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Humanity matters, capitalism needs an upgrade

The COVID-19 vaccine crisis is another tragic instance of a clash between the needs of humanity and the principles of capitalism. Capitalists insist that private producers of vaccines must make profits because that is their compensation for investing in research and production. If the prices they charge are beyond the reach of poor people, they are not morally compelled to serve them at a loss. Then, governments must step in and buy from private producers and subsidise sales to poorer people. For which, governments need revenues of course, and taxes on private companies could be a significant source. However, if private companies also press governments for lower taxes, to make their investments more attractive; and if the government is also pushed by them, on ideological grounds, to stay out of business, viz. not having any “public sector” production enterprises, governments find both their hands tied behind their backs in crises when citizens blame them for breakdowns of public services. The Indian government is facing this crisis now.

Conversion of the commons

How Will Capitalism End? Ask Wolfgang Streeck and his co-authors in their book with that title. It will end, they say, when the forces that support capitalism run out. Capitalism expands by converting “the commons” into private capital. Economists justify this on practical grounds: it is the ‘tragedy of the commons’, Garrett Hardin postulated, that people will not care for something unless they own it. This is an ongoing justification for capitalist businesses owning land and forests and water resources. Businesses convert natural capital into financial capital and use it for generating profits and more capital for themselves. Over-exploitation of the earth’s resources to produce profits has contributed to the crisis of environmental sustainability and climate change. The concept of ownership of assets for creating wealth had gone too far when slaves without human rights were used in capitalist enterprises as their economic assets until moralists objected.

 

Creation of monopolies

Slavery is banned by law and the earth’s resources are limited. Therefore, capitalism has moved on to convert knowledge into private property. Modern regimes of intellectual property rights (IPR) with armies of patent lawyers help capitalists to create intellectual property monopolies. Thus, people are denied the use of their own knowledge — as they are when natural products, such as neem and turmeric are patented by capitalists. Thereby, communities whose traditions produced the knowledge must pay those who stole it from them, albeit legally. The public contributes to the creation of scientific knowledge in many ways, for example through government research and development grants and subsidies, as Mariana Mazzucato explains in her book, The Value of Everything: Making and Taking in the Global Economy. In fact, large public assistance in various ways has enabled U.S. pharmaceutical companies to develop their new COVID-19 vaccines at ‘warp speed’.

India has been a spoiler in the global Trade-Related Aspects of Intellectual Property Rights (TRIPS) regime which was promoted by the World Trade Organization in 1995 for uniform global IPR rules. TRIPS is founded on the principle of “product patents”. India had a different approach to IPR based on “process patents”. Product patents allow inventors of new drugs to have exclusive rights to produce and sell them for some years. Producers can use their monopoly to fix higher prices and make more profits for recovering their investments in drug development. Thus, the quantum of production is limited by the inventor to keep prices high. On the other hand, the process patents route forced Indian producers to invent better processes for producing larger volumes at lower costs of ‘generic’ versions of the medicine. This benefited citizens of poorer countries including India. However, Indian generic drug producers became threats to the pricing power of ‘innovator’ drug producers from the West.

TRIPS does have a provision to enable governments to enforce ‘compulsory licensing’. They can demand that an innovator company must allow domestic, lower cost, producers to increase the supply of the drug in an emergency, with compensation to the inventor of course. However, western companies do not like this provision, which has been used before by the South African government, for example, to get drugs for AIDS produced by Indian low cost producers when the AIDS pandemic was raging and Africans could not pay the high prices charged by western companies. This is the provision that South Africa and India want to invoke now to enable production of the new U.S. invented COVID-19 vaccines whose prices are too high for poorer countries.

 

There are three stakeholders involved in a system to produce adequate volumes of affordable medicines: citizens who need the medicines, governments who must ensure they get them, and private companies who produce and sell them. If the stand of private companies is that because their business must be only business, and the public good is not their responsibility, governments must step in. They must have the means to regulate the prices and also to enhance production. However, if private companies (and the economists who support them) take the view that any interventions by governments distort the market, and go even further to say that taxes must be reduced to make their investments more attractive, governments have both hands tied behind their backs when they have to step in to help people in distress.

Public sector versus private

Many economists do not like ‘public sector’ enterprises. Whenever governments set up ‘public sector’ enterprises, such as banks, hospitals, and schools, economists can prove that these enterprises do not produce as much shareholder returns than they would if they were ‘privatised’. If they were privatised, their owners’ objectives would be primarily, if not entirely, to maximise returns to investors. In that case, public benefits are relegated to the background, or even drop right off the table. Therefore ‘private’ will always be better than ‘public’ by the limited metric of shareholder returns.

 

The purpose of governments is to improve the all-round well-being of all citizens; not merely to provide products to customers who can pay good prices for them, which is the means by which private enterprises meet their objective of producing profits for their investors. The COVID-19 crisis has revealed the inadequacy of capitalism to fulfil societal needs. If capitalist enterprises are not willing to fulfil public purposes, governments must create more public spirited enterprises to provide public goods equitably to all citizens. Relentless economic growth is devouring the earth that hosts humanity. With artificial intelligence algorithms in social media, capitalist enterprises are able to manipulate human minds. Their investors have become the richest people on the planet. New mRNA technologies on which some new COVID-19 vaccines are based provide the means to manipulate the composition of human bodies. Thus, capitalists can create even more wealth for themselves off human beings.

Time to reflect

Money-driven capitalist values have drifted too far from human values. Money has become the supreme measure of success in all spheres: the wealth of individuals, the size of companies, and the scales of nations’ economies. The sustainable health of complex systems — which human beings and societies are — is being lost sight of. The COVID-19 crisis will not end capitalism. But capitalism must mutate to survive. Companies must rethink the purpose for their existence. It is imperative now that more human and less money values are adopted.

Arun Maira is the author of A Billion Fireflies: Critical Conversations to shape a New Post-pandemic World


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Printable version | Oct 19, 2021 12:00:10 AM | https://www.thehindu.com/opinion/op-ed/humanity-matters-capitalism-needs-an-upgrade/article34670933.ece

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