Leaked Documents open a Pandora’s Box of Issues

The International Consortium of Investigative Journalists (ICIJ) is a non-profit organisation based in the United States. It is fully funded by donations, and donor details are available on its website, as are its annual reports. Its 2020 annual report says that its annual expenses were $4.7 million (about Rs 35 crore). The ICIJ has a small, core group of 280 investigative reporters who operate through various offices worldwide and is also supported by a network of members from more than hundred countries.Read the full article in Free Press Journal

With 16% of global population having cornered 60% of vaccines, patent waiver is welcome

This article was first published in National HeraldLast October, India and South Africa proposed in the World Trade Organization that intellectual property rights of Covid-related drugs and vaccines be suspended. This proposal was supported by 60 countries. However, the United States, still under the Trump administration and the EU were opposed to the proposal.The then presidential candidate Joe Biden in early July itself had said that he supported such a proposal. So, there was expectation, but the pressure from the pharma lobby was intense too. Besides, abruptly curtailing patent rights is against the basic sanctity of contracts. You can’t renege on a sovereign promise, which is what patent rights are.

Then in April last month more than 100 Nobel Prize winners, and several prominent world leaders, including former heads of State, urged the United States to support a waiver of the TRIPS (Trade Related aspects of Intellectual Property Rights) clause in the WTO. Such a waiver they said, would vastly increase innoculation rates, and would legally allow developing countries to make their own vaccines, which were currently developed and produced by global pharma companies.The signed letter also said that vaccine knowhow and technology should be shared openly, and industry monopolies should not be allowed to create artificial supply shortages. This is seen as essential to winning the war against the pandemic. Winning over US support for a patent waiver is crucial because it entails taking on the might of major pharma companies like Pfizer, Moderna, Novavax, Johnson and Johnson and AstraZeneca.

Of course, there is the argument, which has been examined by India as well, that the current TRIPS regime of the WTO has a escape clause in case of emergencies. This is called compulsory licensing, wherein a company can be forced to disclose and license its patents to others, for the sake of national emergencies. But developing countries have been reluctant to use this clause for fear of displeasing the United States, which could counter the move with some other diplomatic or economic punitive measures.It must be remembered that during the anthrax scare of 2001, the Canadian government had threatened to break the patent protection of Bayer, and use compulsory licensing to produce ciprofloxacin on a mass scale through a small company. Bayer however settled the matter with the Canadian government by donating large amounts of ciprofloxacin and offering more in case of an emergency. This led the Canadian government to agree to acquire cipro exclusively from Bayer for the duration of the patent agreement.So, there is a precedent, but many developing countries of Africa have been reluctant to use this route, even for genuine national emergencies like AIDS. An interesting success story without breaking any patent rules was that of CIPLA, an Indian pharma company which in 1993 developed and sold a drug at one tenth the then prevailing price. By 2001, CIPLA had developed an anti-AIDS drug cocktail and sold it at a very low cost, upending the hitherto monopolies, and vastly contributed to the effort to combat and control AIDS.So, in the present context of Covid, the compulsory licensing avenue is only of academic interest. Besides the US has been increasingly under diplomatic pressure to relax the restrictions on export of vaccines which lie unutilised.This week President Biden announced that he would support a TRIPS waiver at the WTO. This is a historic decision. It comes after surmounting the challenges and pressures mounted by the pharma lobby, including the scare that the Russians and Chinese would get the American pharma technology, and that if there was an indiscriminately large production of vaccines all around the world, it would create a big stress on supply chains.As of this writing 120 out of 164 member countries in the WTO are supporting the TRIPS waiver for vaccine patents. Added to this is the statistical evidence that 60 percent of the world’s supplies have been cornered by the rich countries, or only about 16 percent of the world’s population. There is excess stock sitting around in the US which will remain unutilised.

Sure enough the US decision was opposed by many pharma companies and leaders like Chancellor Angela Merkel. She said that patents were not the limiting factor responsible for the vaccine shortage. It was production capacities and high quality standards. But she surely misses the point, that patent waiver allows production to happen on a massive scale, so that the current capacities are no longer the bottleneck, since newer capacities will come up, without fear of infringing on patents.A German company BioNTech also echoed similar sentiments, saying that replicating the manufacturing process and mastering that technology can take years. It also added that it was committed to selling the mRNA vaccine to developing countries on a no-profit basis. But that no-profit price surely has the value of the patent, which itself makes it prohibitive. Strangely even Brazil has opposed the patent waiver proposed by Biden, and so has Bill Gates. Of course, if Covid vaccine patents are going to be breached now, the world has to find a way to compensate the pharma companies for the breach of contract.How this waiver proposal will travel through the WTO’s voting process remains to be seen. Crucial time may be lost, so India cannot count on this proposal to help its cause. It needs to rapidly ramp up vaccine production and imports, and immediately go for universal and free vaccinations. It should not only depend on “app” based booking, because given the great digital divide, it puts the poor and underprivileged at a great disadvantage. Imagine the areas where telecom connectivity is poor, digital literacy is low (can you do a captcha in 20 seconds), and when the Cowin website open slot is as elusive as a passing comet in the sky.The issue of the TRIPS waiver for Covid vaccines is also the right time to examine excessive patent protection, and overall exorbitant monopoly drug prices. There is now abundant research which shows that the maxim “no patents, no drugs” is false. And the billions in dollars needed to develop a new drug is mostly due to costs incurred on stage 2 and stage 3 clinical trials, which are actually in the nature of “public goods”. That’s because once the safety and reliability of the new drug is established in those trials, it deserves to be public knowledge. Hence that cost should simply be reimbursed, and patent-induced monopoly rights should be drastically reduced. This is a longer-term plan. Right now the Covid vaccines are on the agenda.Dr.Ajit Ranade is an economist and Senior Fellow, Takshashila Institution

Consumers need to pay more if workers are to be given a fair deal

This article was originally published in National Herald.President Joe Biden’s administration was able to push through a major fiscal package in March worth 1.9 trillion dollars and includes another round of 1400 dollars of stimulus cheques for individual Americans, 350 billion dollars to states and local governments as grants, and 160 billion dollars for coronavirus testing, tracing and vaccines. But it failed to get the voting support needed to raise the nationwide minimum wage to 15 dollars an hour. The Democrats have a comfortable majority in the Congress (the lower house), but it is a knifeedge situation in the Senate (the upper house). And within the party itself, there are voices opposing increase in the minimum wage which is currently 7.25 dollars per hour.This minimum wage number was set back in 2009. However, individual states in the federal system are free to add to that and have done so. For instance, in New York, Washington DC etc., the minimum wage is far higher. For the rest who follow the 2009 number, in inflation adjusted terms, the minimum wage is even below what prevailed in the 1970s. Surely that needs a correction.

But Republicans and a significant number from the Democrats feel that this increase would put an undue burden on employers, at a time when the economy is coming out of a deep recession. As a compromise, don’t be surprised if an 11-dollar wage is voted successfully. But that is yet to happen. It may also subsequently get indexed to the inflation rate.

That this is happening in capitalist America is a very significant development. Even in the United Kingdom, which has had a conservative, pro-business, pro-employer government for more than 10 years, the minimum wage has been raised to 8.7 pounds for all adults above the age of 25. This may go up further. This wage is roughly two third of the median wage earned by all workers in the UK.In America too, if the 15-dollar minimum wage is imposed, it would be close to two third of the national median. As such the total income (i.e. earnings from wages, salaries and other sources) for a median American household has stagnated for nearly four decades. This has happened despite the growth in national income, and a roaring stock market. Which means that substantial gains of income and wealth were going to the top tier in society.This has lessons for India. Wages have to grow, if incomes and standards of living have to improve. Will a higher minimum wage help? Will that crimp employers and lead to lower employment?While per capita income rose by nearly 7 per cent per year during 2003 to 2012 in India, subsequently this growth has slowed down. This was also a period when rural wages were rising. India’s labour market has 90 per cent of its workforce in the informal or unregistered sector. Which means that they work either without a written contract, or without any health and retirement benefits.Even in sectors where there is a significant registered (‘permanent’) employment, the ratio of permanent to contract workers is very skewed, which is also reflected in their respective benefits and pay. Sometimes this creates a de facto caste system, where for the same work, a contract worker is paid much less than a permanent worker.Such conditions can create stress and unrest, sometimes leading to intemperate outcomes, like the violence a few years ago in an auto plant in Manesar. Due to the large number of informal and seasonal workers, the data on wages and earnings is notoriously bad. But survey data indicates that wages have stagnated. Of course, during the pandemic, there have been large scale job losses too.When surplus labour moves out of agriculture, it is coming from disguised unemployment, so productivity is nearly zero. Hence even a small wage is a decent improvement on zero. This process of absorbing surplus labour from zero wage, can continue for a long time, until agriculture no longer has any surplus labour.Indeed, this was the strategy of sustaining high growth and high exports, at low and constant wages, in China. The low wage workers were taking away higher wage jobs from advanced countries. The low wages in China meant that much of the benefit of high GDP growth was going to capitalists, in this case mostly State-owned enterprises. That profit was continuously re-ploughed leading to high GDP growth rate.To some extent it can work in India, only if industrial employment increases continuously. But unlike China, India’s services sector is nearly 60 per cent of the GDP (national income). It employs only 25 per cent of the workforce. Besides India’s consumption expenditure as a share of GDP is much larger than in China.It is not as if raising the minimum wage in India will make the jobs vanish out of the country. This is because these low paying jobs are mostly in services sector, which is a non-tradable sector. Besides if the increase in the minimum wage is not very large, it does not even affect the demand for those services. Think of the wages paid to farm labour, or security guards, or courier services workers. An increase in their wages surely will not affect the demand for those services, nor will it lead to a decrease in employment. The increase in minimum wages in most sectors just means that consumers pay more. When a McDonald worker gets a fifty per cent higher minimum wage, the burger price goes up by 25 cents.This is a way of transferring incomes from consumers to workers, without causing a burden to the exchequer. It is similar to increasing the minimum support price to farmers, so that urban consumers pay a bit higher for food, and the farmer earns a bit more. This removes the urban bias of the food policy.Similarly, an increase in minimum wage will remove the pro-employer bias of the wage policy. The current national minimum wage of 176 rupees per day certainly needs to be revised upward.Dr. Ajit Ranade is an economist and Senior Fellow, Takshashila Institution. Views are personal 

The current national minimum wage of Rs 176 per day must be revised upward

This article was first published in Free Press JournalPresident Joe Biden’s administration was able to push through a major corona-relief fiscal package this month. It is worth $1.9 trillion and includes another round of $1,400 in stimulus cheques for every American, $350 billion to states and local governments as grants, and $160 billion for coronavirus testing, tracing and vaccines. But it failed to get the voting support needed to raise the nationwide minimum wage to $15 an hour. The Democrats have a comfortable majority in the Congress (the Lower House), but it is a knife-edge situation in the Senate (the Upper House). And within the party itself, there are voices opposing what they consider a steep increase in the minimum wage, which is currently $7.25 per hour.This minimum wage number was set back in 2009. However, individual states in the federal system are free to add to that and have done so. For instance, in New York, Washington, etc., the minimum wage is far higher. For the rest who follow the 2009 number, in inflation-adjusted terms, the minimum wage is even below what prevailed in the 1970s. Surely that needs a correction? But the Republicans, and a significant number from the Democrats feel that this increase would put an undue burden on employers, at a time when the economy is coming out of a deep recession. As a compromise, don’t be surprised if an $11 per hour wage is voted successfully. But that is yet to happen. It may also subsequently get indexed to the inflation rate.Significant development

That this is happening in capitalist America is a very significant development. Even in the United Kingdom, which has had a conservative, pro-business, pro-employers’ government for more than 10 years, the minimum wage has been raised to £8.7 pounds for all adults above the age of 25. This may go up further. This wage is roughly two-thirds of the median wage earned by all workers in the UK.

In America too, if the $15-dollar minimum wage is imposed, it would be close to two-thirds of the national median. As such, the total income (i.e. earnings from wages, salaries and other sources) for a median American household has stagnated for nearly four decades. This has happened despite the growth in national income and a roaring stock market. Which means that substantial gains of income and wealth were going to the top tier in society, and for the vast majority incomes were stagnating.This has lessons for India. Wages have to grow, if incomes and standards of living have to improve. Will a higher minimum wage help? Will that crimp employers and lead to lower employment, or will it help workers?While per capita incomes rose by nearly seven per cent per year from 2003 to 2012 in India, subsequently, this growth has slowed down. This was also a period when rural wages were rising. India’s labour market has 90 per cent of its workforce in the informal or unregistered sector. Which means that they work either without a written contract, or without any health and retirement benefits. Even in sectors where there is a significant registered (‘permanent’) employment, the ratio of permanent to contract workers is very skewed, which is also reflected in their respective benefits and pay.De facto caste systemSometimes, this creates a de facto caste system, where for the same work, a contract worker is paid much less than a permanent worker. Such conditions can create stress and unrest, sometimes leading to intemperate outcomes, like the violence a few years ago in an auto plant in Manesar. Due to the large number of informal and seasonal workers, the data on wages and earnings is notoriously bad. Anecdotal and survey data indicate that wages have stagnated in recent years. Of course, during the pandemic, there have been large-scale job losses too.When surplus labour moves out of agriculture, it is coming from disguised unemployment, so productivity is nearly zero. Hence, even a small wage is a decent improvement on zero. This process of absorbing surplus labour from zero wage, can continue for a long time, until agriculture no longer has any surplus labour. Indeed, this was the strategy of sustaining high growth and high exports at low and constant wages, in China. The low-wage workers were taking away higher wage jobs from advanced countries.The low wages in China meant that much of the benefit of high GDP growth was going to capitalists, in this case mostly state-owned enterprises. That profit was continuously re-ploughed, leading to high GDP growth rate. To some extent, it can work in India, only if industrial employment increases continuously, like it did in China. But unlike China, India’s services sector is nearly 60 per cent of the GDP (national income). It employs only 25 per cent of the workforce. Besides India’s consumption expenditure as a share of the GDP is much larger than in China.Jobs won't vanishIt is not as if raising the minimum wage in India will make the jobs vanish out of the country. This is because these low-paying jobs are mostly in the services sector, which is a non-tradable sector. Besides if the increase in the minimum wage is not very large, it does not even affect the demand for those services. Think of the wages paid to farm labour or security guards, or courier services workers. Even the gig economy workers, such as hail tax drivers feel the squeeze. An increase in their wages surely will not affect the demand for those services, nor will it lead to a decrease in employment.This has been amply documented by researchers in America, who show that contrary to populist caricaturing, the increase in minimum wages in most sectors just means that consumers pay more. When a McDonald worker gets a fifty per cent higher minimum wage, the burger price goes up by 25 cents. This is a social tug of war. This is a way of transferring incomes from consumers to workers, without causing a burden to the exchequer.It is similar to increasing the minimum support price to farmers, so that urban consumers pay a bit higher for food and the farmer earns a bit more. This removes the urban bias of the food policy. Similarly, an increase in minimum wage will remove the pro-employer bias of the wage policy. The current national minimum wage of Rs 176 per day certainly needs to be revised upward.The writer is an economist and Senior Fellow, Takshashila Institution.

Why the Rupee Overvaluation must be kept in check

Inflation is nothing but erosion of the purchasing power of the money in your pocket. If in one year the price of vegetables, milk or petrol goes up by 10 per cent, it is as if the Rs 100 in your pocket has gone down to Rs 90.

Read the full article in Times of India

Cautious Optimism

The welcome to the new year was wishfully cheerful, riding more hope than evidence. Economic data that is coming out is still mixed, yet hopeful. But to have survived the year 2020 is itself a cause of celebration.Read the full article on OrissaPost

Having survived 2020 is in itself a cause for celebration

The welcome to the new year was wishfully cheerful, riding more on hope than on evidence. The economic data that is coming out is still mixed, yet hopeful. But to have survived 2020 is itself a cause for celebration. Disease, death, economic destruction and yet resilience, fortitude and determination is how most people experienced the last year. Most of the country, for much of 2020, was in lockdown mode, which was progressively diluted.The lockdown is still operative in many States. It has affected jobs, income and livelihoods, especially in the informal sector. The plight of the urban migrant workers in the country is now well known, and was even mentioned by the Prime Minister in his radio address. The rural economy turned out to be their saviour. The adverse economic impact on small and medium businesses has been severe. The exact detailed economic picture of India’s vast informal sector becomes clear only with a lag.Read the full article in the Free Press Journal

India, China and the Proverbial 13-year gap that is widening

Two years ago, the Chinese people celebrated 40 years of the launch of their economic reforms. The achievement of this period is breath-taking.

Read the full article on Times of India

Amazon, Facebook, Google and the question of trust

In the season of Secret Santa, and last-minute Christmas shopping or new year’s gifts, the option of shopping with e-commerce is a godsend.

Read the full article on Mumbai Mirror

V-shaped recovery anticipated, but it's the human capital base of economy that needs care

Macroeconomic winds are blowing favourably as we enter the New Year. Stock markets are at an all-time high. Share price indices are up nearly 60 per cent from their lows of March. The stock market is supposed to be a harbinger of economic times to come, so clearly it is indicating a strong revival. Liquidity in the banking system is more than ample. Interest rates are at multi-decadal lows. The gap between Indian and Western policy rates is the lowest it has been in a long time. Coupled with inflation rates above 6 per cent.Read the full article on Free Press Journal

Let 2021 be the Year of Empathy

It has been a helluva year. Full of tragic struggle against a deadly invisible virus. So many loved ones lost, so sudden. Not even being allowed to see the dying patient. Friends and well-wishers reduced to sending heartfelt

condolences by text messages. Of the city’s migrant workers and families walking for a thousand kilometres to their

villages. Because their livelihoods in the city had been shut down.

Read the full article on Mumbai Mirror

A firebrand farmer leader

During the current farmers’ agitation there was much scorn heaped on a farmer who had the audacity to speak in polished English to journalists.

Read more at Mumbai Mirror

A formidable challenge

In the last week of November, the government confirmed that India was officially in a recession, possibly for the first time in modern history. The technical definition of a recession is when the economy contracts for two successive quarters, ie three month periods.Read more at Orissa Post.

The union's nose truly in states' tent

When the prime minister announced PM Kisan, which pays Rs 6,000 per farming household per year, it was welcomed by all. It is a direct benefit transfer to those who toil to produce food for us. Where are these farmer households? They are not spread uniformly across the country. So the money from the PM Kisan goes unevenly across different states.Read the full article on Mumbai Mirror 

Water Cannons Can't Douse Their Anger

In September, the central government passed three laws to give more freedom to farmers. Mind you that agriculture is a state subject and farm policies are best left to individual states, as each state has a different mix of farmer issues and circumstances.Read the full article in the Mumbai Mirror

Don't micromanage

This article was published originally in the Orissa Post. You can read the full article here.

---

Nokia was once the world leader in mobile phone handsets. Its largest manufacturing plant was located in Sriperumbudur in India as part of a Special Economic Zone. In a six-year period, it produced more than 500 million handsets, much of them exported. Nokia employed a workforce of 30,000 including employment, and it had a big share of women employees. Nokia was indeed the rockstar example of what it means to make India a manufacturing hub of the world.Read More

Atmanirbharta may come at a price

This article was originally published in Mumbai Mirror. You can read the full piece here.

---

Bharat Sanchar Nigam Limited (BSNL), which was formed 20 years ago, has more than 12 crore customers - 10 percent of all the telecom subscribers in the country. In landline connections, it has nearly half of the two crore landline customers in India. Telecom may be lucrative business, but as a company BSNL has been bleeding.Read more

The need for a more direct stimulus

The finance minister announced a stimulus package called Atmanirbhar 3.0, so-called because it was the third in a series. The total rupee value of this stimulus for the economy is 2.65 trillion. A stimulus is supposed to put money in the pocket of the citizen so that he or she can start spending. That is, start buying things like essential goods, clothes, medicines or pay rent.

Read More

Economy to Decide Ties

Kamala Harris will become the first-ever Vice President of America to have Indian ancestry. Senator Harris' mother Shyamala Gopalan arrived in the United States at the age of 19 to do her PhD in nutrition and endocrinology at the University of California in Berkeley. Harris has maintained her links with her maternal grandparents and other Indian relatives.Read More

The consent of the loser

One of the best speeches of a candidate conceding electoral victory to his rival was that of Senator John McCain in 2008. America had just elected its first ever black President. It was close to midnight on voting day November 4, after a gruelling campaign season that lasted several months. Of course, not all votes were counted by midnight. Actually it always takes days or weeks to get a tally of all the votes, since they come by mail, from overseas, from military personnel posted in remote locations. But a concession speech is given much before the counting is done. A mature, experienced leader can see the writing on the wall, no matter how bitter the contest, and how close the result. McCain was such a man. As a naval officer he had fought in the Vietnam War, and suffered torture as a prisoner for six years. Yet his later life showed no bitterness, and in fact he was part of the effort to restore diplomatic relations with Vietnam. His life was dedicated to public service, as a core member of the Republican Party, and as people’s representative for more than three decades. It is worth recalling the words he said on that night. “The American people have spoken, and they have spoken clearly. A little while ago, I had the honour of calling Senator Barack Obama to congratulate him on being elected the next president of the country that we both love. In a contest as long and difficult as this campaign has been, his success alone commands my respect for his ability and perseverance. But that he managed to do so by inspiring the hopes of so many millions of Americans, who had once wrongly believed that they had little at stake or little influence in the election of an American president, is something I deeply admire and commend him for achieving.” Obama and McCain were opponents, not enemies.Read More