Category Archives: Economics

India in Focus on World AIDS Day

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THE VIRUS. The fever. The disease. The cocktail. The alphabet soup. The death. By any other red ribbon or name, today is December 1, World AIDS Day, and much of the day’s significant news on the topic comes, for better or worse, from India. (Photo: “An Indian sex worker wears AIDS symbols as she takes part in a rally in Siliguri,” AFP via Yahoo! News.)

aidsday06.jpgFor better, former US president Bill Clinton announced yesterday in Delhi a deal to dramatically reduce the price of effective treatment for children with HIV/AIDS. Among other things this is a fascinating example of a new approach to achieving health outcomes that combines public action with market tools. With funding from five countries, three European and two South American, the foundation has negotiated volume discounts on behalf of 40 destination countries. Thanks to the bulk purchase, the Indian generic manufacturers Cipla and Ranbaxy can sell single-pill tri-therapy drugs at 460 for a whole year’s supply. So the $35 million put up by France, Britain, Norway, Brazil and Chile ends up going a long, long way. $35 million! That’s NOTHING. Imagine if, say, the United States tossed in a little spare change from its daily Iraq expenditure. Grrrrr…..

Anyway, here’s a news story with details:

Only about 80,000 of the 660,000 children with AIDS who need treatment now get it, the United Nations AIDS agency estimates, and half the children who do not get the drugs die by the time they turn 2 years old. The United Nations Children’s Fund, or Unicef, has described children as the invisible face of the AIDS pandemic because they are so much less likely than adults to get life-saving medicines. …

Cipla and Ranbaxy Laboratories, Indian generic drug manufacturers, will be providing pills that combine three antiretroviral drugs into a single tablet, a formulation that is easier to transport, store and use than multiple pills and syrups. The combination tablets also need no refrigeration, an important advantage in poor countries lacking electricity, and can be dissolved in water for babies and infants too young to swallow pills.

Sandeep Juneja, the H.I.V. project head for Ranbaxy, said in a telephone interview that the company was able to provide the lower prices because of the larger volume of sales and because the Clinton Foundation, buying on Unitaid’s behalf, would consolidate many small purchases. He explained that the market for pediatric AIDS drugs was relatively small, fragmented and spread thinly across many countries.

“It would be a nightmare handling those small orders,” he said.”Imagine 40 to 60 countries buying a few hundred bottles individually, with no way to predict how many bottles would be needed.”

The new prices for 19 pediatric AIDS drugs are on average 45 percent less than the lowest rates offered to poor countries in Doctors Without Borders’ listing of AIDS drug prices, and were more than 60 percent lower than the prices the World Health Organization reported were actually paid by developing countries, the foundation said.

On the other hand — and here’s the “for worse” part — even the most abundant supply of inexpensive drugs can’t overcome poor distribution networks and, even worse, bonehead ignorance, especially when it comes from the people in charge of administering AIDS programs. Here’s a horror story this week from rural Gujarat: Continue reading →

The cost of illness

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A friend working in public health once told me that while mortality rates were highest in Africa, morbidity rates (the rate of non-fatal illness) were highest in India. If I remember correctly, she told me that this had to do with relatively high rates of innoculation – which cut all the nasty childhood diseases that lead to low life expectancy at birth – but a poor health system over all.

While I’m not sure if this is still true, what I do know is that getting sick is expensive, anywhere. Consider the impact of illness on financial health in the USA:

50 percent of all bankruptcy filings were partly the result of medical expenses… Every 30 seconds in the United States someone files for bankruptcy in the aftermath of a serious health problem. [Link]

And this is even though “68 percent of those who filed for bankruptcy had health insurance” [Link].

If illness wipes out the savings of relatively high (by world standards) earning Americans, you can imagine what it does to the poor in India. While the cost of medical care is cheaper in absolute terms in India, it is still a large share of already meager resources. Couple that with lost earnings, and the impact can be dire.

About one-fourth of hospitalized Indians fall below the poverty line as a direct result of their hospital expenses, according to a 2002 World Bank report. Many people take out steep loans or sell their homes in order to pay. And for the poor, losing even a day’s wages while waiting in the hospital can be devastating.

“A health event is a bigger risk to farmers than an unsuccessful crop. Once they sell their land or livestock, they become indentured laborers. That takes a generation to fix,”… [Link]
Continue reading →

Friedman on India

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It should be no surprise to most here that I’m a strident fan of Milton Friedman and that his passing was quite a bit more than a garden variety celeb obit for me. While I’m a geek of rather high proportions, there are quite a few of us for whom the loss left an almost personal hollowness.

“The current danger is that India will stretch into centuries what took other countries only decades” – Milton Friedman, 1963Because he called San Francisco home, I actually had the honor of seeing Uncle Milt speak in person about 2 years ago at a benefit gala for a thinktank I’m a contributor to.

And earlier this spring, I had another opportunity to see Milton & Rose Friedman in person at the unveiling of a PBS documentary on his life and times. At the time, I implored several friends to join me with the argument that “at 94, homey ain’t gonna be around too much longer – see him while you can.” Unfortunately, a bout of flu kept Friedman from joining us that evening (Rose did, however make it) and alas, my words were sadly prophetic.

Interestingly, at that event, Gary Becker was on tap for Milton & Rose’s intro. In nearly any other context, Becker’s own Nobel Prize would have garnered him a headline act. But given Friedman’s ginormous stature, Becker’s intro speech was instead somewhat rudely met with idle chatter from the back of the banquet hall. You’d think scoring a Nobel prize would earn a little more respect – apparently not so when you’re between an audience and the Friedman’s.

‘Tis the curse of the passage of a generation that we take for granted previous, hard fought accomplishments – both material and intellectual. In its extreme, we just assume that he world we see around us had to be rather than recgonize the role of volition, creativity, and intellectual accomplishment which enabled it to be.

In Friedman, India, and recent economic history, we see all this wrapped up in a neat tidy little package. So much that seems obvious now was contrarian then. And so many of the arguments we use to excuse and ignore the outcome of disastrous policy was plainly predicted and evident decades ago.

Continue reading →

A Farewell to Doffing & Doffing About

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Marginal Revolution’s Tyler Cowen has a (p)review of Gregory Clark’s “A Farewall to Alms: A Brief Economic History of the World” in today’s NYT.

It takes 3 men to replace one good woman?

Unfortunately, the book isn’t available quite yet but, interestingly, the full manuscript is available on the web (not anymore!)

Clark follows in the footsteps of recent mass market developmental econ books such as Jared Diamond’s Pulitzer-winning Guns, Germs and Steel and William Easterly’s The Elusive Quest for Growth. All three attempt to tease apart resources, institutions, culture, money, colonialism, and the like in trying to answer the age old question of why some nations are rich and others are poor.

Clark comes down firmly in favor of culture while using the somewhat oblique, econ-centric term “Quality of Labor”. The example Cowen chooses to excerpt in his NYT review comes from India –

…A simple example from Professor Clark shows the importance of labor in economic development. As early as the 19th century, textile factories in the West and in India had essentially the same machinery, and it was not hard to transport the final product. Yet the difference in cultures could be seen on the factory floor. Although Indian labor costs were many times lower, Indian labor was far less efficient at many basic tasks.

For instance, when it came to “doffing” (periodically removing spindles of yarn from machines), American workers were often six or more times as productive as their Indian counterparts, according to measures from the early to mid-20th century. Importing Western managers did not in general narrow these gaps. As a result, India failed to attract comparable capital investment.

Contrary to the “race to the bottom” thesis, Clark argues that the real driver of globalization is interconnectedness amongst others who’ve mastered the strange calculus of economic growth rather than simple exploitation of the poorest –

Professor Clark’s argument implies that the current outsourcing trend is a small blip in a larger historical pattern of diverging productivity and living standards across nations. Wealthy countries face the most serious competitive challenges from other wealthy regions, or from nations on the cusp of development, and not from places with the lowest wages. Shortages of quality labor, for instance, are already holding back India in international competition.
Continue reading →

The Karma of Capitalism

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Harvard Business School Ain’t What It Used To Be….

BusinessWeek is currently featuring a story on the purported influx of Desi inspired ideas into cutting edge American capitalism. Paint me a cynic but the piece takes a simplistic view of 1) what really happens in business or 2) what’s really uniquely desi philosophy or 3) both. The result is a mass of ethnic feel-goodness but not enough of a structured explanation to satiate a, uh, cynic like myself.

Our no-doubt well-intentioned writer christens the movement “Karma Capitalism” –

You might also call it Karma Capitalism. For both organizations and individuals, it’s a gentler, more empathetic ethos that resonates in the post-tech-bubble, post-Enron zeitgeist….while it used to be hip in management circles to quote from the sixth century B.C. Chinese classic The Art of War, the trendy ancient Eastern text today is the more introspective Bhagavad Gita.

BizWeek quotes different folks who take stabs at identifying what “it” is –

…One key message is that enlightened leaders should master any impulses or emotions that cloud sound judgment. Good leaders are selfless, take initiative, and focus on their duty rather than obsessing over outcomes or financial gain. “The key point“The key point is to put purpose before self”,” says Ram Charan, a coach to CEOs such as General Electric Co.’s (GE ) Jeffrey R. Immelt, “is to put purpose before self. This is absolutely applicable to corporate leadership today.”

…”The best way to describe it is inclusive capitalism,” says Prahalad, a consultant and University of Michigan professor who ranked third in a recent Times of London poll about the world’s most influential business thinkers. “It’s the idea that corporations can simultaneously create value and social justice.”

Continue reading →

Time to Liberalize Higher Education in India?

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I’m sure many readers saw the article in the New York Times on the coming skills gap in the IT sector in India. The basic gist is this:

Software exports alone expanded by 33 percent in the last year.

The university systems of few countries would be able to keep up with such demand, and India is certainly having trouble. The best and most selective universities generate too few graduates, and new private colleges are producing graduates of uneven quality.

With the number of technology jobs expected to nearly double to 1.7 million in the next four years, companies are scrambling to find fresh engineering talent and to upgrade the schools that produce it. (link)

A shortage of 500,000 high tech workers is predicted for 2010. Perhaps the only way to forestall a huge wasted opportunity would be if the government were to liberalise its policy on foreign universities, and allow for-profit foreign institutions to open up campuses — with some regulation. According to this Rashmi Banga editorial in the Financial Express, the many thousands of Indian students who don’t go to IIT currently spend $3 billion on education in the U.S. — money which could be spent in India itself. Banga also outlines some of the basic problems in the Indian system as it operates from an insider’s perspective.

This is not a new idea. Proposals have been floated, committees have reported, and bills have been passed — though none of it has really led to anything. The many U.S. universities that have pondered building campuses in India (including both Stanford and Yale) have all been repulsed by the continuing ban on for-profit enterprises and the miles of regulations, regulations, regulations. (You can follow the saga on the T. Satyanarayan’s excellent Education in India blog) The arguments against liberalization seem weak. Standards are really not that hard to ensure, and a set of simple regulations or guidelines to ensure an orderly process shouldn’t be that hard. The charge of “cultural sensitivities” is raised, but are cultural sensitivities served by the current system, where thousands of students go abroad to study? (And many of them end up sticking around in the places where they get their degrees?)

It also needn’t be solely about filling the voracious staffing needs of the big consulting, outsourcing, and banking companies; I imagine that a Yale or Stanford campus in India would be much more than that. I’m sure many U.S. academics in the social sciences and humanities would jump at the chance to have rich, lively intellectual exchanges with Indian students and researchers — without having to go through a lot of bureaucracy. Continue reading →

Nobel Peace Prize to Muhammad Yunus, Grameen Bank

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A fine, fine choice for the Nobel Peace prize! Mohammed Yunus and the pioneering micro-credit institution he founded, Grameen Bank. More on this as we get time to put together a full post, but here is the Nobel Peace Prize committee press release:

The Norwegian Nobel Committee has decided to award the Nobel Peace Prize for 2006, divided into two equal parts, to Muhammad Yunus and Grameen Bank for their efforts to create economic and social development from below. Lasting peace can not be achieved unless large population groups find ways in which to break out of poverty. Micro-credit is one such means. Development from below also serves to advance democracy and human rights.

Muhammad Yunus has shown himself to be a leader who has managed to translate visions into practical action for the benefit of millions of people, not only in Bangladesh, but also in many other countries. Loans to poor people without any financial security had appeared to be an impossible idea. From modest beginnings three decades ago, Yunus has, first and foremost through Grameen Bank, developed micro-credit into an ever more important instrument in the struggle against poverty. Grameen Bank has been a source of ideas and models for the many institutions in the field of micro-credit that have sprung up around the world.

Every single individual on earth has both the potential and the right to live a decent life. Across cultures and civilizations, Yunus and Grameen Bank have shown that even the poorest of the poor can work to bring about their own development.

Micro-credit has proved to be an important liberating force in societies where women in particular have to struggle against repressive social and economic conditions. Economic growth and political democracy can not achieve their full potential unless the female half of humanity participates on an equal footing with the male.

Yunus’s long-term vision is to eliminate poverty in the world. That vision can not be realised by means of micro-credit alone. But Muhammad Yunus and Grameen Bank have shown that, in the continuing efforts to achieve it, micro-credit must play a major part.

Continue reading →

What would happen if things were upside-down?

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The Public Policy Institute of California released a survey today that is making all sorts of headlines. The survey sheds light on voting trends in the most populous state in the Union. Given the coming demographic shifts within the U.S., it is fair to wonder if these results apply to the rest of the nation as well. From the San Francisco Chronicle:

The growing diversity of California’s population isn’t showing up in the voting booth, where people who are richer, older and whiter than their nonvoting neighbors are making the decisions that will shape the state’s future, a new study shows.

Further, the plans and priorities of the Californians most likely to vote and those of the nearly 50 percent of adults who don’t participate in elections are as different as their bank accounts and racial backgrounds, said Mark Baldassare, a pollster who conducted the study released Wednesday by the Public Policy Institute of California.

“About 15 percent of adult people make the decisions, and that 15 percent doesn’t look much like California overall,” he said. “And that’s even more problematic here because so much public policy is made at the ballot box via initiatives…” [Link]

What these results seem to indicate is that if a larger portion of the population simply registered to vote and showed up on election day, you could throw conventional wisdom out the window. Want an example?

Take the issue of taxes, for example. Gov. Arnold Schwarzenegger and his Republican allies in the Legislature argue incessantly that Californians are adamantly opposed to new or increased taxes.

A poll last May showed that when likely voters were asked whether they would prefer higher taxes and more services or lower taxes and fewer state services, they split on the issue — 49 percent favored more services, and 44 percent called for lower taxes.

But Californians not registered to vote have far different views. More than two-thirds of those residents welcomed higher taxes and more services, while less than 30 percent called for less government.

“The size and role of government is hugely determined by the shape of the likely voter electorate today,” Baldassare said. [Link]
Continue reading →

Macacas bumrushing borders

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It’s been a little while since we last had a good dust-up about illegal immigration. Thankfully the U.S. Government’s Office of Immigration Statistics has some fresh material for us to chew on. (Thanks to SAJA for the tip.) It has just released a report estimating the number of illegal immigrants residing in the U.S. in 2005 by period of entry, state of residence, and country of origin. Here are the big-picture findings:

Mexico was the leading source country for unauthorized immigration with nearly 6.0 million residents in the United States in 2005. El Salvador, Guatemala, India, and China were the next leading source countries, accounting for a combined total of nearly 1.4 million unauthorized immigrants. Among the 10 leading source countries, the annual average increase in the unauthorized population from 2000 to 2005 was greatest among Mexican immigrants (260,000). However, the greatest percentage increase in the unauthorized immigrant population from 2000 to 2005 occurred among immigrants from India (133 percent) and Brazil (70 percent).

Interesting! Illegal immigrants from India more than doubled in the last five years, the fastest growth of all source countries; and it’s not a trivial number, since India ranks fourth, ahead of China, in total number of illegals. Of course these estimates are complicated to produce — the study gives details of the methodology — but clearly we are looking at a substantial trend.

Back in April when the big immigration marches were taking place, we noticed that South Asian organizations, especially Indian-American ones, didn’t seem to be much involved, and a number of commenters argued that, by and large, illegal immigration wasn’t much of a desi issue. At a minimum, these numbers suggest that we think again.

Here’s a key question: Who are these new illegal immigrants? Where do they live, what do they do for work? Where in India do they come from? I know we have plenty of readers who work “in the trenches” who could share some insight, even if it’s imcomplete or anecdotal.

Beyond that, what does this massive rise in illegals from India tell us about the Indian economy, given that it occurred during the much-vaunted time of “India Shining?”

And what about the desi community and the organizations and leaders who claim to represent it? It may serve the public image of Indian immigration to keep the rise of the illegal population out of view, but does that serve the community as a whole? Continue reading →

Temper Tantrums at the WTO

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Bernard Gordon at the Wall Street Journal criticizes India’s trade representative, Kamal Nath, in a recent Op-Ed:

Surprise, surprise, the WTO talks in Geneva are “suspended.” But in truth, hardly a surprise, since in May France’s agricultural minister said, “I would prefer that the negotiations fail rather than . . . raise questions about . . . agriculture.” At the G-8 summit this month President Jacques Chirac backed him up: “Only Europe has moved [and] gone to the extreme limits.”

Both were responding to America’s insistence that Europe do more to match its offer to cut farm subsidies — in order to break the logjam at the heart of the now-collapsed Doha Round. But Europe had a partner in its “my way or the highway” approach. India’s Commerce Minister Kamal Nath, presumably speaking for the developing nations, said more “flexibility” was needed, and then gave his definition of the word: “We can’t negotiate subsistence and livelihood . . . we should not even be asked to do that.”

Mr. Nath had walked out of earlier trade talks, arguing “there was no point” in continuing, which prompted the press at home to fault him for throwing a “temper tantrum.” Not a bad label in this case, since India in 2004 accounted for less than 1% of world trade. And speaking after the collapse, which Mr. Nath characterized as “between intensive care and the crematorium,” he sharply singled out the U.S. as the sole culprit: the “mind-set” of the Americans was “inverted . . . they’re thinking only of market access.” (link; subscription required)

(Note that he’s not inventing the phrase “temper tantrum,” only citing the Indian media’s use of the term approvingly.) Gordon goes on to try and poke holes in Nath’s criticism of the U.S. for the fact that the Doha round has gone aground. Gordon mentions that the Brazil representative was actually more critical of Europe than the U.S., and cites President Bush’s promise to reduce U.S. farm subsidies by 60% in keeping with the opening of U.S. markets.

While the intricacies of world trade agreements and the workings of the WTO are, admittedly, not my area of expertise, one does note that Kamal Nath actually has plenty of company in blaming the U.S. primarily for the collapse of the talks. Continue reading →