A Ne Win situation: Burma’s three demonetizations

Posted on October 29, 2017 by Ananth

Burma’s colonial experience was bitter. The British hurt Burmese pride and occupied their beloved ‘Suvarnabhumi’. The nature of Burmese society and religion, and the comparatively short period of its colonial experience, prevented the Burmese from integrating with the British Empire. Consequently, imperial Burma saw Indians (and a few Chinese) flood the colony to grab opportunities in this resource rich but under-developed and restive land. The booming population of Indians, and their role as money-lenders and financiers, led to indigenous rebellions from as early as the ‘30s. A largely non-violent but chauvinistic political movement arose, and from this emerged the founding fathers of Burma such as Aung San, U Nu, Ba Maw and Ba Swe. Yet there were millions of ‘foreigners’, ethnic minorities in Burma, serving the Empire, and slowly appropriating the land and forest resources.

The Japanese invasion in 1942 saw many ethnic minorities flee but there were still remnants. Independence led to a self-professed modern, socialist regime which tragically denied entry to returning refugees and formally cast remnant ethnic minorities as second class citizens. This did not lead to a consolidation among ethnic Burmese though—political conflicts erupted repeatedly and culminated in a chaotic split in the Anti-Fascist Peoples Freedom League, Burma’s reigning umbrella alliance, in 1958. Besides the national polity, even institutions such as the armed forces and the Buddhist Sangha were affected. The military, under a grim general named Ne Win who first rose to prominence in the Burma Independence Army during the imperial control, stepped in as a caretaker when the split occurred. Within two years, the army went back to the barracks, handing over power to the elected party. However, Ne Win later launched a coup in 1962 when the new government seemed to be making compromises with minorities, insurgents and communists, in return for eschewing violence. Despite a self-professed ideological core of socialism, one espoused publicly by the leadership, Burmese society had multiple fault lines with a strong strain of paranoid conservatism running through its heart. A mosaic nation was not to the liking of many—this was one reason behind the longevity and strength of the military Junta.

The military Junta declared a “Burmese Way to Socialism” and promised to fundamentally recast Burma. Ne Win ‘graciously’ allowed deposed democratic leaders to run powerful-sounding advisory committees but ultimately the whims of the generalissimo prevailed. In 1974 the junta instituted a sham democracy through a one-party government, headed by Ne Win. Fear of Ne Win’s authoritarian streak made democratic leaders flee or silently acquiesce. As the reins of the country were held by generals who knew little of running a country, ham-handed and ad-hoc decisions became the norm. As with nearly all authoritarian regimes, Burma printed money endlessly to finance their political goals and some showpiece projects—without instituting a proper financial system. This caused money supply and inflation to rise uncontrollably. To grab resources and prove socialistic credentials, the regime executed total nationalization and instituted mindless, debilitating control on all economic sectors. Waves of nationalization broke the back of ethnic minorities as they were historically involved in small business, trade and finance.

The demonetisation of 1964

The economy, unsurprisingly, plumbed and black markets grew exponentially. The Junta, however, did not pause to reflect. They could not slow down their drive to nationalization everything without losing face and revealing their administrative naiveté. Since they jealously guarded power they could not delegate responsibilities, install a proper financial system, or curtail policies that drove galloping inflation. Something had to give. And the dictator’s mind, molded by years in the military, now seized upon on a blitz-like move. In was meant to be a masterstroke large denomination notes, with which the “evil capitalists and deviants” obviously hoarded their money, would be swept away. The reasoning was as follows: The Indians and the Chinese would be the first casualties and inflation would be halted. Therefore, the people would welcome the move. All deviants who had the gall to live outside the control of the state would be broken. The coterie around Ne Win concurred.

The Demonetisation Act of 1964 declared that all Burmese kyat notes of denominations of 50 and 100 ceased to be legal tender overnight. These notes were to be surrendered to Receiving Centres established all over Burma. Reimbursement would be provided if notes were surrendered within a week. For small amounts, spot reimbursement was promised. For amounts between 500 and 4,200 kyats, ‘timely’ reimbursement was guaranteed. Any amount over K4,200 would warrant further scrutiny and the application of an escalating tax. The Junta’s narrative was wrapped in conflicting themes of divisiveness and social justice. The official declaration of the Central Bank proclaimed that this revolutionary move was designed to remove social evils: “The purchasing power of the vast sums of hidden money which could be used to embarrass the Government and the economy, by unsocial acts of hoarding and speculation of essential commodities (by foreigners and evil capitalists).”

Drawing upon popular perceptions and memories of Indian moneylenders and financiers, the Junta claimed that foreign capitalists (meaning ethnic minorities who were never given full citizenship) had historically accumulated money that belonged to the real people, thus hindering the Burmese Way to Socialism. Ethnic Indians and Chinese, already reeling under nationalization, suddenly found themselves destitute. Most of them decided to leave Burma for good. An overwhelming majority of Burmese Indians were small financiers and businessmen—a far cry from the rich and powerful community of pre-war Burma—and now they were even more wretched. It would take the concerted effort of a number of Indian ministries to bring them to India. The Junta on their part did everything to hasten the emigration of their fellow countrymen.

However, the demonetisation did not impact just the ‘evil capitalists’ targeted by the government. In a predominantly cash economy, demonetisation ruined many ordinary people and small businesses. The Junta had, of course, thrown in sops such as partial or complete amnesty (with punitive taxes) and light sentences. This was done to ameliorate the losses of military political elite and regime supporters who had also entered the money-lending and financing business following independence. All these measures came to nought as agencies tasked with managing the demonetization quickly found themselves floundering. These agencies were never brought into confidence in the first place. Consequently, the spot reimbursement limit was halved within a day of the original announcement. The following day spot reimbursements were stopped altogether. The weak central bank suddenly had to oversee the process, but also had to examine surrendered notes and scrutinize returns.

As the whole circus started to break down, the Junta claimed that the small weaknesses and delays were temporary and for the ultimate benefit of bona fide citizens. The redemption deadline was repeatedly extended and when it finally ended four months later, about 78% of notes was returned. Fear of scrutiny kept away some hoarders but the logistical breakdown meant that many people in rural Burma were unable to change their notes. In the end the 1964 Burmese demonetisation was a dismal failure. The state’s endless hunger for funds resulted in a huge quantum of new denomination notes soon matching the demonetized money. Inflation continued unabated. The greatest consequence was the loss of confidence in the kyat. People returned to holding wealth in the form of precious metals and stones. Coins were hoarded and there was soon an endemic shortage of small change. The atmosphere was rife with rumors of further demonetisations.

Demonetisations of 1985 and 1987

The worst, sadly, was yet to come. In 1988, the military junta was essentially rebooted after mass riots and much human tragedy. This crisis, called the “8888 Uprising” was due to two bizarre demonetisations in 1985 and 1987. Once again, the stated main motivations were to curb money supply, and end profiteering and the black market. Inflation, of course, was a perennial bugbear. But this time the narrative also included a new objective: widening the tax base. The Finance Minister stated: “… (the objectives are) to collect taxes from those who engaged in the unscrupulous economic activities…..” Moreover, there were comments that this act would cripple insurgencies such as the Karen Movement. The November 1985 demonetisation struck at the K100, K50 and K20 notes (K100 and K50 notes had been quietly brought back a few years before). Similar to the previous demonetisation an exchange limit and deadline were set.

History repeated itself. The deadline was postponed time and time again, and the exchange limit was decreased. Shockingly, only 25% of the value of surrendered notes was ultimately reimbursed. This demonetisation order also introduced new K25, K35 and K75 notes. The basic nature of the regime had not changed. Therefore, they printed these new notes so fast that money-supply rise rebounded quickly. Even more destructive was the 1987 demonetization. Announced out of the blue by Ne Win on 5 September—apparently without the knowledge of senior officials—K25, K35 and K75 notes, issued just two years earlier, were pulled.

Not even a semblance of an official reason was given this time. Sixty to eighty per cent of notes became worthless overnight, but no exchange or compensation was provided. The Junta soon allowed reimbursement for up to K100, only so that restive students (who were now penniless) would have enough money to leave the cities and return home, instead of rioting in the cities. The affair became even more bizarre two weeks later: strange denominations of K45 and K90 were issued. The choice of these denominations became subject to much speculation. It is widely believed that the extremely superstitious Ne Win believed that the number 9 was lucky for Burma and him personally.

Once again the 1987 demonetisation did not arrest monetary growth nor rein in inflation. There was a sharp contraction, but with the heavy issue of K45 and K90 notes inflation bounced right back again. For the people of Burma, the kyat was no longer a currency they had faith in. Also the argument that the demonetization crippled insurgents soon proved to be false. Insurgents simply carried out transactions in Thai and Chinese currencies. Not to forget that they had their own stable economy based on narcotics, border trading-posts and extortion.

The reckoning

The prospects of further demonetizations resulted in economic chaos. Barter economies based on paddy and commodities boomed. There was a steep demand for smuggled consumer goods which inadvertently strengthened the criminal elements. Rumblings against the regime began right after the third demonetisation order but exploded in March 1988. By August, the whole country was engulfed in violence and disorder. Ne Win suddenly resigned in September, but any hopes of true democracy died when the army executed a coup on it’s puppet government. Thousands would die in the streets but Ne Win held effective power through a succession of military rulers, till debilitated by advanced age.

Despite a name change to Myanmar in 1989 and through relentless suppression of dissent, the socio-economic situation remained bleak for over a decade. After all, root causes of social and economic woes were never addressed. The death of Ne Win in 2008, the reign of the comparatively enlightened General Thein Sein (2011-2016), and now democracy ushered in a host of structural reforms in the Burmese economy.

Though endemic problems in Myanmar’s society remain, economic prospects for the country seem positive. With control of inflation and slightly better discipline in monetary policies, perhaps the citizens of Myanmar will not be subjected to another demonetisation.

References:

Brown, Ian. (2013). Burma’s Economy in the Twentieth Century. Cambridge. Cambridge University Press.
Taylor, Robert. (2015). General Ne Win: A Political Biography. Singapore. Institute of Southeast Asian Studies.
Turnell, Sean. (1999). Fiery Dragons: Banks, Moneylenders and Microfinance in Burma. Copenhagen. Nordic Institute of Asian Studies Press.

PS: This is my article in The Mint, published on October 29, 2017. Here’s the link to the original article.

Armed Ascetics, Yoga and the British

Posted on September 17, 2017 by Ananth

In twelfth and thirteenth centuries a number of armed ascetic orders such as the Dasnamis, Satnamis and Naths emerged from erstwhile reclusive religious spaces. The loss of respectable lifestyle tied to temples and state patronage, following the foreign invasions of the previous century, had perhaps led to this evolution. Some orders were newly founded to resist invaders bent on iconoclasm and forcible conversion. These orders soon controlled major trade routes and access to major pilgrimage sites. Caste was not much a concern for these orders and core principles were based on the Saiva and Tantric streams. Many orders utilized Haṭha-Yoga and other physical training routines to prepare themselves for both ascetic life and combat. The training regimes nurtured in the orders’ Akharas (training congregations) were reportedly similar to military drills. The militarized orders did not hesitate to contest state power, or fight between themselves, to preserve their interests. Some orders were mobile, roving across different regions and a few of these gained notoriety as mercenaries, albeit with a mystical veneer.

While the relationship between these orders and Muslim and Hindu kingdoms oscillated the British turned out to be another matter: revenue collection was always their overriding objective. Till the mid-nineteenth century, the armed orders stoutly resisted rising socio-economic control by the British. Bankim Chandra’s Anandmath, featuring the Sanyasi Rebellion, drew from this history. The Haṭha-Yoga practicing orders were perceived as prime threats due to their physical prowess and organization. It took the British over a century to eliminate or disband the orders. A handful managed to survive by relocating to remote locations where they could retain their core practices. Most renounced their militarized nature and settled as seminaries, still calling themselves Akharas. A popular disdain for such orders developed following these events. To survive, many Yogis were forced to become road-side performers: the training they once utilized for asceticism and combat was now used to shock and amuse. These displays became a source of both fascination and repulsion for foreigners; the Yogi lying on a bed of nails became the defining image of India. Modern Hindus chafed at this portrayal and assigned blame on the Yogis. Orthodox Hindus following purity and pollution norms largely avoided the caste-less Yogi. Additionally, the British were also wary of Yoga due to its association with their old enemies. Visibility and acceptance of yoga suffered and proponents of yoga positioned it as mere meditation rituals.

However, as a result of unintended consequences Yoga soon re-emerged. Victorian era had ushered in the idea of “Muscular Christianity”, coinciding with the rise of fitness culture in the West. The belief of “sound mind in a sound body” gelled with nationalistic ideas of “defense through strength” and emerging eugenics. Also, colonial interests necessitated portraying strong conquerors against conquered weaklings. Consequently, Indians were depicted in demeaning manner: many of these portrayals persist to this day. These factors, and the colonial yoke itself, provoked many Indians to promote India’s own Yoga by developing a culture of nationalistic physical prowess. The efforts of Aurbindo Ghosh, Swami Raghavendra, etc. soon created an evolved, modern Yoga. Here, modern practices and training regimens were developed and blended with ancient principles. Some schools of Yoga, and certain popular Asanas of today were rebooted, if not invented, in modern times. The global physical culture wave also helped increase the acceptance of Yoga in this period. The martial nationalism of these modern Akharas attracted many and soon influenced organizations such as the RSS and Arya Samaj. Yoga also became a cover for training religiously inclined revolutionaries. Early revolutionary groups, such as Anushilan Samiti and Jugantar displayed institutionalized militancy and rigor similar to the ethos of the old orders. Yoga was in the government’s crosshairs again and revolutionaries had to disguise themselves as travelling gurus, dispensing training in new Akharas disguised as gymnasiums. Both modern Yoga and military training was combined under the heading of “Yoga” to evade detection. Brazilian Capoeira was similarly secretly developed and disguised as dance to prevent colonial crackdown.

The militant nationalistic streams never became as popular as the mainstream national movement. Therefore, the efforts to create an army of trained Indians to forcefully wrest power never materialized – and by the mid-40s independence was in grasp. However, these efforts of the covert and overt proponents of Yoga had successfully created a system which produced many Yoga luminaries, thereby leading to global popularity of Yoga. Naga Sadhus and other Akharas, more visible today due to Kumbh Mela and the new socio-political scenario, are the remnants of the armed orders of old.

PS: This is the original version of my first article in Daily News & Analysis (DNA), published on July 16, 2017. Here is the link to the published article.

The Hajj lands and the Western Empires

Posted on September 17, 2017 by Ananth

In the second half of the 19^th century, the Hajj pilgrimage was characterized as a “source of twin infections” by the British, French and Dutch empires: the cholera pandemics which killed millions, and fundamentalist Islamism stoked in the Hajj lands. By the early 1800s, imperial expansion had brought millions of Muslims under foreign rule and the responsibility of the pilgrimage now fell upon the new non-Muslim masters. Steam power made the hajj accessible to the lower strata of Muslim society and the number of pilgrims increased. The acceptance of the Kufr rulers was heavily based on how Islamic worship and sensitivities were treated. To ward off rebellion and mass deaths through pandemics, imperial machinations regarding the Hajj continued till the accession of Sultan ibn Saud as the Emir of the Hajj lands.

It was clear to imperial authorities that trade, mass gatherings and migrations were responsible for the sudden cholera outbreaks. It was therefore imperative to police the Hajj, where people from many nations congregated. Most pandemics were found to have originated in British India and consequently there was much pressure on the Raj. The second threat, the “infection” of anti-colonial radicalism against western powers, was perceived to be even more dangerous. The Hejaz, the strip of land linking Mecca and Medina and bordering the Red Sea, was an area where Islamic exiles and malcontents always gravitated to. Also, several Islamic sects were based here and their adherents from around the world exchanged ideas and experiences here. Fundamentalist Wahhabism gained had been gaining power steadily in the Arabian Peninsula and was perceived to be a threat by all empires. Some of the highlights of the Wahhabi rise were a failed rebellion against the Ottomans which led to the beheading of the first Saud Emir, and the sack of Karbala, a major spiritual centre for Shia Islam. The Hejaz was under Ottoman control and relationship between Ottoman Turkey and the west had deteriorated since the Crimean War bonhomie. The vastly superior western navies however plied the Red Sea and the Turks could not stop this. Nevertheless, the growing pan-Islamist movements under the aegis of the new Ottoman Emperor Abd Al-Hamid II was a major threat.

The French wildly oscillated in their Hajj policy – ranging from outright ban to subsidy extravaganzas. The British and Dutch were more even-tempered and relied on diplomacy, track-II diplomacy, and secret agents. Elements of the Muslim communities which feared the rise of radicalism actively aided the western empires here. The western quarantine measures were universally despised though. Crude methods of disease containment and disposal of bodies caused much suffering and death at the home ports and the Red Sea ports. The black legends of “western medical conspiracies” grew, if not originated, in this period. The Ottoman administrators in the Hejaz also successfully deflected the blame towards the westerners. The colonial narratives and mindset also created racist bureaucracies which offended and hurt the pilgrims. The high-handedness in the name of pandemic prevention even led to occasional bursts of violence. To an extent this phenomenon was reduced when the British recruited Muslims into the Hajj bureaucracy and actively gathered the opinions of various communities and sects.

The cholera threat was subdued by science by the end of the 19^th century, but the anti-colonial threat remained. The Ottomans had long dreamed of re-conquest by posturing their Emperor as the Khalifa of all Muslims, because he was custodian of the shrines of the Hejaz. In response, the British threw their lot with Abdulaziz Ibn Saud and his Wahhabi allies during World War-1. This Arab Revolt succeeded and control of the Hejaz passed to Ibn Saud, who quickly united various tribes and eliminated rival power centres – including his former ultra-radical Wahhabi allies called the Ikhwan. Soon, the discovery of oil and the new American alliance propelled Ibn Saud to great power and influence. The Saudi control over the Hajj played a major role in the independence of Algeria from the French: the Saudis recognized the rebels as the rightful representatives of all Algerians pilgrims and actively aided the rebellion. In a way, the nightmare of Hajj inspired anti-colonial radicalism leading to loss of empire had finally come true.

PS: This is the original version of my article in Daily News & Analysis (DNA), published on April 30, 2017. Here is the link to the original article.

India and the secret war in Tibet

Posted on September 17, 2017 by Ananth

The late 40s saw the rise of the Communist rule in China, a frightening development for the U.S. bloc. Prados’s “Presidents’ Secret Wars” and Knaus’s “Orphans of the Cold War” and other works, including those of Indian authors such as former IB chief B N Mullick, detail subsequent U.S. operations to destabilize the Chinese occupation of Tibet, which was violently annexed in 1950. Thousands of bitter Tibetans were recruited by the CIA in Sikkim, Nepal and India. A major figure in the Tibetan resistance was the current Dalai Lama’s brother, Gyalo Thondup. Training was imparted in various global locations, and trained Tibetans were infiltrated into Tibet throughout the 1956-1962 period. These were mostly intelligence gathering missions but the Tibetans also routinely skirmished Chinese forces. Operations were mainly directed from a US site in East Pakistan. Indian authorities were aware of these clandestine activities and the Americans made considerable efforts to prevent Indian interference. This was the “Indo-Chini bhai-bhai” period, and India was trying its best to court the Chinese.

Everything changed when the war broke out in 1962. Faced with military collapse India planned to use Tibetans to attack the strained Chinese supply lines. They were aware of existing US-trained Tibetans forces in US bases in Asia. Gylao Thondup was contacted for assistance: India’s newfound interest was welcomed by the Tibetans and thus India entered the secret war. Army Chief Kaul and Mullick chose the enterprising Brigadier Uban to lead this mission. Most of the trained Tibetans were relocated to Chakrata and “Establishment-22”, which would later metamorphize into the Special Frontier Force (SFF), was thus formed. Before the Indo-US-Tibetan project could participate in the war, the Chinese unilaterally declared a cease-fire. India was now wiser to the long-term Chinese threat: the shooting war was over but there was work to be done. Biju Patnaik, no stranger to intrigue and adventure, also played a part in this covert program. Armed with Nehru’s support, Patnaik initiated the formation of an operations base in the Charbatia airstrip in Odisha. With the assistance of American veterans and under the cover of Patnaik’s Kalinga Airlines, this base named “Oak Tree-1” turned into a major node of the program. Patnaik apparently helped route funds discreetly, arranged the services of his own air-crew, and provided office space and equipment from his own businesses. The Special Service Bureau (SSB), which would evolve into the Sashastra Seema Bal, was also founded by Mullick and Patnaik to support to these operations. A fictitious Gurkha regiment was created to hide the presence of the Tibetans in various Indian military facilities. Great care was taken to hide American personnel from the public eye.

The joint operations lasted did not last long despite major successes, including uncovering the Chinese nuclear weapons program. US-Pakistan ties deepened in the 60s due to the Cold War; on the other hand, the Russians actively courted India after the 1962 war. India’s outspoken non-aligned stance also enraged the US Government and by 1965-66 American involvement in the Indian leg of operations wound up. Officials and political personalities who once actively worked with the Americans had by now faded away or were tuned to the breakdown in relationship. The growing clout of China, the Pakistan effect and the Nixon visit to China ultimately ended US assistance to the Tibetans in the early 70s. The improvement in Sino-Indian ties in the late 60s also led to significant roll-back of covert operations in Tibet. The sizeable Tibetan force was disbanded, with a few being absorbed into the SFF and SSB. However, episodes like the 1967 clashes, the 1987 episode and the Indo-Pak conflicts saw Tibetans in major combat roles. Remaining Tibetan forces in Nepal were less fortunate after the King turned on the Tibetans in late 1974, to gain Chinese support. Major leaders were killed or incarcerated and only a personal appeal from the Dalai Lama to the Tibetan forces avoided heavy causalities. India could not intervene but absorb a handful of escaped fighters and refugees.

Tibetans serve in the Indian Armed forces to this day, undoubtedly dreaming of their homeland’s liberation. Other Tibetans like the Dalai Lama continue the struggle through peaceful means.

PS: This is the original version of my article in Daily News & Analysis (DNA), published on April 2, 2017. Here is the link to the published article.