Thursday, August 28, 2008
Monday, August 11, 2008
CREATIVE CAPITALISM - THE WAY AHEAD
The world does seem unfair. On one hand, you have people fighting it out to top the Forbes rich list, and on the other, you have 1.1 billion people living on less than a $1 a day, according to a report published by The World Bank. Poverty is a problem many countries face, but due to a lack of resources, governments and NGOs can't do enough. They need support, and that's where Bill Gates comes in.
The man, who has topped the Forbes rich list consecutively from 1995 to 2007, gave a ground-breaking speech on 'creative capitalism' at the World Economic Forum in Davos in January 2008. Coupled with his article in Time magazine ('How To Fix Capitalism', August 11, 2008), he provides an insight, and more importantly, a thin end of the wedge for the future of capitalism.
The Problem With Capitalism
The Problem With Capitalism
Capitalism has touched and improved the lives of many people. But, in it's pristine form, it hasn't provided anything for the neglected.
But, the problem lies in the longevity of the solution. In this world of short-term economic ups and downs, it's hard to remain attentive to global welfare issues. And in the midst of a global economic crisis, these welfare issues get neglected and thrown back down the priority list. Fund-raisers, donations and aid may be temporary fixes. But, there is a need for a continuous, long term effort to solve problems like the one faced by Ethiopia.
What Is Creative Capitalism?
Government aid and philanthropy are generally, selfless. Capitalism isn't. Capitalism deals with making a profit, and harnesses self-interest regarding it's own employees. The problem lies in permanently riveting capitalism to global welfare problems. This is where creative capitalism comes into the picture.
Creative capitalism deals with channeling market forces and innovation into solving the problems of economically-challenged, thereby paying heed to the problems of the neglected and helping companies see the green in the bottom line.
It helps by creating a permanent ground for companies to work on, and helps maintain their interest in projects targeting under-developed and developing countries and extends the longevity of benefit provided to the people of these countries.
Is Creative Capitalism Possible?
Creative capitalism isn't just some new penned word. It has already reached fruition in some cases. Companies like Gap, Hallmark and Dell sell (RED)-branded products, a brainchild of U2 vocalist Bono. These companies donate a portion of their profits, from this brand, to fight AIDS and, in the past year, has generated $100 million for the Global Fund to Fight AIDS, Tuberculosis and Malaria. These companies get recognition for the work being done, customers experience a moral satisfaction knowing that they have contributed to a welfare cause, and the donation helps the cause.
Product (RED) is not a non-profit brand and hence, companies do reap profits, thereby making the brand, and ultimately the proceeds towards the cause, permanent.
Creative capitalism is not about asking companies to be more virtuous, but it's about asking them to identify opportunities in places previously uninspected. It combines innovation and technology, present with companies, in developing products which people in under-developed and developing countries need and, in the same time, help these companies make profits.
According to The World Bank, there is almost $5 trillion of purchasing power in the poorest two-thirds of the world's population. Indeed, there is plenty of scope for companies to benefit financially and simultaneously help bring technology to these people. But, companies must study these markets in order to identify the needs of these people. Vodafone, in 2000, invested in a Kenyan cell-phone company called Safaricom. Today, Safaricom has more than 10 million customers, much more than the estimated 100,000, and is making a profit (net income of $169 million in 2007). To cater to low-income Kenyans, Safaricom charges users on a per-second basis, which helps reduce call charges. Kenyan farmers use their cell-phones to find the best prices in nearby markets. Cell-phones also enable users to carry electronic cash, which requires authorization before its use, and hence, limits the potential of becoming a victim of a robbery or theft (commonplace incidents in Kenya). These amenities provided by cell-phones have helped Safaricom prosper in Kenya, which shows the outcome of creative capitalism.
Who's Responsibility Is It?
Companies willing to embrace creative capitalism need help. R&D costs incurred in developing a drug are huge and the incentive, in terms of publicity and praise, involved in helping the people of an under-developed country might be insufficient to convince companies to get involved. In such cases, the government should do it's part to support such companies and reward them in non-financial ways. For example, under a U.S. law enacted in 2007, any drug company that develops a new treatment for a neglected disease, like malaria, can get a priority review, from the FDA, for another drug the company has produced. A priority review speeds up the FDA review process, and this helps the company in putting its product in the market as much as a year earlier, and this could be worth millions to a company.
There is a need to eradicate red-tape to allow more business investment and provide flexibility to companies. The government, industrialists as well as NGOs need to work together to make creative capitalism work.
The Future Of Creative Capitalism
The future of creative capitalism lies in identifying new opportunities in poor countries. The examples of Sumitomo Chemicals (a Japanese company, which bought a stake in Tanzania's A to Z Textile Mills to create up to 10 million insecticide treated mosquito nets) and Cadbury (the British confectioner is investing millions in small farming communities in Ghana that provide the cocoa beans for one of it's lines of chocolate) reiterates this fact. There seems to be immense opportunities for creative capitalism. And industrialists should take note of this.
Please feel free to post comments regarding any personal ideas or examples of creative capitalism.
Sunday, August 10, 2008
Thursday, August 7, 2008
THE COLLAPSE AT DOHA
On July 29, 2008, the 8th Doha Development Round organized by the World Trade Organization, held in Geneva, Switzerland collapsed due to disagreements of India & China with the U.S. over the Special Safeguard Mechanism (SSM).
A failure in agreement regarding the threshold which would allow the SSM to be used triggered the collapse with the U.S. blaming India and China for being steadfast in their position on the issue. With both sides rejecting any compromise the talks collapsed with Susan Schwab, U.S. Trade Representative being quoted as saying, 'In the face of global food price crisis, it is ironic that the debate came down to how much and how fast could nations raise their barriers to imports of food.' and calling the attempts by India & China as 'blatant protectionism'.
India and China depend heavily on agriculture, with India having 60% of its workforce and China having 45% of it population in agriculture. Because of huge populations, countries like India and China can not meet the food requirements for its population and as a result have to import from other countries. Countries, like the U.S. and the European Union, export food grains to India and China. These exporters knowingly or unknowingly resort to 'dumping' which is the practice exporting a good at a relatively lower rate compared to the rate of the good manufactured in the importing country. Dumping and large import volumes decrease the price of a good or commodity, thereby hurting local producers of the same commodity.
In order to protect farmers in low-income countries like India and China, Mexican Foreign Minister Lois Ernesto Derbez, in September 2003, suggested the establishment of a special agricultural safeguard which came to be known as the Special Safeguard Mechanism.
According to the SSM, whenever the import price of a commodity falls below a certain threshold or if the import volumes increase to a certain level, the SSM is triggered. The SSM automatically applies additional duty to imports to keep the price of the commodity from falling further.
The stance taken by India and China was severely criticized and was seen as a demonstration of the power and influence that China and India have on the international economic agenda, although India's Minister of Commerce Kamal Nath defended India's stance saying, 'I'm not risking the livelihood of millions of farmers.'
A question that needs to be asked is, 'Is the government's (of India) stance genuine, in view of the plight of Indian farmers, or is this just a performance executed by the Congress Party keeping in mind the imminent general elections in 2009?'
DR. 123 AND MR. HYDE
A lot of hype has been created over the nuclear agreement between the U.S. and India. Supporters can't stop getting excited about the infinite energy (just an exaggeration) India will get through this agreement, whereas critics are counting the last days of India's independence (another exaggeration). This agreement has created a huge debate and the latest controversy regarding 'suitcase politics' during the July 22 'vote of confidence' in the Indian parliament is an offspring of this debate.
Political parties have made a mess of this issue and there's a need to look at it before jumping to any conclusions. Let's take an unbiased look at each perspective.
PROS: According to Section 123 of the United States Atomic Energy Act of 1954, US law permits the US to enter into nuclear collaboration with countries who have declared that they do not posses nuclear weapons, have signed the Nuclear Non-Proliferation Treaty and have signed the Comprehensive Test Ban Treaty, none of which India conforms to.
The Hyde Act (Henry J. Hyde United States-India Peaceful Atomic Energy Cooperation Act of 2006) is a legislative act, passed by the US Congress, which virtually creates an exemption for India with regards to the 123 Agreement (an agreement in compliance with Section 123). Interestingly, Barack Obama included provisions in the Hyde Act to restrict the fuel supplies to reasonable civilian reactor requirements'. This exemption has been granted to India and only to India. Israel, a long time pal of the US, has been lobbying for an agreement on similar lines but the US has, till date, refused to toe the line.
Given the climbing energy requirements by India, and the increasing oil prices, nuclear fuel presents itself as a source of energy which would satiate a large portion of India's energy demands. Moreover, the implementation of this deal will provide India with a much larger global image and will increase India's influence on world affairs.
CONS: One problem with the agreement is that the Hyde Act creates a few constraints on the Indo - U.S. 123 Agreement. The Indian government is stating that the constraints of the Hyde act is not binding on India as it is a U.S. domestic law (The Hyde Act) and as per international law, an international treaty (123 Agreement) can't be supplanted by an internal law.
The other problem lies in certain grey areas of the 123 Agreement. Article 1.m of the agreement states that if any information, which is defined in Articles 2.2(a, c, d, f), 2.3 and 3, and technology can not be shared with the military according to article 1.m. Article 14.1 states that any party can unilaterally revoke the treaty and if the treaty is revoked, whatever has been supplied must be returned (Article 14.4).
The agreement has no clear-cut definition of 'information' nor a demarcation between 'civilian' and 'military' nor a method to verify whether any information has been passed between the civilian nuclear engineers and the military.
Moreover, Article 14.4 does not literally exclude 'spent fuel' from being 'supplied materials' and spent fuel obviously can't be returned. Certain clarifications must be made regarding these Articles.
In retrospect, even though the Congress Party survived the July 22 vote of confidence and the IAEA approval of the agreement, the 45-nation Nuclear Suppliers Group must approve a policy allowing cooperation with India before President Bush can make the final changes and get it approved by the U.S. Congress. With the U.S. elections imminent and the deal still hanging in the balance, it's hard to tell whether efforts made by the Bush administration and the Indian Congress Party since 2006 will take any form of fruition.
Political parties have made a mess of this issue and there's a need to look at it before jumping to any conclusions. Let's take an unbiased look at each perspective.
PROS: According to Section 123 of the United States Atomic Energy Act of 1954, US law permits the US to enter into nuclear collaboration with countries who have declared that they do not posses nuclear weapons, have signed the Nuclear Non-Proliferation Treaty and have signed the Comprehensive Test Ban Treaty, none of which India conforms to.
The Hyde Act (Henry J. Hyde United States-India Peaceful Atomic Energy Cooperation Act of 2006) is a legislative act, passed by the US Congress, which virtually creates an exemption for India with regards to the 123 Agreement (an agreement in compliance with Section 123). Interestingly, Barack Obama included provisions in the Hyde Act to restrict the fuel supplies to reasonable civilian reactor requirements'. This exemption has been granted to India and only to India. Israel, a long time pal of the US, has been lobbying for an agreement on similar lines but the US has, till date, refused to toe the line.
Given the climbing energy requirements by India, and the increasing oil prices, nuclear fuel presents itself as a source of energy which would satiate a large portion of India's energy demands. Moreover, the implementation of this deal will provide India with a much larger global image and will increase India's influence on world affairs.
CONS: One problem with the agreement is that the Hyde Act creates a few constraints on the Indo - U.S. 123 Agreement. The Indian government is stating that the constraints of the Hyde act is not binding on India as it is a U.S. domestic law (The Hyde Act) and as per international law, an international treaty (123 Agreement) can't be supplanted by an internal law.
The other problem lies in certain grey areas of the 123 Agreement. Article 1.m of the agreement states that if any information, which is defined in Articles 2.2(a, c, d, f), 2.3 and 3, and technology can not be shared with the military according to article 1.m. Article 14.1 states that any party can unilaterally revoke the treaty and if the treaty is revoked, whatever has been supplied must be returned (Article 14.4).
The agreement has no clear-cut definition of 'information' nor a demarcation between 'civilian' and 'military' nor a method to verify whether any information has been passed between the civilian nuclear engineers and the military.
Moreover, Article 14.4 does not literally exclude 'spent fuel' from being 'supplied materials' and spent fuel obviously can't be returned. Certain clarifications must be made regarding these Articles.
In retrospect, even though the Congress Party survived the July 22 vote of confidence and the IAEA approval of the agreement, the 45-nation Nuclear Suppliers Group must approve a policy allowing cooperation with India before President Bush can make the final changes and get it approved by the U.S. Congress. With the U.S. elections imminent and the deal still hanging in the balance, it's hard to tell whether efforts made by the Bush administration and the Indian Congress Party since 2006 will take any form of fruition.
WHO'S THE BEST FOR THE YANKS
Various issues trouble the American public and Obama & McCain have their independent views regarding these issues. The road to November primarily deals with convincing the American public that one (Obama or McCain) knows how to deal with these key issues in the best possible way.
Of all these 'issues' the two big-ticket issues which rank top amongst all concerns of the American voter are 1) the Iraq war 2) the shaky economy.
The two candidates couldn't be more contradictory to each other regarding these issues.
McCain was, and is, a vehement supporter of the decision to invade Iraq and pledges to keep US troops there until 'the war is won'.
Obama, on the other hand, was an early opposer to the war and during the democratic primaries, promised to remove US troops from Iraq, although in early July, he slightly shifted from his stance and stated that he needs to assess the situation before taking a firm decision.
The presence of US troops in Iraq doesn't go down well with voters because many voters have relations in the armed forces. Moreover, the war on Iraq will cost the US a staggering $1 trillion and more, and this stat hasn't done anything but aggravate the taxpayer. Hard-core conservatives will stand by McCain on this issue, but a majority of voters will support Obama, although the recent centralist comments by Obama regarding this issue may disgruntle voters.
On the agenda of economy, the chasm is also evident. McCain supports Bush's tax cuts for wealthy Americans and cutting corporate tax rates. Obama would rather let Bush's tax cuts expire for Americans earning over $250,000 annually and raise capital gains tax rates.
Obama has also opposed McCain's proposed federal gas tax summer holiday. While McCain feels that it would give a slight boost to struggling families seeking a vacation, Obama calls it 'a political stunt' to gain the popularity vote of gullible voters.
Another issue which has been lingering for some time is regarding health care. McCain wants to do away with the employer-based insurance coverage using tax credits (a tax credit is a recognition of partial payment already made towards taxes due) and create an open market system where people can decide upon competing policies. An open market will presumably enable more competition amongst insurance policy providers, thereby increasing health care quality and decreasing costs. But, without government control on such a vital issue, an open market assumes too much risk. Families, who can't afford even low-cost insurance would be neglected. Obama would keep the current job-based system and expand government involvement and also supports universal health care for children. The U.S. is the only wealthy, industrialized nation that does not have a universal health care system. Supporters of universal health care allege that it provides uniform coverage to everyone and hence crosses out the number of uninsured Americans, which create direct and hidden costs shared by all, and thus, lower costs. Opponents to universal health coverage believe that it would increase taxes and decrease quality and feel that people should have the option to opt out and choose their own insurance policies.
The 2 big-ticket issues along with health care are the main concerns for Americans and its up to Obama and McCain to convince the voters that they have the best solution for each issue. The next few weeks should impart more clarity on the stance of Obama, McCain and the American voter.
Of all these 'issues' the two big-ticket issues which rank top amongst all concerns of the American voter are 1) the Iraq war 2) the shaky economy.
The two candidates couldn't be more contradictory to each other regarding these issues.
McCain was, and is, a vehement supporter of the decision to invade Iraq and pledges to keep US troops there until 'the war is won'.
Obama, on the other hand, was an early opposer to the war and during the democratic primaries, promised to remove US troops from Iraq, although in early July, he slightly shifted from his stance and stated that he needs to assess the situation before taking a firm decision.
The presence of US troops in Iraq doesn't go down well with voters because many voters have relations in the armed forces. Moreover, the war on Iraq will cost the US a staggering $1 trillion and more, and this stat hasn't done anything but aggravate the taxpayer. Hard-core conservatives will stand by McCain on this issue, but a majority of voters will support Obama, although the recent centralist comments by Obama regarding this issue may disgruntle voters.
On the agenda of economy, the chasm is also evident. McCain supports Bush's tax cuts for wealthy Americans and cutting corporate tax rates. Obama would rather let Bush's tax cuts expire for Americans earning over $250,000 annually and raise capital gains tax rates.
Obama has also opposed McCain's proposed federal gas tax summer holiday. While McCain feels that it would give a slight boost to struggling families seeking a vacation, Obama calls it 'a political stunt' to gain the popularity vote of gullible voters.
Another issue which has been lingering for some time is regarding health care. McCain wants to do away with the employer-based insurance coverage using tax credits (a tax credit is a recognition of partial payment already made towards taxes due) and create an open market system where people can decide upon competing policies. An open market will presumably enable more competition amongst insurance policy providers, thereby increasing health care quality and decreasing costs. But, without government control on such a vital issue, an open market assumes too much risk. Families, who can't afford even low-cost insurance would be neglected. Obama would keep the current job-based system and expand government involvement and also supports universal health care for children. The U.S. is the only wealthy, industrialized nation that does not have a universal health care system. Supporters of universal health care allege that it provides uniform coverage to everyone and hence crosses out the number of uninsured Americans, which create direct and hidden costs shared by all, and thus, lower costs. Opponents to universal health coverage believe that it would increase taxes and decrease quality and feel that people should have the option to opt out and choose their own insurance policies.
The 2 big-ticket issues along with health care are the main concerns for Americans and its up to Obama and McCain to convince the voters that they have the best solution for each issue. The next few weeks should impart more clarity on the stance of Obama, McCain and the American voter.
OBAMA OR MCCAIN? WHO?
The 2008 US Presidential Elections might be the most significant elections till date, not only for the US but for all the countries which are influence by the American economy and it s politics.
The question: Obama or McCain, will be decided by American voters, but the consequences of this election will affect many nations, including India.
'How will they affect America, India and world politics?' is a question which needs to be addressed.
A little information on the background of both candidates.
Obama - Born in 1961 in Hawaii to a Black Kenyan father and a White mother from the highly rural state of Kansas, Obama spent a rough childhood in Hawaii and Indonesia. He graduated with a degree in Political Science, with a specialization in International Relations from Columbia University, New York. After some work-ex, Obama moved to Chicago and worked as a Community Organizer for 3 years. He entered Harvard in 1988 and graduated with a Juris Doctor in 1991. He taught constitutional law at the University of Chicago Law School from 1992-2004. He was also involved with law firms and was actively involved in public litigation.
Obama was elected to the Illinois Senate in 1996 and ran for a Democratic primary run for the U.S. House of Representatives against Bobby Rush, a former candidate for mayor of Chicago, and lost; thus losing credibility amongst his fellow party members and going into debt. But, he didn't lose hope and from 2003 to 2004, worked to regain his lost credibility and toned down his Harvardesque attitude, which enabled him to connect with the local populace. He ran for the US Senate in 2004 and won, thus opened the door to mainstream politics where he sponsored a number of bills and introduced the Iraq War De-Escalation Act of 2007. In February 2007, Obama announced his candidacy for President of the United States in the 2008 U.S. presidential election.
McCain - John McCain was born at Coco Solo Naval Air Station in the Panama Canal Zone to a naval officer and a service wife in 1936. Following the footsteps of his father, McCain graduated from the United States Naval Academy at Annapolis in 1958. Unlike Bush, McCain's career in the armed forces was very perilous with the 1967 USS Forrestal fire incident and his ordeal as a POW from 1967 to 1973 as testaments to this fact. McCain retired from the navy in 1981 and finished with seventeen military awards and decorations including the Silver Star, Legion of Merit, Distinguished Flying Cross, Bronze Star and Navy Commendation Medal.
His career in the US Congress started in 1982. In 2000, McCain ran against Bush for the Republican Presidential Primaries and subsequently lost. Because of his lost and differences with Bush, McCain contemplated leaving the Republican party in 2001 and till 2004 he ran counter to Bush's views on a number of issues, until their rapprochement in 2004. He saw out his 3rd and 4th Senate term and finally in 2007, announced his intentions to run for president. He won the Republican primaries in March 2008 and, if elected, will become the oldest president at 72 years.
Politically, Obama is defined as a Liberal and McCain is defined as a Conservative.
The question: Obama or McCain, will be decided by American voters, but the consequences of this election will affect many nations, including India.
'How will they affect America, India and world politics?' is a question which needs to be addressed.
A little information on the background of both candidates.
Obama - Born in 1961 in Hawaii to a Black Kenyan father and a White mother from the highly rural state of Kansas, Obama spent a rough childhood in Hawaii and Indonesia. He graduated with a degree in Political Science, with a specialization in International Relations from Columbia University, New York. After some work-ex, Obama moved to Chicago and worked as a Community Organizer for 3 years. He entered Harvard in 1988 and graduated with a Juris Doctor in 1991. He taught constitutional law at the University of Chicago Law School from 1992-2004. He was also involved with law firms and was actively involved in public litigation.
Obama was elected to the Illinois Senate in 1996 and ran for a Democratic primary run for the U.S. House of Representatives against Bobby Rush, a former candidate for mayor of Chicago, and lost; thus losing credibility amongst his fellow party members and going into debt. But, he didn't lose hope and from 2003 to 2004, worked to regain his lost credibility and toned down his Harvardesque attitude, which enabled him to connect with the local populace. He ran for the US Senate in 2004 and won, thus opened the door to mainstream politics where he sponsored a number of bills and introduced the Iraq War De-Escalation Act of 2007. In February 2007, Obama announced his candidacy for President of the United States in the 2008 U.S. presidential election.
McCain - John McCain was born at Coco Solo Naval Air Station in the Panama Canal Zone to a naval officer and a service wife in 1936. Following the footsteps of his father, McCain graduated from the United States Naval Academy at Annapolis in 1958. Unlike Bush, McCain's career in the armed forces was very perilous with the 1967 USS Forrestal fire incident and his ordeal as a POW from 1967 to 1973 as testaments to this fact. McCain retired from the navy in 1981 and finished with seventeen military awards and decorations including the Silver Star, Legion of Merit, Distinguished Flying Cross, Bronze Star and Navy Commendation Medal.
His career in the US Congress started in 1982. In 2000, McCain ran against Bush for the Republican Presidential Primaries and subsequently lost. Because of his lost and differences with Bush, McCain contemplated leaving the Republican party in 2001 and till 2004 he ran counter to Bush's views on a number of issues, until their rapprochement in 2004. He saw out his 3rd and 4th Senate term and finally in 2007, announced his intentions to run for president. He won the Republican primaries in March 2008 and, if elected, will become the oldest president at 72 years.
Politically, Obama is defined as a Liberal and McCain is defined as a Conservative.
Monday, August 4, 2008
ARE YOU INTERESTED?
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