Tuesday, 30 April 2013

Dodgy Academic Papers - the link between Austerity and MMR


Both sagas have their roots in dodgy academic papers, the agenda-pushing press and politicians – and willing believers
A child receives an MMR vaccination
A measles outbreak in Swansea has affected 900 people. Photograph: Alamy
Dodgy research pushed by publicity-happy academics. False claims burnished into golden truths by irresponsible newspapers, apparently trying their hardest to manufacture a panic. Finally, the repercussions: bad decisions and, years later, huge worries about the harm posed to the public.
I'm describing the MMR scandal, the story of how one paper published in a top medical journal prompted a mass scare about a possible link between the triple jab and autism, and led to around one million children being deprived of full vaccinations against measles, mumps and rubella. It's been in the news again this week, following a measles outbreak in Swansea affecting 900 people, and worries that London may be next.
Yet listening to the radio discussions, a feeling nagged at me. Didn't this saga, with its origins going back more than a decade, sound similar to a more recent episode in a different field – the economics of austerity? Over the past fortnight, an academic paper regularly used by George Osborne to justify his cuts, public-sector redundancies and tax hikes has also been exposed as riddled with errors and dubious statistics.
At first, I'll admit, the comparison felt like too much of a stretch. On the one hand, there was Andrew Wakefield, the MMR heretic whose image would regularly flicker up on the 10 O'Clock News; on the other, there was Carmen Reinhart and Ken Rogoff, two Harvard economists of great renown – but hardly box-office. Wakefield was struck off for malpractice; Reinhart and Rogoff are guilty of no such breaches and their book on banking crises, This Time Is Different, will be considered a classicMMR was a scare foisted on New Labour (remember those stories about whether baby Leo Blair had been injected?), which it had to defuse; this coalition has pushed austerity. The MMR debate boiled down to a question raised by every parent: should I vaccinate my child? The arguments about austerity can't be rendered in personal terms.
So much for the obvious caveats (there's one more, which I'll come to later). Yet whenever I raised the comparison with colleagues or others who had watched the cuts debate, nearly all saw the parallels. At the root of both sagas lies research, heavily contested then and now discredited, but given excessive credibility by outsiders in politics or the press – and used to push distinct agendas. That public-health scare from the turn of the noughties, and this public-finance panic from the start of this decade share common themes. Combined, we could call these lessons: how to flog a terrible idea.
Lesson 1: Have a suspicious public
For a terrible idea to take flight, the public must be in a receptive mood. The MMR scare was preceded by the mad-cow scandal, in which the government had kept insisting that British beef was safe. The arguments over austerity followed on the great bust of 2007-8 – and hadn't then-prime minister Gordon Brown promised to abolish boom and bust? In both cases, the press had been gulled by the official expertise. Do you remember those spreads in the Daily Mail about the coming chaos at RBS? No, I don't either.
Lesson 2: Bad ideas sound like common sense
The press had trusted establishment scientists and the economic technocrats; by the time MMR and the banking bust came along there was a market for policies that sounded easy to understand. So David Cameron really could get away likening the British economy to a household that had maxed out its credit card. It was nonsense, of course, but it was easy to understand nonsense. Unlike Bloomsbury-style Keynesianism, which was much more sensible amid a slump but was treated as far-out science to do with money supplies and fiscal multipliers.
Lesson 3: Bad ideas need strong supporters
My memories of the MMR story were to do with Wakefield. But when academics Tammy Speers and Justin Lewis looked at the news stories, they found that Wakefield got fewer mentions than baby Leo. The scare about MMR was never centred around a paper in the Lancet; rather, the research was recruited into the service of a general scare. That goes much more so for austerity, where the government here and the European troika used available research to push the cause of cuts and lay-offs. The Reinhart-Rogoff paper was published two years after Osborne had adopted austerity as his policy; academia provided justification, but they didn't change minds. And austerity has been fully cloaked in the language of morality: of debt being a bad thing, of southern Europeans being feckless.
The final caveat is: pure science lays much more emphasis on reproducing tests to see if the results bear up; macroeconomists can't run big experiments on entire countries to see which policies work, meaning that fights in the dismal science are necessarily more ideological (however disguised) than methodological. Yet so many economists hanker after hard science status there's even a term for it: "physics envy". Indeed, that key finding from Reinhart-Rogoff – that countries with debt of more than 90% of their GDP experience sharply slower growth – sounds like something you'd hear at the back of a school lab. But it isn't a rule at all: high debt can mean slow growth, but obviously so too can slow growth produce high debt. Still, whether MMR or austerity, the bottom line in both is that plausible science can make bad decisions seem sensible. When the science no longer seems implausible, the game is up. Wakefield was rumbled; slowly but surely the same is happening to the austerity-mongers.

Cash-hungry countries have encouraged the rise of tax havens

HAMISH MCRAE in The Independent
Tuesday 30 April 2013


A desire to protect the oppressed, and generate revenue, has got us to here

So why don’t the major countries do something about tax havens? Is it that they can’t, or might it just be that permitting tax havens to exist rather suits them?
The mood against tax havens is running hot and strong, fuelled by extreme examples of tax avoidance by multinationals and rich individuals, and the main governments, including our own, are pledged to do something about it. But, for most of us, the puzzle is that the whole system was allowed to grow up in the first place. We can just about understand why our racing drivers choose to live in Monaco but when multinationals flip their earnings through several different jurisdictions, with affiliates busy lending to each other, and end up paying hardly any tax – well, it does all seem a bit rum.
The easiest way to get one’s mind round this extraordinarily complex world is to divide it into two categories: tax havens for individuals; and tax havens for companies. Though the two blend into each other. Take individuals first.
There are really two forces that have pushed countries to create tax havens for people. One has been the desire to protect people fleeing from oppression. Thus the British “non-dom” status goes back to the Napoleonic Wars, when people were fleeing from the Continent. The Swiss banking secrecy was formalised in 1934 after the Nazis came to power, largely to enable Jewish people to get their money out and not be traced by the authorities in Germany. Both systems have been abused and belatedly are now being reformed, but the origins were honourable.
The other has been a simple quest for revenue. The Channel Islands, Andorra, Monaco and the like are all short of natural resources. Having a tax regime that is attractive to rich individuals is a way of exploiting one competitive advantage: the freedom to set tax rates. Again, there have been abuses, and there are downsides such as the impact on property prices (Monaco is prime London, doubled). But if people live in a place, they pay the local taxes. If they need to keep a log of their movements to prove they really live there, so be it.
For companies, it is more complicated. Governments around the world seek to attract investment. So they build foreign firms’ factories, give grants for training, pay for improved infrastructure and so on. For manufacturing, it was all fairly clear, though there have been abuses, where companies take the money, build their washing machines or whatever for a few years, then declare the business unprofitable and bunk out. While many of these incentives made little sense, the photo opportunity for a politician to open a factory in a marginal constituency proved a powerful driver.
But now much international investment is not in physical capital – a factory – but rather in financial and intellectual capital. So countries have developed elaborate schemes to attract these forms of capital, too. The Netherlands has focused on intellectual capital, which is why pop groups locate there. (Yes, pop music is intellectual capital.) Luxembourg has majored on financial capital, attracting fund managers – as indeed has Ireland. Cyprus had a huge offshore banking business, and the money there is now being eagerly courted by other eurozone centres.
If a government in an established democracy creates an incentive, it will attract business. The great advantage of luring financial and intellectual capital is that it is cheap to do so. Politicians may not get the kudos from opening the factory but they don’t have to stump up the funds to build it. Yet the host still gets tax revenue from the deal. The Netherlands, Luxembourg and Ireland are decent, established democracies. The problem is that the effect of these incentives is to deny revenue to other decent democracies.
The solution? There will, of course, have to be better coordination on this to check the most egregious examples of such manipulation – and there will be. But do not expect a revolution. Why else would both the present British Government and its predecessor boast about bringing down UK corporation tax rates to attract investment from other, more onerous jurisdictions? One country’s incentive is another country’s loophole.

Sunday, 28 April 2013

Chit Funds, Ponzi Schemes -Different schemes built on different structures

Anguished at the collapse of the unregistered Saradha Group, collection agents and depositors took to Kolkata's streets in protest. Photo: Ashoke Chakrabarty
Anguished at the collapse of the unregistered Saradha Group, collection agents and depositors took to Kolkata's streets in protest. Photo: Ashoke Chakrabarty

Even as thousands come to terms with the loss of life savings in the West Bengal “chit funds,” it is interesting to find politicians promising new stern laws against such funds. Absence of laws is the least of the reasons for such schemes flourishing in the State. We are not short of such laws — in fact, we have plenty of laws that prohibit such schemes and provide for the sternest penalties for the perpetrators.
The current scam is an almost identical rerun of one from 25 years ago and the machinery has allowed the same thing to happen. But if a Rs.22,000 crore scheme questions the very institutions that define the system — be it the Supreme Court or SEBI, and the implementation of their orders — there is little surprise that the only succour we can pretend to find is in law-making.
The West Bengal ‘chit funds’ are not chit funds at all, since these have a different structure. Chit funds are mutual credit groups where money circulates among the group members, and the monthly contributions of the chit members are received in rotation by one of the members who bids for it — much like a ‘kitty’. Chit funds are perfectly legal (if they are registered under the Chit Funds Act 1982).
The several names that keep popping up in West Bengal are Collective Investment Schemes or Public Deposit Schemes, which on the face of it do not come under any law. They are structured so as to be neither a ‘public deposit’ nor a ‘collective investment scheme.’ However, this restructuring is purely superficial and takes advantage of apparent legal loopholes. Even the most basic regulation should detect this.
The evolution of regulatory structure in India is a rare case of human learning and we have burnt our fingers every time. Every scam brought in a law; the law is the edifice built on scams and not on intuition.
Money circulation schemes were banned by law in 1978, after Sanchayita Investments went down with money pooled from a few lakh investors in West Bengal. Soon after, chit funds became a hot political issue, leading to a chit fund law in 1982.
So how do scamsters still end up raising several thousand crores? Obviously, so much money is neither raised overnight, nor silently, as there is a massive machinery of agents who do it from the very bottom of the population pyramid. Each scamster innovates a device to sell to unsuspecting depositors — ranging from debentures, preference shares and land deals to advance payment for goods.
The mechanism of these schemes is so simplistic that it is hard not to see that these schemes must go bust.
The promoters who float this fund sign on agents by selling either shares or a stake in a real estate investment fund. They are to get a commission for signing on new people. Suppose an agent signs on 4 people, when each of them signs on another 4, the original agent receives commission for 16 people.
Thus, people at the top make money rapidly, often becoming rich overnight. The people lower down the pyramid see these examples and it is this which makes them greedy, attracting them to sign on as depositors hoping to make easy money.
No matter what the device used, the common thread in these schemes is that the flow of new ‘depositors’ must keep coming in — the only source from which existing depositors can continue to be paid is by inflows from new depositors. Money is initially raised at hefty interest rates, and with attractive periodic prizes, gifts, gala parties, and so on. The agents are given hefty commissions, because the design relies on a highly incentivised structure of brokers or agents.
The cost of interest, plus the agency commissions, the luxurious spending on so-called depositor prizes and the lavish remuneration of the promoters builds up a huge working cost. The company must then make profits at over 25 per cent, a rate which no business can sustain. It is not that these promoters are blue-eyed investors, and they end up sinking funds in illiquid properties, resorts or hotels and often end up making losses.
More often than not, they have dubious intentions and the money from the fund is siphoned off into personal accounts. This is what Ponzi schemes are all about.
The massive money raised surely shows somewhere on the balance sheet of the company, which is filed regularly with the Ministry of Corporate Affairs (MCA). Surprisingly, it is the MCA which is the least proactive in the entire process of bringing the perpetrators to regulatory focus.
(The author, a specialist in financial law and visiting faculty at prominent universities, can be contacted at vinod@vinodkothari.com)

Saturday, 27 April 2013

Want to boost the economy? Ban all meetings

David Cameron has had the cabinet table extended so more spads can fit around it. Wave goodbye to productivity at No 10
Jas illo for Marina Hyde
'Nobody really believes cabinet meetings affect anything. Their sole impact on the economy is driving sales of those plastic document folders that hide the text beneath them.' Illustration by Jas
If you want a sense of just how big David Cameron and his ideas are, then know this: a carpenter was recently ordered to build an extension to the cabinet table. A piece of furniture that has seen governments through for more than half a century has now been made even bigger, the better to accommodate the increasing number of people who don't make decisions around it.
To the annals of things that sound like rejected Thick of It plotlines, then, let us add the cabinet table thing. (One troubling irony of The Thick of It's success is what a crutch of Westminster life the show has become. The sheer volume of defeatist politicos who now explain away their days by saying "It was like an episode of The Thick of It" should really be satirised by an episode of The Thick of It.)
Anyway, a cabinet maker – appropriately – really has created a 4ft table extension to make room for all the extra ministers given attendance privileges, and all the special advisers and press officers and other bods who pitch up at 9am every Tuesday looking like they've won a competition to attend a cabinet meeting. (Second prize, to give the old joke a run-out, is attending two.)
It's going to be agony waiting out the 30-year rule to discover what someone's spad said about something that had been decided by some other people somewhere else some other time – but in the interim, I hope No 10 will embrace further advances in the modern science of meetingology. They could start having cabinet off-sites and cabinet awaydays. Perhaps one of Cameron's gurus could appropriate the word iCabinet and fashion a new governance gimmick around it.
It's hardly a new point, but nobody really believes cabinet meetings affect anything. Their sole impact on the economy is driving sales of those plastic document folders that hide the text beneath them. If cabinet attendees let photographers see their cabinet notes, then they might not be allowed to come to cabinet any more.
Yet the cabinet is merely a Westminster example of the meeting malaise that increasingly grips the world. Last month an admittedly non-scientific survey claimed that the average office worker spends more than 16 hours a week in meetings. The average civil servant spends 22, with both public and private sector respondents deeming significant percentages of these meetings to be utterly pointless.
In olden times, one of the best things about print journalism was that there were scarcely any meetings at all, because it seemed to everyone there wasn't time. There was one in the morning, where people took a briskly critical look through that morning's paper before deciding what to put in tomorrow's. And then everyone went off and did it. For most of my colleagues, alas, those days are gone. My own weird job – lancing my brain with a keyboard, basically – is one of the few that requires almost no meetings at all. I count myself one of the luckiest people alive. Friends with non-media occupations often tell me that they are required to attend so many meetings that they wonder when on earth they're supposed to do their actual job. In a surreal non-productive way, the meeting has almost become the job.
Indeed, I'm told by some that the higher up you get in the world of meetings, the more stage-managed they are. Decisions aren't made there: they're just ratified. The old "information sharing" justification is apparently cobblers too, because if you have to wait till the meeting to get the information, then you're really not relevant enough to be at the meeting.
What the vast majority of meetings do is confer status on those blowhards "leading" them, or attendees who really should find other ways to validate themselves. Even Cobra – the snazzy-sounding Whitehall crisis response meeting – is widely griped about, with Scotland Yard's formerly most senior anti-terrorism officer complaining it was "cumbersome and bureaucratic", full of people "jockeying for position", and slowed everything down.
But on people go. Gazillions of meetings are held every day, with every one presumably regarded as an indispensable step toward something worth attaining. What would winning the game of meetings even look like? I suppose you'd battle up all the levels, and finally ascend to the ultimate meeting: one to which you'd actually want to go to. Maybe you'd get in on the Meeting of Meetings, which would be something like that meeting where Obama and Hillary and the joint chiefs watched Osama bin Laden's compound being stormed live. But was that really a meeting? In the photos it looked so passive as to be more like a movie night.
As a last word on meetings, I keep thinking of that radical Dutch urban planner who did away with all traffic lights in various towns, and found road safety dramatically improved. If only, instead of making fatuous interventions on some footballer's disciplinary breach Cameron did something similarly useful with his time. Imagine if he could announce that for one week – in fact, make it a month – all meetings in all workplaces in all Britain were to be banned. People would simply have to muddle through, reclaiming the civilised mores of a time before the answer to everything was to have a meeting. Who knows, a meetingless Britain might even prove that holy of holies for George Osborne – the entirely free initiative that would significantly boost the economy.

The Self-Hating State

Devolving policy to “the market” doesn’t solve the problem of power. It makes it worse.
In other ages, states sought to seize as much power as they could. Today, the self-hating state renounces its powers. Governments anathematise governance. They declare their role redundant and illegitimate. They launch furious assaults upon their own branches, seeking wherever possible to lop them off.

This self-mutilation is a response to the fact that power has shifted. States now operate at the behest of others. Deregulation, privatisation, the shrinking of the scope, scale and spending of the state: these are now seen as the only legitimate policies. The corporations and billionaires to whom governments defer will have it no other way.

Just as taxation tends to redistribute wealth; regulation tends to redistribute power. A democratic state controls and contains powerful interests on behalf of the powerless. This is why billionaires and corporations hate regulation, and – through their newspapers, thinktanks and astroturf campaigns – mobilise people against it. State power is tyranny; state power is freedom.

But the interchangeable middle managers who call themselves ministers cannot wholly dismiss the wishes of the electorate. They must show that they are doing something to protect what people value. They resolve the contradiction between the demands of the electorate and the demands of big business by shifting their responsibilities to something they call “the market”. This term is often used as a euphemism for corporations and the very rich.

To justify the policy of marketisation, they invest the market with magical capabilities. It can reach the parts that the ordinary scope of government can’t reach; it can achieve political miracles. I don’t believe that market mechanisms are always wrong. I do believe that they fail to solve the problem of power. In fact they tend to compound it.

Last week the European Emissions Trading System died. It was supposed to create a market for carbon, whose escalating price would force companies to abandon fossil fuels and replace them with less polluting alternatives. In principle it was as good a mechanism as any other. What it did not offer was a magical alternative to political intervention.

The scheme collapsed on Tuesday, after the European Parliament voted against an emergency withdrawal of some of the carbon permits whose over-supply had swamped the market(1). Why were too many permits issued? Because of the lobbying power of big business. Why did MEPs refuse to withdraw them? Because of the lobbying power of big business.

If a market is to serve a wider social goal than simply maximising corporate profits, it must operate within a tight regulatory framework. Pricing mechanisms do not magic away the need for regulation: if anything they enhance it. To make them work, politicians still have to confront and overcome powerful interests. They still need to govern and decide. Yet everywhere markets are invoked as an alternative to dirigiste and decisive government.

To make a significant impact, the price of carbon needs to be in the region of €30 or 40 per tonne. It needs to be incapable of falling far, and likely to rise. At the time of writing the price is €2.8(2), and it’s going nowhere. The Economist reports that this puts European carbon permits “below the level of junk bonds.”(3)

In an important respect the scheme has been worse than useless. New airports and roads and power stations have been justified with the claim they they will not raise emissions, as the greenhouse gases they produce will be absorbed by cuts made elsewhere. The one lasting impact of the European carbon market has been to rationalise polluting projects which might not otherwise have been built.

But even as this scheme collapses, governments are launching new ones, creating markets which are far less appropriate – even in theory – than the trade in carbon. Last month, the UK’s Ecosystem Markets Task Force, a body set up by the government but largely composed of corporate executives, published its final report(4). It invokes the magic of the markets to fill the gap left by the withdrawal of democratic governance.

Not everything it proposes is dangerous and wrong. Creating incentives to reforest the hills from which our rivers flow, or for farmers to use anaerobic digesters to process waste makes sense: as long as it redeploys rather than augments farm subsidies. But in other respects an attempt to reconcile the protection of the living planet with commerce simply turns the biosphere into another corporate asset.

For example, the task force revives the old myth that nature is best served by harvesting timber. As long ago as 1995 a paper by the biologists Clive Hambler and Martin Speight showed that of the woodland insect species listed as threatened in Britain, 65% are threatened by the removal of old and dead wood, while just 2% are threatened by a reduction in this management(5). But the task force maintains that bringing “unmanaged woodlands into active, sustainable management for woodfuel … is a win-win for business and nature.”(6) Just as the myth was at last being laid to rest, it has been revived by the need to make nature and markets appear compatible.

This is an example of what happens in a market-based system: any clash between generating profit and protecting the natural world is resolved in favour of business, often with the help of junk science. Only those components of the ecosystem which can be commodified and sold are defended(7,8,9). Nature is worthy of protection when it is profitable to business: the moment it ceases to be so, it loses its social value and can be trashed. As prices fluctuate or crash, so do the fortunes of the ecosystems they are supposed to protect. As financial markets move in, with the help of the environmental bonds and securitisations the task force champions(10), the defence of nature becomes ever more volatile and uncertain. The living planet is reduced to a subsidiary of the human economy.

When governments pretend that they no longer need to govern; when they pretend that a world regulated by bankers, corporations and the profit motive is a better world than one regulated by voters and their representatives, nothing is safe. All systems of government are flawed. But few are as flawed as those controlled by private money.

Why students need the right to copy



The lawsuit by publishers seeking to stop Delhi University from distributing photocopied course packs goes against the spirit of education for all

BREAKING FREE: The case also shows why it is necessary for academics to explore alternative open access models. A meeting in October 2012 at Delhi University to examine the implications of the case.
The HinduBREAKING FREE: The case also shows why it is necessary for academics to explore alternative open access models. A meeting in October 2012 at Delhi University to examine the implications of the case.

Late last year, leading publishing houses including Oxford University Press and Cambridge University Press brought a copyright action against Delhi University and a tiny photocopy shop licensed by it, seeking to restrain them from supplying educational course packs to students. This lawsuit sent shock waves across the academic community, leading more than 300 authors and academics including famed Nobel laureate Professor Amartya Sen to protest this copyright aggression in an open letter to publishers. Tellingly, 33 of the authors of various books mentioned specifically in the lawsuit (as having been copied in the course packs) signed this protest letter making it clear that they were dissociating themselves from this unfortunate lawsuit.

For those not familiar with the term, course packs are compilations of limited excerpts from copyrighted books, put together painstakingly by faculty members in accordance with a carefully designed syllabus and teaching plan.


What makes the lawsuit particularly egregious is the fact that publishers are effectively seeking an outright ban on all course packs, even those that extract and use no more than 10 per cent of the copyrighted book. Under U.S. law, reproducing up to 10 per cent of the copyrighted books is “fair use” of a copyrighted work, and therefore legal. Given that India is a developing country, with poorer students and more severe educational access constraints, it stands to reason that Indian courts ought to peg this number at 30 per cent or even higher.

Further, the Indian education exception is far wider than its U.S. counterpart. Section 52(1) (a) embodies the “fair use” exception and permits any fair dealing of a copyrighted work for the purpose of research and private study. In addition, unlike the U.S., Section 52(1)(i) embodies a separate exception, under which it is perfectly legal to reproduce any copyrighted work during the course of educational instruction. These exceptions reflect a clear Parliamentary intention to exempt core aspects of education from the private sphere of copyright infringement. Eviscerating these exceptions at the behest of publishers will strike at the very heart of our constitutional guarantee of a fundamental right to education for all.

In fact, copyright scholars have begun labelling these exceptions as “rights” accruing in favour of beneficiaries such as students. In CCH Canadian Ltd. v. Law Society of Upper Canada, the Supreme Court of Canada endorsed this sentiment noting that:

“…The fair dealing exception, like other exceptions in the Copyright Act, is a user’s right. In order to maintain the proper balance between the rights of a copyright owner and users’ interests, it must not be interpreted restrictively.”


Recently, an association of students and academics applied to be impleaded as parties to the lawsuit, so that they could help the court arrive at a robust interpretation of the copyright exceptions. While allowing these impleadments, the judge noted the critical importance of “public interest” in deciding intellectual property cases. These developments come close on the heels of the famed Novartis decision where the Supreme Court foregrounded the interests of the public in accessing affordable medication.


Meanwhile, publishers have offered the tantalising option of acquiring a licence from the Indian Reprographic Rights Organisation (IRRO), an organisation set up by publishers to collect royalties on their behalf. This is a dangerous route to tread for three reasons.

First, taking a licence for course packs amounts to paying for a right that does not exist. It bears reiteration that photocopying for the purpose of educational instruction is a legal exception under copyright law and one is not required to seek the permission of the copyright owner and/or pay any licence fees.

Second, the IRRO and publishers are likely to offer a paltry licensing fee at the start. Once their foot is in the door, there is no stopping them from rapidly escalating licensing fees year after year. Canadian universities bore the brunt of this copyright greed around a year or so ago and refused to renew their licenses.

Third, the IRRO does not hold the rights to all published works. If Universities are to track down and enter into licensing deals with every copyright owner, this would lead to excessive delays in the preparation of course packs.

Academic institutions should therefore refrain from entering into any deal with the IRRO or publishers till such time as the case is disposed of. In fact, given the rather wide language of Section 52(1)(i), institutions are well within their right to presume that the creation of course packs and related educational material is legal, until a court holds otherwise.


Notwithstanding the egregiousness of this lawsuit, a key advantage is that it forces us to re-examine the current publishing and pricing model that places profit above the interest of students. Academics need to come together and explore alternative open access models in order to break through this private profit monopoly thicket that has come to plague academic publishing.

That a majority of educational textbooks are priced above the affordability range of an average Indian student is well known. A recent empirical study done by me along with my students reveals that a vast majority of popular legal and social science titles have no corresponding Indian editions and need to be purchased at rates equivalent to or higher than in the West.

Therefore, the claim by publishers that course packs would destroy their market for books and put them out of business is highly questionable. Given that this is the first copyright law suit to be brought against course packs, one can only assume that the healthy growth figures boasted by the academic publishing industry means that course packs have not done them much damage. If at all anything, the inclusion of extracts of copyrighted works in the course packs is likely to encourage readers to buy the books when they can afford them.

In the end, this lawsuit must be seen for what it is: a highly pernicious attempt to fill the coffers of publishers at the expense of students! It must be resisted with all the moral and legal force we have.

(Shamnad Basheer teaches IP Law at NUJS, Kolkata. He wishes to thank Amita Baviskar for her inputs in this piece.)

Friday, 26 April 2013

Accountancy firms 'use knowledge of Treasury to help rich avoid tax' – MPs

Experts offering advice on legislation they helped to create is 'ridiculous conflict of interest', says select committee chair
Margaret Hodge
Margaret Hodge MP has called on the Teasury to stop accepting staff from the 'big four' accountancy firms when drawing up new laws. Photograph: Dominic Lipinski/PA
The so-called "big four" accountancy firms are using knowledge gained from staff seconded to the Treasury to help wealthy clients avoid paying UK taxes, a report by the influential Commons public accounts committee says.
DeloitteErnst & YoungKPMG and PricewaterhouseCoopers have provided the government with expert accountants to draw up tax laws. But the firms went on to advise multinationals and individuals on how to exploit loopholes around legislation they had helped to write, the public accounts committee (PAC) found.
Margaret Hodge, the PAC's chair, said the actions of the accountancy firms were tantamount to a scam and represented a "ridiculous conflict of interest" which must be stopped. "The large accountancy firms are in a powerful position in the tax world and have an unhealthily cosy relationship with government," she said, calling for the Treasury to stop accepting their staff to draw up new tax laws.
The report comes after David Cameron on Thursday set out plans to use Britain's chairmanship of the G8 to tackle what he described as staggering worldwide levels of tax evasion and avoidance.
The PAC claims HM Revenue and Customs had to seek outside help because it was engaged in a "battle it cannot win" in seeking to stem the losses to the exchequer from tax avoidance.
The accountancy giants employed almost 9,000 staff and earned £2bn a year from their tax work in the UK, and £25bn globally, the report claims. MPs found that Revenue and Customs had far fewer resources, particularly in the area of transfer pricing: complex transactions deployed by multinational companies in order to shift taxable profits to low tax jurisdictions. "In the area of transfer pricing alone, there are four times as many staff working for the four firms than for HMRC," the report says.
The committee highlights the way the firms seconded staff to the Treasury to advise on issues in the drafting of legislation. "Through their work in advising government on changes to legislation they have a detailed knowledge of UK tax law, and the insight to identify loopholes in new legislation quickly," it said.
One example in the report is that of KPMG, whose staff advised on the development of "controlled foreign company" and "patent box" rules, and then issued marketing brochures highlighting the role they had played. The brochure "Patent box: what's in it for you" had, it said, suggested the legislation represented a business opportunity to reduce tax and that KPMG could help clients in the "preparation of defendable expense allocation".
The committee is "very concerned by the way that the four firms appear to use their insider knowledge of legislation to sell clients advice on how to use those rules to pay less tax", the report adds.
The report was welcomed by Prem Sikka, professor of accounting at University of Essex. "They [the big four] are the epicentre of a global tax avoidance industry and the loss of tax revenues is directly responsible for the current economic crisis. The Treasury should follow the US authorities and prosecute and fine the firms. The habitual offenders should be shut down," he said.
Officials from HMRC rejected criticisms that tax officers were not making progress in tackling avoidance. "The facts show that we are not only aggressively fighting battles against tax avoidance, but we are winning them," a spokesman said.
KPMG said in a statement: "When requested to by government departments we do provide individuals on secondment. Their role is to provide tax technical input and commercial experience so that the authorities can make informed choices on tax policy. Our secondees do not write legislation or make policy decisions."
Bill Dodwell, head of tax policy at Deloitte, said: "We do not believe that there has ever been any conflict of interest but would want to help ensure that there is no perception of conflict." Kevin Nicholson, head of tax at PwC, said: "We provide technical insight to government but only when asked and are never involved in deciding tax policy which is a matter for the government."
In evidence to the committee, John Dixon, Ernst and Young's head of tax, said: "I think there are benefits in the work we do with government ... benefits to the country at large. If you look at the quality of the legislation that we now have ... it is a lot better than it was 10 years ago.
"Why is that? Because we are actively working with government, at our cost, to make sure that the legislative footprint we are working with is as clear and concise as it can possibly be."
An HMRC spokesman said: "HMRC gives careful consideration to the potential risks, as well as how to mitigate any potential conflicts of interest, before any such secondments are agreed. On balance, the carefully targeted use of secondees is beneficial for the development of tax policy and improving the effectiveness of the tax system."
Cameron, who hopes to use an EU summit in May as a stepping stone to a wider agreement at the G8, wrote to all EU leaders proposing:
• Rapid movement to a global system of information exchange to help tackle tax evasion including through the use of offshore trusts.
• Action plans by G8 countries to produce full transparency, breaking through walls of corporate secrecy and establishing central public company registries.
• Voluntary deals for multinational firms to make clear the tax they pay in every country they operate in.
• Implementation of the EU accounting directive so developing countries can access information on payments to governments made from the oil, gas and mining industries.

Wednesday, 24 April 2013

The hierarchy of death: Boston's bombings shock us more than the silent drone war in Pakistan.

 But should they?

A drone flies above the mountains of Pakistan. (Photo: Reuters)
A drone flies above the mountains of Pakistan. (Photo: Reuters)
The author and journalist Owen Jones, a columnist for The Independent, is probably not many Telegraph readers’ cup of tea. He is an old-style socialist (though a young man) and I don’t suppose I find myself agreeing with more than 10 or at most 20 per cent of what he writes. But I read him regularly, because he writes well and makes intelligent, and often disturbing, points. He is one of these valuable, even necessary, journalists who makes you stop and examine your prejudices – though I quite often wish he would examine his own ones.
He had an article this week which will have raised a few hackles. He talked about “the hierarchy of death” – not his own phrase; he attributed it to Roy Greenslade, a former editor of The Daily Mirror – and asked: “Why is the slaughter in Boston more shocking or newsworthy than the deaths in Iraq?” As it happens, I had made the same point in a column I write for The Scotsman. The weekend of the Boston carnage, there was a string of car bombings across Iraq, as the country prepared for local elections. At least 32 people were killed, 15 of them in Baghdad. The death toll in Baghdad was therefore much higher than in Boston. But Boston horrified us, and news and speculation filled our TV screens, while I would guess that most of us greeted the news of the deaths in Iraq with something like indifference, if indeed we noticed it at all.
Owen Jones didn’t in any way seek to minimise or play down the horror of Boston. He admitted too that we are affected by “cultural proximity”. Americans are like us. We speak the same language, have much in common with them. We feel close to them as we don’t feel close to Iraqis. Moreover, we have come to expect that there will be bombings in Baghdad, while the idea of an event like the Boston Marathon being targeted by bombers is shocking.
All this is true. It is more natural for us to be more moved to tears or anger by what happened in Boston, just as it is more natural to mourn the death of a friend than the death of a stranger; and yet that phrase, “a hierarchy of death”, is disturbing. It is disturbing because it hits home, When a child is killed in Baghdad, the bereaved parents grieve just as bereaved parents do in Boston. Shakespeare understood this, when he gave Shylock these words to speak: “Hath not a Jew eyes? Hath not a Jew hands, organs, dimensions, senses, affections, passions? Fed with the same food, hurt with the same weapons, subject to the same diseases, healed by the same means, warmed and cooled by the same summer and winter, as a Christian? If you prick us, do we not bleed? If you tickle us, do we not laugh? If you poison us, do we not die? And if you wrong us, shall we not revenge?”
Revenge: there is another relevant, and equally disturbing, point to be made about the Boston atrocity. The USA has for years been engaged in a war against the Islamists. As in most wars, it doesn’t matter who started it; each side blames the other, and each seeks to revenge attacks made on it. The war began before 9/11, and has been pursued vigorously ever since. Recently the favoured American means of attack has been by pilotless drones. These are targeted at known or suspected terrorists, especially their leaders, but there are other victims too. It is estimated that between 1,900 and 3,500 people have been killed by drones in Waziristan, one of the tribal provinces of Pakistan. Some of the dead – no one knows how many – were civilians, among them women and children. There should be no surprise if deluded but devout young Islamists strike back. It would be wrong and wicked to say that America was asking for something like the Boston bombing to happen, but, if you are engaged in a war, you must expect that there will be casualties on your side, and some of these will be civilians – and women and children. Drone warfare has, it seems, become less discriminating. According to an ex-CIA man, Richard Blee, “In the early days, for our consciences, we wanted to know who we were killing before anyone pulled the trigger. Now we are lighting these people up all over the place. If we are going to hand down death sentences, there ought to be some accountability.” But is there?
It’s common to describe terrorist bombings as “cowardly”. I think President Obama used the word with regard to Boston. But if these deluded brothers, one now dead, the other wounded and facing a life in prison, possibly even a death sentence, were cowardly, what word would you use to describe the act of killing people thousands of miles away by projectiles directed by someone sitting in front of a screen safe in Middle America? A bomber pilot risks death; the director of a drone doesn’t. But he kills just the same.

Tuesday, 23 April 2013

The EU-India Free Trade Agreement: India up “For Sale” to Western Corporate Capital

Giving the Thieves the Key to Your Home

Do you know that there is a country up for sale? Do you know that its finance, agriculture and retail sectors are being put ‘on the market’? Perhaps you are already aware of this due to various media reports. But then again, maybe you are not because it’s all being carried out behind closed doors in Brussels. The EU-India Free Trade Agreement (FTA), something that could fundamentally restructure Indian society and impact the lives of hundreds of millions, is being negotiated ‘on the behalf of the public’ by politicians on both sides who are champions of the type of economic liberalisation that has already been responsible for bankrupting many Western economies.
Negotiations began in 2007, covering a wide range of areas, including various goods, products and services, as well as investment rules, government procurement; and intellectual property rights. After 16 rounds of talks, the issues are still being fine tuned. ‘Developed’ countries are resorting more and more to these types of bilateral trade agreements with individual developing countries because they want to continue to push their free trade agenda that was rejected by developing countries at the World Trade Organisation.
The EU-India FTA essentially represents the demands of big business in the West and results from their strategic hegemony over government bureaucracies and politicians. With Western economies in crisis, India represents potential ripe pickings for transnational corporations’ never ending compulsion for profit.
Kavaljit Singh of the Madhyam research institute notes that the EU wants to export its heavily subsidised dairy products to India (1). The Indian government has encouraged the co-operative model in the dairy sector with active policy protection. It therefore makes little sense that dairy trade will be opened up to unfair competition from subsidised European exports under the FTA. According to RS Sodhi, managing director of the country’s largest milk cooperative, Gujarat Co-operative Milk Marketing Federation, the FTA will rob the vibrant domestic dairy industry and the millions of farmers that are connected to it from their rightful access to a growing market within India.
The EU has an overproduction problem in the dairy sector and is looking to dump its surplus. By dumping products in other countries, producer prices and incomes there become depressed. India’s dairy sector is mostly self sufficient and employs about 90 million people, a majority of whom are 75 million women. The sector is a lifeline for small and marginal farmers, landless poor and a significant source of income for millions of families.
Although the Indian government is saying that the dairy sector will be protected, the EU is lobbying hard to open up the sector. S Kannaiyan of the South Indian Coordination Committee of Farmers movements wonders if the government can be trusted. It’s a fair point, given its obsession with foreign investment and neo-liberalism.
In general, profits for EU companies could be huge if they can dump their products in India and permanently displace local farmers and producers. In the name of ‘free trade’, the EU wants India to cut import duties, but will not alter its own massive subsidies to its agribusiness and farm sector, which means that Indian farmers will not be able to compete with EU agribusiness. Yudhvir Singh of the Bhartiya Kisan Union (BKU) says that free trade is supposed to be trade between equals, but such free trade pacts are on a completely unequal footing.
The FTA also seeks better protection for European biotechnology companies in the form of stronger intellectual property rights. On its blog, the BKU notes that this will allow European biotech firms to sell their seeds in India at any price they wish, get royalties from Indian farmers and deprive Indian farmers from saving or exchanging seeds. Indian farmers are already in debt, committing suicide en masse and suffering from the failure of expensive GMOs and unaffordable private seeds.
The EU is also demanding the liberalisation of the retail sector and is attempting to facilitate the entry of European agro-processing and retail gaints like Carrefour and Tesco, which could threaten the livelihoods of small retailers and street vendors. Nandini Jairam of the Karnataka farmers’ movement argues that the entry of such retail giants will be terrible for farmers because they will monopolise the whole food chain from procurement to distribution. In effect, farmers will be at the mercy of such large companies as they will have the power to set prices and also will not be interested to buy small quantities from small producers.
Under the FTA there are also plans to liberalise investment provisions, financial services and banking, whereby European banks and finance companies can enter the Indian market. According to the BKU, investors from the EU will get preference over resources like land, coastal areas and water rather than local people. Such provisions could serve to facilitate takeovers of farm land and conversion from food crops to export oriented cash crops.
At a time when countries across the world are reeling under a financial crisis caused by private banks, regulation and not liberalisation is needed. The proposal to liberalise the banking and insurance sectors is taking place in a world already ravaged by the criminality of the finance sector and which, according to Kavaljit Singh, by providing greater market access to crisis-ridden European banks, could potentially weaken an otherwise stable banking system in India.
Moreover, according to Singh, measures on investment could see the Indian government sued by multinational companies for billions of dollars in private arbitration panels outside of Indian courts if national laws, policies, court decisions or other actions are perceived to interfere with their investments.
At the heart of this whole debate is the issue of national sovereignty – or, to put it another way, self determination, self sufficiency and the nurturing of local democracy and economies in order that local people have control over their own lives and futures. The EU-India FTA appears to sound the death knell for such notions.
Since the passing of Margaret Thatcher, much has been written about the impact of the types of neo-liberal policies that she championed, not least in terms of them leading to the current crisis being experienced by Western economies. The pro-globalisation corporate interests that backed Thatcher helped destroy the post-1945 Keynesian consensus and tip the balance in favour of elite interests. This subsequently led to the depression or stagnation of wages and thus demand. The profits accrued from the subsequent debt-bubble Western economies of the 1990s and onwards could not be sustained, and now, facing crisis at home, places like India represent rich pickings for Western capitalism.
Call it ‘globalisation’ if you must, but let’s call it for what it is: imperialism. In an effort to maintain profit margins, elite concerns are going abroad to plunder public assets, exploit human labour and trample over local economies and communities. The worst thing is that it doesn’t have to be this way. Once India’s political leaders began to place emphasis on ‘deregulation’ and cede power to ‘the market’,  the green light was given for transnationals to hollow out Indian society.
Farmers and trade unions in India, via the alliance called the Anti FTA front, have written 872 letters to important officials, organisations and political parties about the FTA. Rakesh Tikait of the BKU argues that, although there are serious impacts on food security and the livelihood security of millions of farmers and small retailers, farmers haven’t even been informed nor consulted about the FTA.
Praveen Khandelwal, Secretary General of Confederation of All India Traders (CAIT) states that Indiashould not legally commit to policies under this FTA. He believes that the government cannot seal this issue at the behest of EU while a national debate is still ongoing on the subject. It begs the question: are we to witness democracy being sidelined in the blind pursuit of a corporate driven agenda? It seems so (2).
It begs another question too: where is the logic in handing the thieves the key to your home?