeping with the global shift towards populism, its agenda being non-regional and non-identity based makes it a potent force for left-of-centre consolidation all over India — a space the Congress occupied since Indira Gandhi’s ascendancy. Akhilesh Yadav could take his party into that space. 

The Trump phenomenon has yet to fully play out, though Modi is past the halfway mark. Republicans controlling both Houses and most state governorships may have peaked. The 2018 election can reverse this dominance and even create conditions for Trump’s impeachment if he continues his autocratic and erratic decision making. Contrariwise, he could adapt and grow beyond his election rhetoric and be the deal maker he claims he is. Modi, likewise, has to tailor his messianic zeal to respecting institutions and seek consensus, otherwise electoral setbacks in crucial states can embolden the simmering resentment in his own party. 

In conclusion, as The Economist in its review of Mishra’s book states: ‘Ceaseless change gave birth to liberalism, which, for all the mistakes made in its name, continues to adapt’. That has to be the hope for India and the US. 

The writer is a former Secretary, Ministry of External Affairs