Orwell Times: Corporate Beneficence

9 Jun

Corporate Beneficence, which was once limited to the rarefied realm of funding Opera Houses and Classical Music, has lately found itself immersed in a variety of ‘charitable’ activities to ‘advance’ human welfare.

As identity and consumption have become conflated, corporations have aggressively spent money on a variety of ‘charitable causes’ to reposition their brands.

Apple

“Apple has agreed to host music for an organization that uses African music to help people caught in the escalating ethnic violence in Darfur, Sudan.” MacWorld. Apple really understands its upper-middle-class pretend-liberal bourgeoisie customers, whose participation in liberal causes starts with Gay rights and ends with attending music concerts about Darfur, and never ever extends to any substantive political action. By the way, where is Darfur again?

McDonald’s

The mission of Ronald McDonald House Charities is to “provide a “home away from home” for families of seriously ill children receiving treatment at nearby hospitals.” The other, better known, mission of McDonald’s is, of course, to get those children to be sick.

Coca-Cola

The company which has been accused of depleting groundwater resources in rural India and which earned a profit of nearly $5 billion in 2005 announced that it would invest “$20 million over five years to improve global water conservation. The plan is part of the company’s effort to adapt to global warming and to address a crucial constraint to growth in emerging markets.”

Shell

“Shell Foundation’s mission is to develop, scale-up and promote enterprise-based solutions to the challenges arising from the impact of energy and globalization on poverty.”

Beyond Petroleum
British Petroleum, the company that was once part of the Global Climate Coalition, an organization set up to promote global warming skepticism, and a company that is facing criminal charges for “allowing 270,000 gallons of crude oil to seep across the Alaskan tundra” (Wikipedia) is now ‘Beyond Petroleum’.

Crystal Geyser

The bottled water company is a ‘proud sponsor’ of “American Forests”.

Walmart

Walmart, which has been widely decried for its low wages, inadequate healthcare benefits, and for ‘burying’ local mom and pop stores (pdf), and a corporation which had a net profit of close to $11.2 billion in 2005, had the following statement on its website, “Walmart charity begins with giving the local community financial support through community giving. Our community giving programs provide direct contributions to the local communities from the Walmart charity fund. Last year, Walmart charity initiatives were to exceed $170 million in support of local communities and non-profit organizations.”

Halliburton

The company sponsors a Charity Golf event. “The 2006 event raised more than $625,000, and over the past 13 years, I’m happy to report that this event has now provided more than $2.1 million to more than 48 local nonprofit charities.”

Bechtel Corp.

The corporation accused of trafficking women in the Balkans and myriad other charges of fraud in handling its contracts in Iraq generously helped fund an International Center at Stanford University.

A Small Government: US Federal Budget as Proportion of the Economy

11 Dec

The US federal budget is larger than that of any other country in absolute terms. The US government spends more than $2.3 trillion every year, about $500 billion dollars more than Japan, which has the second largest budget in the world at around $1.7 trillion.

Yet, as a proportion of the economy, the US federal government budget is small. The US federal budget of $2.3 trillion is about one-fifth (.197) of its $12.5 trillion GDP. The average budget-to-GDP ratio in developed countries in Europe is about twice as much. For example, UK’s budget of $951 billion is nearly half of its $2.228 trillion GDP, while France’s budget of $1.144 trillion is a little more than half of its $2.055 trillion GDP. The US budget-to-GDP ratio is closer to the ratios in the developing world. For example, India’s GDP of $720 billion is nearly five times bigger than its budget of about $135 billion. Surprisingly, the US budget-to-GDP ratio also matches the ratio of its left-leaning northern neighbor, Canada.

Petro-economies like Saudi Arabia have budget-to-GDP ratios that fall between those of the developing world and the developed economies in Europe. Petro-economies also fall in the middle in terms of budgetary dollars spent per person. Nigeria, unsurprisingly, is an exception in this regard, with budget numbers far below that of other petro-economies.

In terms of dollars spent per person, United States is far behind developed EU economies. The budgetary allocation per person in the EU is more than double that in the US.

There are two key caveats in interpreting all this. An exclusive focus on the federal budget understates the total government spending for countries with strong federal structures like the US. But the good thing is that federal spending and state and local spending are not inversely proportional in countries with strong federal structures but are strongly correlated. Hence, while relying solely on federal budgetary expenditure does understate the impact, it doesn’t do it by as big a margin as one would expect. Take, for example, the US, whose total budget at the state level is around $600 billion, adding which pushes total government spending to $3 trillion or still about .25 of the GDP.

Secondly, one must look at not only the size of the budget but also where it is spent. For example, the US military budget accounts for a fifth of its net budget by conservative estimates. In sheer numbers, US military budget exceeds the total military spending of the rest of the world, but in terms of its size relative to US GDP, it is a measly 4%.

Developed countries pool:

Country

GDP (in trillions, 2005 estimate, unless mentioned otherwise)

Budgetary Expenditure (in trillions, 2005 est. unless mentioned otherwise)

Proportion of budget/GDP

Population
(millions)
(2006 est.)

Budget expenditure per
Person (thousands)

Germany

$2.73

$1.362

.498

82.4

16.529

France

$2.055

$1.144

.556

60.6

18.877

UK

$2.228

$.951

.426

60.4

15.74

Italy

$1.71

$.8615

.503

58.1

14.827

Norway

$246.9 billion

$131.3 billion

.531

4.5

29.177

Switzerland

$367 billion

$143.6 billion

.391

7.48

19.197

Asia Pacific

Japan

$4.664

$1.775

.380

127.4

13.932

Australia

$612.8 billion

$240.2 billion

.391

20.09

11.95

Developed North American economies

USA

$12.49 trillion

$2.466 trillion

.197

295.7

8.3395

Canada

$1.035

$152.6 billion(est. 2004)

.147

33.09

4.611

Developing country pool:

Country

GDP (2005 est.)

Budgetary Expenditure (2005 est.)

Proportion of budget/GDP

Population
(millions)
(2006 est.)

Budget expenditure per
Person

India

$720 billion

$135 billion

.1875

1,095

123

Pakistan

$89.55 billion

$20.07 billion

.223

162

124

Indonesia

$270 billion

$57.7 billion

.213

245

235

Brazil

$619.7 billion

$172.4 billion

.278

186

927

China

$2.225 trillion

$424.3 billion

.190

1,306

325

Chile

$115.6 billion

$24.75 billion

.214

16

1546

Petro-economies

Iran

$181.2 billion

$60.4 billion

.333

68

888

Saudi Arabia

$264 billion

$89.65

.339

27

3320

Venezuela

$106.1 billion

$41.27 billion

.388

25.375

1626

Nigeria

$77.33 billion

$13.54 billion

.175

128

105

All figures from CIA World Fact Book which can be accessed at: https://www.cia.gov/redirects/factbookredirect.html

Piracy—the Real Mantra Behind Indian Success

9 May

The Wall Street Journal (WSJ) ran an opinion piece yesterday arguing that India is “rapidly evolving into Asia’s innovation center” and “leaving China in the dust” because of its famed intellectual property regime.

Not only is the claim patently bogus, but the opposite—that the Indian innovation is surviving primarily through piracy—is very likely true. It is, of course, clear that the authors of the article have never ventured to Palika Bazaar or Nehru Place in Delhi or the countless other entities that use and sell pirated materials in India. Nor have the authors ever read an Indian science book, for all they will find are hasty copies of works by foreign authors on poor paper. Nor have they ever been to an Indian store in the US. For they won’t be able to spot a rightfully purchased Bollywood movie at these stores.

Yes, India has a wonderful copyright law. At least so the gentlemen would like us to believe. However, it is rarely enforced. The article points out that in 1994 the copyright act was amended to explain the rights of holder and penalties for infringement. “In 1994, the Indian Copyright Act was amended to clearly explain the rights of a copyright holder and the penalties for infringement of copyrighted software.” Nowhere does the article mention that the act itself was rewritten to make it tougher. The only effect of the law, which the article mentions has been called one of the “toughest in the world” (without quoting sources), was to create this handbook.

Since the implementation of a copyright law that was “one of the toughest in the world,” a government study on copyright piracy in India done in 1999 concludes, “The total value of pirated copyright products sold in India during 1996-97 was about Rs. 1,833 crores which formed 20% of the legal market. Segment wise, the piracy rate is found to be the highest in computer software (44%) and lowest in cinematographic works (5%).”

Let me finish by focusing on how piracy has helped India innovate. Without the countless street level computer training centers which mostly rely upon pirated software, there wouldn’t have been an IT revolution in the country. Without the lax patent laws on Pharmaceuticals, which patented only the way in which a medication is produced and not the mix of ingredients itself, there would have been no Indian success story in Pharmaceuticals. Without the cheap knock-off science books that are abundant for poor Indian students, there wouldn’t have been the countless educated Indians with a high level of understanding of fundamentals of science.

Moving on to the authors’ contention that India is leaving behind China in the dust. The authors use the following line to support such an exaggerated claim, “The number of Indian patent applications filed has increased 400% over the past 15 years.”

Aah, the wonders of statistics.

Let’s put the numbers in perspective. “According to the World Intellectual Property Organization’s (WIPO), the number of international patent applications from Japan, Republic of Korea, and China, has risen by 162%, 200%, and 212%, respectively, since 2000. These growth rates reflect the rapidly growing technological strength in northeast Asia.” More instructively, China in 2004 filed for 1,705 patents while India filed for 689. [PDF – WIPO statistics]. One more comment about China. Chinese economy (and innovation) with annualized growth rates of upwards of 9% and with high tech stalwarts like Lenovo is flourishing. Any comments as to leaving China in the dust aren’t just wrong, but also dumb or dishonest.

Lastly, I would like to address the question of why this poorly researched article trumpeting fake achievements and rationale for India’s success has made it to the Wall Street Journal. My guess is that this is a deliberate piece, produced after much deliberation with the businesses. It comes as no surprise that one of the authors of the article, Mr. Wilder is a lawyer representing the euphemistically named IP lobbying Association called the “Association for Competitive Technology.”