Saturday, July 31, 2010

The Rising Power of China's Workers

Flagging the new cover story of the Economist.

Friday, July 23, 2010

Vedanta and its business in Orissa

I guess, not surprisingly, Vedanta has been found wanting in its attitude towards tribals in Orissa.

Here is a story in The Hindu - that talks about Amnesty International's report that the government and Vedanta had failed to protect tribals from health hazards of mining.

Another story in the Business Standard, about tribals protesting violation of forest rights to the National Advisory Council and the Ministry of Environment and Forests.

Thursday, July 22, 2010

Tribal Welfare Vs Mining Company Profits

A slightly dated story on mining in Orissa and the larger issue of land acquisition in the country. A good story with lots of figures - one that keeps the big picture in mind. Businessweek - What's holding India Back.

Resource nationalism, economic sovereignity, role of a welfare state - highly complicated issues with no simple answers.

Child Labor and the Bt-Cotton Boom

I love telling this story. When I began as a journalist six years ago, I was never allowed to cover pharma at this business newspaper in Delhi, because my editor thought I was biased against Monsanto. During the interview, I told him how business newspapers should write about Monsanto's experiments with GM crops in India.

Well, here is a story that as far as I know - draws attention for the first time - a link between child labor in Rajasthan and the Bt-cotton boom. I am not so sure about sourcing in this Hindustan Times story - but nevertheless it is a first.

Minimum wage in Hong Kong and NREG in India

This article in The Economist calls a minimum wage battle in Hong Kong - The end of an experiment - departure from the "swash-buckling, free-market ways" of HK. Figures in the story allege that unemployment will go up with an increase in minimum wage. It goes on to say that because Hong Kong is getting more regulated, it may become less prosperous! Sounds familiar?!

Here is in some ways, a similar prescription from the editorial pages of the Financial Express. Minimum wages is not the answer - skills development is. Fair enough.
Excerpts from this argument in FE:
A 100-day job under NREG violates more than 37 labour laws: minimum wages, contract labour, ESI, EPFO, etc. So the government—unlike Left parties and trade unions—seems to recognise that the good is not the enemy of the great and a job is better than no job. But any state intervention programme in labour markets that ignores the issue of labour law reform ignores the very real costs of our current regime; unorganised employment, capital substitution and corruption. The labour law issue is important to the poverty and skill issue because it is very difficult—if not impossible—to sustain third party financing of skill development unless it leads to organised employment.

Ethical Sourcing

A Newsweek story on ethical sourcing links potential supply chain issues of tech companies to war ravaged mines of Africa - Congo in particular. There is talk about certified trading chains for international companies. I guess when such deals become a part of trading agreements between countries, some of these issues can be addressed.

Part of a quote from the story:
David Sullivan, policy manager for Enough Project, “We [have] yet to see a smoking gun from a conflict mine to a major electronics brand, but the companies are fairly upfront about the fact there’s no mechanism in place to ensure these minerals are not seeping into their supply chains.”

Thursday, July 15, 2010

WB loan for Tehri doubtful?

Any one who has visted the Tehri site will be astounded at the scale of operations -after all India's largest hydropower project. For years people have been protesting about the ecological disaster that this has created / can inflict, in addition to the arbitrary displacement of local communities that happens ever so often in India today.

It turns out that the World Bank (!) is now concerned about all the environmental implication the projects has had / can have, before it approves a $600 million loan. Here is a story by Mint - Tehri hydel project under scrutiny.

TIME has a photoessay here - Holy Water - Controversy on the Ganges. and a story - How India's Success Is Killing Its Holy River

Read Sunita Narain's article on the larger issue of water crisis in India.

Gag order in Kashmir

Contesting the gag order in Kashmir.

I tweeted about this, but for the record on Resistance Recorded - here is a report by the Committee to Protect Journalists.

The rage in Kashmir
: FT.
This part of the story sounds straight from a film, too bizarre. Excerpts:

"Jameela Akhtar, a Kashmiri housewife, sent her teenage son, Ishtiyaq, to a bakery in their middle-class Anantnag neighbourhood to buy bread. It proved to be a fatal errand. A kilometre away, teenagers were hurling stones at police on the national highway, part of an upsurge of violent clashes pitting frustrated local youth against the might of Indian security forces across Kashmir.

It is unclear whether Ishtiyaq, 15, joined the agitation or was simply caught in the chaos. But police – chasing protesters through the narrow, twisting alleys of the residential colony – pursued him home, then shot him in his courtyard, where he died in front of his family. A friend and a bakery employee were also shot and killed on the spot.

...The story goes on with a quote:
His older cousin, Asif Khandey, an engineer, asks: “How is it possible that they would have shot three people at point blank range? Is this justice? Is this India? Is this democracy?”


Defending - Crude - The Film!

A federal appeals judge in New York heard arguments this week on an important First Amendment case. Documentary filmmaker Joe Berlinger is fighting Big Oil Chevron – for his film called Crude. The company has demanded 600 hours of the fimmaker’s footage.

Read a Fortune story The media vs. Chevron: Bring it on.
Also an interesting argument of whether documentary filmmakers should be protected under a journalist’s privilege.

Here is an update on this week’s hearing brought to you by Courthouse News Service.

Ban on iron ore in India?

A potential resource crunch? The Indian government is doing some serious thinking about giving away raw materials for steel mills in China and elsewhere. Interesting. Hope the establishment will also spare a thought or two for the people who are routinely displaced from mines.

Here is the FT story: India seeks ban on iron exports, by James Lamont in New Delhi. July 13, 2010.

Also, check out this link for the organization that has been fighting for the rights of people on mineral resoruces. Mines, Minerals and People.

Friday, July 9, 2010

Former UCC lawyer regrets in hindsight.

Fali S Nariman on his role as a counsel for UCC in the Bhopal case.

Wednesday, July 7, 2010

The fashion industry and garment workers in Bangladesh

Here is a great piece of reporting by Jacob Resneck in The Caravan - an Indian magazine.

Read the story of garment workers in Bangladesh susceptible to lung diseases, even as multinationals exert a downward pressure on prices to appease Western consumers.
A disclosure: I do buy stuff from H&M. Just as one would expect people to keep buying Apple products inspite of labor violations by its subcontractors in China.

This set me thinking when I was in school last year. Based on Dan Ariely's book Predictably Irrational, we were asked to design an experiment that would bring out signs of irrational behaviour in consumers.

Here is what I found:

Two friends of mine, who hold diametrically opposing views on the resolution of the Israel-Palestine conflict, set me thinking when I designed this experiment. While both my friends are Indians, one is of Jewish origin and the other is Muslim. (My Muslim friend claims that he has nuanced opinion about Israel.) Both of them are not exactly comfortable with each other. I think this was strange because here are two Indians who disagreed strongly with each other about the resolution of a conflict thousands of miles away, but one, both felt passionately about. My Muslim friend does have a dislike to a few things from Israel and my Jewish friend is highly intolerant of anything from the Arab world. My belief is that the world is more liberal than it appears, notwithstanding reconstructed wars over civilizations. In an age of free trade or economic imperialism as some would say, I wanted to know if politically conscious consumers, would base their purchasing decisions on where and how a product is made.

My experiment examined whether ethnicity could impact decision making. I spoke to 25 people, from 15 countries and various ethnic groups. Many of them were students at New York University and almost everyone was widely traveled. Although studies have shown that it has been difficult to establish a correlation between ethnicity and economics, partly because people want to sound politically correct and more because, the world has indeed become more accommodating of various ethnic groups; I wanted to explore this area.

I just had three basic questions for my respondents. The first one was if they would be willing to pick up a conversation amongst people from diverse ethnic backgrounds that they were unfamiliar with. This was just to test how open and comfortable they were in a new environment and whether they were guided by stereotypes that may be deep-rooted or sub-conscious. Nearly 40% of the respondents said that they would be hesitant and cautious while trusting and talking to people whose ethnicity they were unfamiliar with. One interesting response was from a South Asian who said he would be generally distrustful of the western world (North America and Europe) and more comfortable everywhere else!

The next question was whether they would buy products from any country without exception. While most were curious about trying out new products from various countries, some would be cautious. There were two parts to this question – whether they were neutral to buying products from anywhere in the world and second whether they cared very much about potential violations that the production entailed. Exactly half of the respondents would be driven by the rational decision of judging the product on the quality alone and not its label. The other half, said they would be cautious or had preference for goods from Italy or China. It also emerged in this experiment that the Swiss and the Italians may boycott Mozzarella cheese, if they knew it was made in India. Not surprising because, 70% of the world's buffalo population lives in India (on the roads mostly). Many would walk into a seemingly international store, looking to pick up a label from Europe when in fact they would be surprised to see the 'Made in Madagascar/Bangladesh' label. Would they drop it then? Some said they would.

The second part of the question was whether as a customer they would be bothered about the grounds on which a product was made? If the production meant brazen exploitation of labor common in some countries or regions were specific minorities were underpaid, economic processes that used child labor, would it have affected their decision? This time, 40% of the respondents were driven by the quality of the product and nothing else. The rest 50% said it would affect their decision while buying the product even if it was a trusted brand and priced attractively. Less than 10% of the respondents said they should base their decision on such factors but had not yet thought about it deeply. One respondent said that unless she worked under such exploitative conditions she would not know whether she would stop buying such products. One Japanese respondent said that she has stopped dreaming about buying diamonds after watching Blood Diamond. Another customer – a vegetarian said that while buying cosmetics she would be vary of its contents that may violate her religious affiliation.

My third question was if ethnicity had any impact on economic status. Only 12% of the respondents felt that ethnicity has no impact on economic status. The rest were of the view that belonging to a certain ethnic group could work both ways. Majority felt that in reality, although it is only hard work that determines success but glass ceilings existed in most countries.

The inferences I draw from this experiment is that, typically a ‘rational’ consumer weighs his choices based on quality and price, but he could make his decisions based on emotional factors otherwise considered irrational. He could be concerned about the mode of production or origin of production; even as his needs a consumer was being met. I think, going forward, as people begin to travel a lot more and become aware of the schisms dividing the world, this will undoubtedly have an impact on businesses. My hunch is companies can no longer view their markets across the world as silos that have nothing to do with each other. They will have to keep in mind consumer preferences for the group as a whole – their actions in one part of the world may impact businesses in another.

Tuesday, July 6, 2010

Ethical investing and BP

FELIX SALMON: ReutersThe ethics of owning BP stock
Jul 5, 2010 23:27 EDT
ethics | stocks

Value investor Whitney Tilson is long BP, and answered my ethics question in a Q&A sent to his investors:

Q: Regardless of how cheap BP’s stock is, is it immoral to try to profit from owning it, in light of the company’s bad behavior?

A: As noted earlier, BP appears to have an atrocious safety record. In owning the stock, we are not endorsing its behavior, either before or after the Deepwater Horizon accident. But as value investors, we sometimes have to hold our noses when we invest because the cheapest stocks are often the ones of companies that have behaved badly or are otherwise tainted. Example include McDonald’s, which many believe bears responsibility for the obesity epidemic in this country (see Fast Food Nation and Super Size Me), and Goldman Sachs, which many blame for the global financial crisis (see The Great American Bubble Machine).

That said, we would have a problem owning stock in a company if we believed that its core business harmed people – most subprime lenders at the peak of the housing bubble, certain multi-level marketing firms and tobacco companies come to mind. BP certainly doesn’t fall into this category.

As for BP’s safety record, we don’t defend it, but we don’t think BP is deliberately blowing up its own rigs and refineries and killing its employees. If an email emerged that the CEO or board of BP were warned that the Deepwater Horizon rig was likely to explode and failed to act, we would certainly rethink the morality of holding the stock.

I don’t find this answer compelling at all. First is the language in which Tilson talks about his comparables, McDonald’s and Goldman Sachs. He writes about what “many believe” and what “many blame”, and cites the most shrill and stringent critics in both cases. Being a contrarian value investor is all about making your own mind up, and what’s germane here is what (and whether) the investor thinks about the ethics of the investment, rather than what someone like Morgan Spurlock or Matt Taibbi thinks.

Tilson then says there are companies he’d have a problem investing in, if they make harmful products. That seems to imply that it’s worth taking a serious look at the ethics of owning stock in BP. But his conclusion is trite, setting up a straw man of BP deliberately killing its employees, and saying that he’d only have a serious ethical problem with BP if it knew the explosion was likely.

Note the definite article here: Tilson is saying that he’d only have qualms if BP knew this particular explosion was likely. But the ethical case against BP is that it acted with reckless indifference towards safety standards in general, that it cut corners knowing that doing so increased the likelihood of disaster, and that it should have known that an explosion was likely, at some point, and that the chances of this explosion happening at a BP rig were significantly higher than the equivalent probability at other big oil companies.

This has important implications for the stock, of course. BP has thousands of oil rigs; the chances of one of them exploding are not much smaller today than they were a few months ago. The clean-up and other costs associated with the Deepwater Horizon are one thing, but how much will BP be forced to spend on upgrading the safety systems at all of its other rigs, now? We’ve learned our lesson, and surely all want to ensure that this kind of thing doesn’t happen again. But we’ve barely started to think about what that kind of root-and-branch revamp of BP’s physical and managerial safety systems might cost, both in terms of cash and in terms of opportunity cost. I’d be interested in what Paul O’Neill thinks — before he was Treasury secretary, he did amazing things for Alcoa’s safety record. If Tony Hayward’s successor wants to do something similar, it won’t be easy, and it won’t be cheap.

p.s. Salmon is a blogger I totally admire(I flout rules of blogging here, but make an exception of reproducing his entire post here. Forgive me.)

Sunday, July 4, 2010

Anti-oil spill legislations and senators who received funding from Big Oil

BERKELEY, CA, July 2, 2010 - As oil continues to spill into the Gulf of Mexico legislators in both parties have been quick to respond with legislation. A number of bills have been introduced, some specifically targeting the crisis, and others with an eye toward preventing future problems. The main question to be addressed is how much BP and big oil (generally) will pay for the oil spill, now and in the future.

By examining campaign contributions researchers revealed that of legislators sponsoring post spill oil bills the ones who have received the most money from big oil are championing bills that go lightest on the industry.

Republicans have drawn about 70% of big oil money this election cycle and while many Democrats rely on big oil as a major source of campaign funding, the ones sponsoring recent oil bills are not among them.

Which one of these bills, if any, will show how much influence big oil has over the 111th Congress?

A Closer Look at Oil Bills in Congress

In the House of Representatives, seven bills addressing the question of who is financially liable for the spill have been presented. The Democrats brought five, all from representatives who have received relatively little money from oil companies in the last election cycle, and two came from Republicans who have taken in significant oil money in the last two years.

Bill Cassidy, Republican from Louisiana, received $61,100 from oil companies over the last two years, the 38th highest recipient of funds of the House’s 435 members. He sponsored a bill, H. Res. 1374, that would devote all revenue from the oil excise tax toward the Deepwater spill cleanup. This bill would offer significant federal funds to help offset BP’s tab. Cassidy also co-sponsored a bill that would end the moratorium on offshore drilling.

The other Republican bill, H.R. 5356: Oil Spill Response and Assistance Act, is sponsored by Roy Blunt (R-MO), who places third among the GOP and fourth overall in oil money received with $165,850 (incidentally the top Republican recipient is Joe Barton, who apologized to BP for the Obama administration giving it a “shakedown”). Blunt's bill addresses the liability limit on oil spills imposed by the Oil Pollution Act of 1990, which caps an oil company’s liability for a spill at $75 million. Blunt’s bill would raise the limit to the higher of $150 million or the sum of the offending company's after-tax profits on its previous four reporting quarters. BP's net income from April 1, 2009 to March 31, 2010 was $20 billion.

New Jersey Democrat Rush Holt sponsored a companion bill, H.R. 5214: Big Oil Bailout Prevention Act of 2010, to one in the Senate, which would raise the liability limit to $10 billion plus the cost of cleanup. Far more than Blunt’s $150 million or 1 year of profits, but perhaps the most lenient of the Democrats’ bills.

To date, Holt's bill has attracted 82 co-sponsors (one Republican and 81 Democrats), a sign that it has a good chance of moving forward. Raul Grijalva’s (D-AZ) bill, H.R. 5355: To amend the Oil Pollution Act of 1990 to repeal the limitation of liability..., would remove the liability limit entirely. A resolution, H.Con.Res.280,brought forward by Mary Jo Kilroy (D-OH) expresses the sentiment that BP should reimburse the federal government for all costs associated with the spill. Steve Kagen’s (D-WI) bill, H.R. 5520: Oil Spill Responsibility Act of 2010, would require BP to pay reparations to people affected by the spill, and a bill, H.R. 5513: Spilled Oil Royalty Collection Act, by Chellie Pingree (D-ME) would place a 12.5% royalty on oil removed (or spilled) from the Outer Continental Shelf (which includes the Gulf of Mexico), and apply it retroactively before the spill. Of these five Democrats, Kagen received the most oil money, $6,400, 231st among House members, and less than 1% of his fundraising total for this cycle.

Of the bills introduced in the last two months none have moved to the floor for a vote. The answer to how much BP and big oil will ultimate pay for the oil spill will play out in the coming months and will be a test of big oil’s influence on Congress.

Methodology: Campaign contributions shown for the last two years of available data, May 6, 2008 - May 5, 2010, including contributions to presidential campaigns. Contributions data provided by the Center for Responsive Politics ( research intern Owen Poindexter contributed to this story.

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