Economic design the world follows actually widens inequality.

Image courtesy: axios.com 

When I say perhaps you would not believe it. “The share of wealth held by public actors is close to zero or negative in rich countries, meaning that the totality of wealth is in private hands. This trend has been magnified by the Covid crisis, during which governments borrowed the equivalent of 10-20 per cent of GDP, essentially from the private sector.” 

Simply put, this observation from the World Inequality Report 2022 means that over the years the governments across the globe are witnessing a unique trend – increasingly they find their treasuries are getting empty. So much so that even the interest rate on small savings are being reduced to help bridge the deficit in revenue collections arising essentially from huge stimulus packages being periodically doled out to big business. It is therefore quite obvious that while the government coffers are getting depleted, the rich are amassing wealth in an unequal proportion. This does mean that the resources are in a way being transferred from the government treasury to the private lockers. 

That’s perhaps what must have prompted the British MP Zarah Sultana to say that the super rich don’t create wealth but they are given wealth. “The wealth of billionaires in UK rocketed £106,500,000,000 during the pandemic. The super rich – and not the working class – should pay more tax.” Another study by the New Economic Foundation shows the rich have a runaway success while the poor have been squeezed in the past two years. The widening inequality is not only restricted to UK but has emerged as a global phenomenon, a disquiet outcome of the neoliberal economic design that was thrust upon every nation. 

While more than 800 million people in India live on less than $2 a day, the combined wealth of the top 1 per cent rose by 35 per cent during the pandemic. While India added another 40 billionaires during the pandemic, nearly 50 per cent of its population is barely surviving on Rs 4,500 per month. This is the average, but don’t forget the shocker that the Economic Survey 2016 had brought out. The average income of farmers in 17 States of India, which means roughly half the country, stood at a paltry Rs 20,000 ($ 267) a year. Imagine how the farming families must be surviving with an average income of less than Rs 1,700 a month. 

“India stands out as a poor and very unequal county, with an affluent elite,” the report rightly observed. With the top 10 per cent having 20 times more wealth than the bottom half, the inequalities obviously galore. Similarly, at the international level, the richest 10 per cent hold 52 per cent of global income. The poor are left with only 8 per cent. As if this is not enough, the gulf between the rich and the poor has further widened during the pandemic. In America alone, the combined wealth of its billionaires has increased by a whopping 44.6 per cent during the pandemic, a study by the Institute of Policy Study had brought out. 

Interestingly, the World Inequality Report draws attention to a faulty perception that has been created in public thinking about the failure of socialism in restricting the economic divide. Between 1951 and 1981, the report shows that inequality was far less than what has been witnessed in the reforms era beginning early 1980s. And as Dan Price, a Seattle-based CEO tweeted the other day: “One of the biggest myths of capitalism is that the rich are job creators. In the pandemic, billionaires’ wealth is up $2.1 trillion and the number of jobs is down 4.2 million. The myth is so dangerous because it leads people to idolise the rich and give them whatever they want.” 

True. In India, whenever a question is raised on the need to provide more stimuli to raise rural demand, a chorus immediately emerges on giving more tax concession and economic stimulus packages to the supply side, meaning the industry, saying it will lead to more job creation. The official statistics have however belies this flawed argument, with almost six million salaried jobs lost in November alone.   

The economic design we follow is so built that it actually widens inequality. To illustrate: if only the annual Rs 1.45-lakh crore tax bonanza that was given to the Indian industry in Sept 2019 was instead provided to farmers , an additional Rs 12,000 per year could go to each land owing farmer, increasing the entitlement under PM Kisan Samman Nidhi programme to Rs 18,000. Such a decent direct income support would have not only helped bridge the existing economic disparity but would have helped create an increased rural demand thereby adding on to country’s economy. Providing more money in the hands of farmers would be the right step ahead in making agriculture economically viable thereby reducing the pressure on the cities for creating jobs. This makes strong economic sense given the speed with which automation is happening in the industry.   

Take another example. In the US, General Mills has already announced that given the high rate of inflation, it will be forced to raise the prices of its grocery products from the beginning of the New Year. What it did not say, and as Dan Price pointed out: “GM Mills paid a $ 300 million dividend to investors, brought back $ 150 million in stock to enrich execs and investors, and pays its CEO $ 16 million. It makes $ 2.1 billion a year in profit. It is raising prices by 20 per cent and blaming ‘inflation’.” Globally it has been seen that co's flush with cash (thanks to tax cuts, bailouts and stimulus) do not invest in creating jobs but use it for buying back shares. India is no exception. Media reports show that Indian companies had bought back shares worth Rs 2-lakh crore in the past five years. 

Inequalities also exist within the corporate houses. A significant proportion of the economic stimulus packages go towards meeting the staggering salary bills plus bonuses for the top executive or used for stocks buy back. As Robert Reich, former US Labour Secretary explains one way is to look at the CEO-to-worker pay ratio. Coca-Cola CEO has an income package that is 1,621 times higher than a median worker’s salary. Similarly, Levi Strauss: 661-to-1; McCormick & Co: 585-to-1; Carnival: 490-to-1; Unisys: 313-to-1; and Tyson Foods: 294-to-1. As per a media report, the basic salary of Star Bucks CEO was 12,617 per cent higher in 2020 than the media employees salary. This mind-boggling pay structure provides a basic salary of $ 1.54 million to the CEO while the average income of a farmer growing coffee beans is less than the international acute poverty line of $1.9 per day. The inequalities that makes the top executives walk away slush with money therefore is woven in the company’s balance sheets, and similarly I find the distressing level of inequalities we see globally are also entwined in the way reforms are designed. #

Source: Providing more stimuli to raise rural demand key to bridge economic disparity. Bizz Buzz. Dec 17, 2021. https://www.bizzbuzz.news/opinion/providing-more-stimuli-to-raise-rural-demand-key-to-bridge-economic-disparity-1085902

 

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Greed triggers gross vaccine inequality

Pic courtesy: NDTV 

This is disturbing. With only one among 500 in the low-income countries having received the vaccine shot in poor countries, a rigorous vaccine inequality has been at play. This is against every fourth person in the rich countries having received a shot. As per the World Health Organisation (WHO) poor countries have received only 0.2 per cent of the vaccine doses while the rich countries walk away with a share of 87 per cent.

So far, only 32 per cent in America, 23.1 per cent in UK, 2.1 per cent in India and 0.3 per cent of the population in the Philippine have received both the doses. At this rate, it may take years before the world can emerge out of the pandemic. The rich need to understand they cannot remain safely isolated from the deadly virus till the poor too have got the protective shield.

What is coming in the way is the greed for more profits over public health. Instead of pushing for a speedier vaccination drive globally, a handful of vaccine manufacturers are actually using patent protection granted under the Trade-Related Intellectual Property Rights (TRIPs) Agreement of the World Trade Organisation (WTO), to hold the world literally to ransom. Not only has the Big Pharma, some of the developed countries have been hoarding the vaccines and oppose any move to temporarily lift the patent protection. The US was hoarding 60 million doses of AstraZeneca vaccine, which it has now decided to share with other countries. Notably, the US Food and Drug Administration (FDA) had not approved AstraZeneca vaccines (called CoviShield in India) for domestic use, and therefore it made little sense to withhold it anymore.

Although India, South Africa and some other developing countries have petitioned WTO to allow a waiver on patent protection for Covid-19 vaccines, the rich trading block – the US, UK, EU, Japan, Canada, Switzerland, Norway, Brazil and Australia – are averse to any such move thereby denying these countries the access to technology to go in for large-scale production of the vaccines.

The pressure to oppose the IPR waiver comes from the pharmaceutical giants (and lobbyists) who have in a signed letter to the US President appealed to disregard the joint proposal put forward by India and South Africa stating that it was without any evidence. It also urged the US Administration to continue to ‘oppose the TRIPs intellectual property waiver’. Hollywood too is siding with the pharmaceutical industry. The TRIPs Agreement provides for a patent monopoly for 20 years. 

Although there exists a clause in the TRIPs Agreement that allows developing countries the option of using compulsory licensing, enabling the governments at time of national emergencies to permit local manufacturers to use the patented technology without worrying about the patent monopoly, developing countries are reluctant to use the option fearing trade retaliation. No wonder, despite even the Supreme Court mentioning the option of using Section 92 of the Indian Patents Act under which compulsory licenses can be issued to manufacture a patented drug; there has not been any visible movement on that front.

Pfizer’s has now offered its vaccines to India at a ‘not-for-profit’ price, but has spelled out any details about the controversial patent issue. It needs to be known that it was in Feb that the TV channel WION had reported how the pharmaceutical giant was trying to extract a higher price from some Latin American countries as a guarantee in exchange for supplying vaccines. It struck deals with seven countries, and was in negotiation with Argentina and Brazil. To Argentina it asked for putting its bank reserves, military bases and embassy buildings as collateral. It asked Brazil for military bases, sovereign assets and an international fund to write-off any expenses arising from probable law suits. The deals fell through. Even at that time, Pfizer’s chairman, Albert Bourla, had in a press release claimed how the company was committed towards equitable and affordable vaccines for people around the globe. Shows the double face of the pharmaceutical industry.

Moreover, it is not that the Covid-19 vaccines were produced with company’s own financial resources and in house research. These vaccines were in fact developed with public money support. For instance, US through its Operation Warp Speed, spent $12 billion to finance research, production and delivery of vaccines produced by a handful of companies. UK Government had provided 84 million pounds for manufacturing support to University of Oxford and Imperial College, London. As we all know, Oxford University later carved out a global licensing agreement with AstraZeneca. German government had given Pfizer’s German partner BioNTech close to $445 million. Further, writing in Project Syndicate,economist Jeffrey D Sachs says: “The Intellectual Property held by Moderna, BioNTech-Pfizer, and others is not mainly the result of those companies’ innovations, but rather of academic research funded by the US Government, especially the National Institutes of Health (NIH). The private companies are claiming the exclusive right to IP that was produced largely with public funding and academic science.”

The billionaire philanthropist Bill Gates too has received brickbats for his recent statement opposing any move to transfer the vaccine technology to developing countries. To say that developing countries do not have the capability to effectively use the technology transfer is not true. There are a number of companies in India, Canada, South Africa and Brazil among others which have the potential to ramp up production. The IPR waiver can easily expedite the mass production of generics, making it cheaply available. That’s what the world needs at this critical juncture.

Well, Pfizer alone is expected to swell its vaccine profits this year by $ 15 billion. This comes at a time when a horrible surge in virus infections is likely to push hundreds of millions of people in Global South at risk for want of vaccines and that too cheap. Let’s not forget, 3.22 million people have already perished worldwide from Covid-19. While the patent debate rages on, the big question is how the world can allow a handful of vaccine companies to profit over human lives. #

Source: Greed triggers gross vaccine inequality. The Tribune. May 6, 2021. https://www.tribuneindia.com/news/comment/greed-triggers-gross-vaccine-inequality-248780

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Indian agriculture has been in distress for over two decades. Why couldn't economists see it earlier?

Pic courtesy: The Hindu

It was in 2013, when just prior to the inauguration of the annual World Economic Forum (WEF) jamboree at Davos in Switzerland, Oxfam too released its annual global inequality report. Estimating that the richest 100 families in the world had added $ 240 billion to their wealth in a year, the report said the amount of wealth concentrating in the hands of top 100 was good enough to wipe out global poverty four times over. If only that report had been heard and action taken to reduce global poverty, the widening inequality could have been contained.  

A few days back, Oxfam released its latest ‘Time to Care’ report ahead of the 50^th Annual Meeting of the WEF. While it once again clearly brought out how the concentration of wealth in the hands of world’s 2,153 billionaires had accentuated over the years, almost equalling the wealth in the hands of 4.6 billion people or 60 per cent of the global population, it also pointed to the worsening inequality in India. India’s richest 1 per cent holds more than four times the wealth that exists in the hands of 95.3-crore Indians forming 70 per cent of the country’s population. In addition, the combined wealth of India’s richest 63 families was higher than the Rs 24,42,200-crore outlay of the Union Budget for the financial year 2018-19.   

Coming at a time when all eyes are on Budget 2020, it will be interesting to see whether the Finance Minister Nirmala Sitharaman will make an attempt to correct this historical distortion in economic approach. With growth hitting an 11-year low and that too on the back of an economic slowdown, and with big business drumming up fears of fiscal slippage if she resorts to increased government spending so as to spur rural demand, I doubt if the credit rating agencies and the economists working with brokering agencies will allow for any policy space to be utilised for bridging the widening inequality. Already, enough noise is being created in the mainline media warning against any fiscal exuberance, suggesting big-bang measures which harbours on more of the same and therefore keep fiscal deficit within the target proposed.  

At a time when fall in consumption and investment are being considered as the reasons behind the economic slowdown, any meaningful attempt to enhance rural spending will come from providing more income in the hands of the rural poor, which will also go a long way in addressing growing inequality. Regardless of what credit rating agencies have been suggesting, the Finance Minister will have to defy the contours of the predominant economic thinking that has pushed the economy on a downhill slide. An economy which caters to serving the consumption needs of 10 per cent of the population must now look beyond, and as the Prime Minister often says to translate into Sabka Saath Sabka Vikas.   

In other words, Budget 2020 provides a perfect opportunity to set the economic imbalance right.

In economic terms, everything boils down to creating demand. More the demand more is the economic growth. And it is primarily for this reason the 7th Pay Commission was hailed by India Inc as a booster dose for the economy. After all, more income into the hands of employees would mean more demand, and thereby more consumption. Similarly, any further relief in personal income tax is expected to leave more surplus money into the hands of urban middle-class thereby giving consumers more to spend. But again, this fits into an economic thinking that restricts all measures to cater to consumption needs of 10 per cent of the population. On the other hand, I have always argued that unless growth is inclusive the economic benefits will not reach the masses. Considering that bulk of the rural poor comprises farmers and farm workers, the focus has therefore to shift to agriculture.

Of the 95.3-crore Indians that the Oxfam report talked about, at least 60-crore are engaged directly or indirectly with farming.  The first and foremost step is to start viewing agriculture as part of the formal economy. Agriculture should not only be seen as a sector whose only contribution is to ensure that food inflation does not cross the four per cent (plus or minus two per cent) limit as laid down under the Reserve Bank of India (RBI) macro-economic policy, but should be seen as a sector that can create economic buoyancy. More so, at a time when the bottom 60 per cent population holds only 4.8 per cent of the national wealth. This is because agriculture unfortunately has been kept deliberately impoverished so as to keep economic reforms thriving as a result of which agrarian distress remains largely pronounced. According to the Economic Survey 2016, a report that I have often quoted, the average farm income in 17 States of India stands at a paltry Rs 20,000 a year. In other words, farming families in roughly half the country, survive on less than Rs 1,700 a month. At such low incomes, the share of agriculture in country’s GDP is bound to remain low.

The IMF says that declining rural demand has pulled down India’s growth, which in turn has pulled down global GDP. This became known to IMF (and for that matter to mainline economists) only when India’s GDP figures slipped down to less than 5 per cent. But even for the past two decades, farm incomes had either remained stagnant or were in the negative, which means rural spending were already low. This fact was never acknowledged. An OECD-ICRIER study for the period 2000 to 2016-17 shows that Indian farmers had lost Rs 45-lakh crore on account of being denied the rightful price. This was followed by a period when according to Niti Aayog, annual growth in real farm incomes had remained at ‘near zero’. However, not even an iota of concern was exhibited by the World Bank/IMF, the credit rating agencies or India’s mainline economists at the extra-ordinary crisis that prevailed in rural India. As long as GDP hovered at 6 per cent and above, economists failed to see the slump in rural demand.

The launch of PM-Kisan scheme in last year’s budget, providing a direct income support of Rs 6,000 per year per farm family (owning land), for which a budgetary provision of Rs 75,000-crore was made, is a ‘tectonic’ shift in economic thinking. As someone who had relentlessly been seeking an income transfer to the farming community, to partly offset the economic loss farmers have been undergoing year after year, I think PM-Kisan is the right vehicle coming at the right time to increase rural incomes. There is no other policy instrument that can reach all farmers. To make a meaningful impact, my suggestion to the Finance Minister would be to provide an economic stimulus package of Rs 1.50 lakh crore over and above the Rs 75,000-crore that is already allocated under the PM-Kisan scheme. This would provide an amount of Rs 18,000 ever year or Rs 1,500 per month (against Rs 500 at present) which is enough to meet some farm expenses like cost of seed, manure and bio-pesticides. This may not sound to be of much significance for those living in the cities but imagine the implications it has for the rural poor whose income is hovering around Rs 20,000 per year. In any case, the additional allocation under PM-Kisan scheme will flow back into the markets by way of enhanced consumer demand. An effort should also be made to ensure 100 per cent implementation of this scheme. At present, against a total of 14.5–crore farmers, only about 7.6-crore farmers have been covered till Nov 30. Also, the Finance Minister should expand this scheme to benefit tenant farmers.

When farm incomes are low, it has negative fallout on farm workers. According to a study by the Centre for Monitoring Economy (CMIE), in the past one year, 2018-19, almost 1.1 crore people lost their jobs. “Estimated 91-lakh jobs were lost in rural India, while the loss in urban India was 18-lakh jobs. Rural India accounts for two-thirds of India’s population but it accounted for 84 per cent of the job losses,” the report said. Several other studies have shown farm wages declining to its lowest in past five years, and massive job losses being faced by both farm and non-farm workforce. Even the MNREGA scheme, for which a budgetary provision of Rs 61,084-crore was made under revised estimates for 2019 fiscal, numerous reports of payments not being made in time have appeared. To bring the economy back on track, my second suggestion would be to enhance MNREGA budgetary allocation by another Rs 10,000-crore, taking it to Rs 70,000-crore for fiscal 2020.

While the Rs 25,000-crore corpus for last-mile funding for stalled housing projects may help the construction industry, another stimulus of Rs 25,000-crore is needed to prop up the Zero Budget Natural Farming (ZBNF) initiative that the Finance Minister had mentioned in last year’s budget but refrained from making any budgetary provisions. Drawing from the successful reach of the ZBNF programme in Andhra Pradesh, where approximately 5.85-lakh farmers have been shifted from chemical farming systems, it is time to replicate organic cultivation in erstwhile Green Revolution areas, which are faced with severe crisis in groundwater depletion as well as environmental contamination. In addition, an allocation of Rs 500-crore be also made to set up Farmer Markets in major urban centres. This should be to encourage the supply of chemical free farm produce to the health conscious urban population.  

And finally, I expect the Finance Minister to launch an Ease of Doing Farming initiative on the lines of ease of doing business. After all, if 7,000 steps for ease of doing business can be laid out for the industrial sector, agriculture too needs it desperately. At every step, linked to production and marketing, a farmers faces obstacles that are primarily because of lack of governance. This will go a long way in making agriculture an economically viable and environmentally sound enterprise. A vibrant agriculture will create so much of demand that the wheels of development will never be faced with a slowdown. Try it, to experience it. #

Source: 'Ease of Doing Agriculture' is the way forward. National Herald. Jan 31, 2020
https://www.nationalheraldindia.com/opinion/ease-of-doing-agriculture-is-the-way-forward?fbclid=IwAR2j0nI_Zg5XA1MMD6z77toBjeFfYZpy-eHubUqcXKtQ6VpVYkdeegq3oG8  

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