Jay Naidoo, like all good socialists, wants a ‘reset of our global humanity’. This time, he is spurred by the apparent injustice of ‘vaccine apartheid’. Jay Naidoo, like all good socialists, is wrong.
‘Another multi-millionaire socialist whining about free markets!’ exclaimed a friend of mine, upon reading Jay Naidoo’s recent rant about ‘vaccine apartheid’.
Naidoo is lobbying for the proposal made by India and South Africa to the World Trade Organisation (WTO) in October last year, calling for the expropriation without compensation of intellectual property rights on Covid-19 vaccines. Developed countries and pharmaceutical companies, naturally, oppose this idea.
Without such annoyances as property rights, Naidoo believes, countries like South Africa could just copy drugs made by foreign pharmaceutical companies and make them on the cheap, without the burden of having to pay for the massive cost of developing the drugs in the first place.
Remember Sarafina II
If pharmaceutical companies and other foreign firms seem wary of doing business with South Africa, it’s because of exactly this sort of high-handed theft. The South African government has a track record of abrogating patent rights when it suits its agenda.
Most infamously, it did so with AIDS drugs, after it dithered and dallied, poured money into an industrial solvent purporting to be a cure, and blew much of the rest of its budget on a bizarre musical produced by a friend of the then health minister, Nkosazana Dlamini-Zuma.
The episode led to acrimonious and unseemly fights both in bilateral trade negotiations with the US, and in international trade negotiations. For a while, South Africa was on the verge of suffering trade sanctions over its wilful disrespect for intellectual property rights.
Years of negotiations led to the adoption of rules under the WTO Trade-Related Aspects of Intellectual Property Rights (TRIPS) agreement that permitted compulsory licencing and parallel importation under certain circumstances.
This means that during an emergency, foreign drug companies may be required to licence their products for local manufacturing, and that countries are entitled to source those products from cheaper sources, should they exist.
Vaccine apartheid
Now, with Covid-19 vaccines, government has dithered again and blames its failure to procure enough vaccines in a timely manner on ‘vaccine apartheid’ on the part of developed countries.
The ‘vaccine apartheid’ narrative fails to explain why Morocco is 17th in the world with vaccinating its population, and 8th if you don’t count mini-countries. It fails to explain why Morocco has enough vaccines for 12,2% of its population, Brazil has enough for 7,8% of its population, and Argentina has enough for 6,4% of its population, while South Africa – an upper-middle-income country, after all – only has enough vaccines for 0,5% of its population.
It also doesn’t explain why president Cyril Ramaphosa was motivated to lie to the nation on 11 January when he said government had been in negotiations with vaccine manufacturers for six months. It hadn’t. It hadn’t even been in negotiations for six days, it later emerged.
None of this sounds like ‘apartheid’. It sounds like sheer incompetence and dishonesty.
To cover its failures, government wants to thoroughly gut the TRIPS agreement, including provisions on entirely unrelated intellectual property rights such as copyright, trademarks and music performances.
Among the clauses it wants stripped is Article 7: ‘The protection and enforcement of intellectual property rights should contribute to the promotion of technological innovation and to the transfer and dissemination of technology, to the mutual advantage of producers and users of technological knowledge and in a manner conducive to social and economic welfare, and to a balance of rights and obligations.’
It matters neither to Naidoo nor the South African government that abrogating patent and other intellectual property rights in vaccines could retard innovation, or disadvantage producers or users in a manner that harms social and economic welfare.
Charity case
‘Africa and the developing world in general are not asking for charity,’ wrote Naidoo. ‘Rather, we are demanding justice.’
No, Mr. Naidoo. You are not demanding justice. Failing to balance rights and obligations as envisioned in the TRIPS agreement is not ‘justice’.
You are asking for charity for Africa. You are asking that pharmaceutical companies freely donate the intellectual property rights vested in the vaccines that they developed, at great expense to themselves and foreign taxpayers.
Demanding free stuff from someone else is not justice. It is either charity or theft, depending on how willing the donor is to part with said stuff. And theft is an injustice under every law going back to the Code of Ur-Nammu, the oldest known law code surviving today.
What the likes of Naidoo forget is that it is exactly this socialist mindset that got poor countries into their depressing economic predicament in the first place. There is a reason why rich countries are both able to develop vaccines and able to roll them out effectively. That reason is free market capitalism.
Sure, rich-world governments might step in with subsidies to hasten development of urgently needed vaccines, but that is no different from a private actor in the market investing in production that they need in future. Besides, that developed country governments can afford such subsidies is entirely because of the prosperity of their populations, brought about by their economic freedom and great productivity.
A step too far
Naidoo goes on about ‘privatising the benefits’ and ‘socialising the costs’, as if South Africans paid a cent towards vaccine development in the developed world. We didn’t. Poor countries have no claim whatsoever on those vaccines, other than the right to buy them on the open market like anyone else.
Of course, initiatives that improve vaccine access to poor countries would be welcome. The pharmaceutical companies themselves are aware of this, as they demonstrate by selling vaccines at or near cost. So are developed countries, as they demonstrate by offering to donate excess vaccine stock.
But these are acts of charitable aid. Undermining property rights to get vaccines into poor countries is a step too far. It is unjust. It is theft.
Poor countries are perpetually in need of things, run as they are by incompetent, socialist or corrupt governments. They cannot blame that on rich countries. They can only blame themselves.
Invalidating patent rights will ensure that any remaining goodwill towards poor countries evaporates like mist in the sun.
Communist utopia
Naidoo ends with a flourish: ‘We live in a world that is more connected, binding people and planet into one global system with one destiny. The digital revolution heralded a new phase of civilisation. One that was to embrace the indivisibility of our humanity and our stewardship of our planet. To build the pathways of hope and opportunity for our future generations. And to weave a notion of human values that saw us evolve to a greater consciousness of a more compassionate and caring human race living in peace and intelligent cooperation with each other and everything and everyone we share our world with. We must return to common decency and fairness.’
This is lovely sounding rhetoric, deployed to appeal to a socialist world in which everyone enjoys equal material prosperity, and in which from each is taken according to their ability, and to each is given according to their need.
This phrase, popularised by Karl Marx himself, referred to a perfect communist utopia, in which goods and services would be abundant, and could be distributed for free.
The problems with this vision, of course, are myriad, as endless socialist experiments have proven. How do you coerce people to produce goods and services, when their work will not make them comparatively better off? How can a society or central authority determine what each person wants or needs? How can a society or central authority determine what needs to be produced, where, in what quantity, at what cost, and for whom? If goods are distributed for free, how will people know to limit their consumption to match production?
A ‘human race living in peace and intelligent cooperation with each other’ is not a socialist world. For countries to be at peace with each other requires that both have more to gain from free trade with each other than from conflict.
I, pencil
The capitalist organisation of production is the very definition of ‘intelligent cooperation’. The flip side of the division of labour, where individuals can specialise according to what they do best, is that those people must cooperate to produce goods and services. No single person knows enough to reliably manufacture a pencil.
It takes a wide variety of skills and resources, ranging from mining for graphite and metal, forestry for wood, chemistry for paint and rubber, engineering to build the machinery to combine these elements into usable pencils, and experts in distribution, retail, marketing and merchandising to get those pencils to those who need them.
This requires the cooperation of numerous people, organised in groups we call companies. And the only reason they would cooperate to make pencils, as opposed to something else, is the prospect of making enough profit to pay everyone what their productive contribution is worth.
And if they fail, that will be because some other group of cooperating people managed to produce a better writing implement, or at least a pencil at a better price. When a government fails, there is no alternative to save the day. When the profit motive is destroyed, there is no reason for competitors to try to produce better products at better prices.
Depriving people of the fruits of their labour (i.e. profit) is not what ‘common decency and fairness’ looks like. Property rights, including intellectual property rights, are core ‘human values’ of a free society.
It is common decency for pharmaceutical companies to make vaccines available at discount prices during a pandemic, and for that, we ought to be grateful. In return, it is fairness to let them make what profit the market will bear once the emergency is over.
Pharma profits
Naidoo pretends that the difference between a normal price and a cost price is pure profit, but it isn’t. It funds a whole host of things, such as decent wages for workers, decent amenities for employees, and research into potential future medicines.
Naidoo throws out the factoid that the 18 largest pharmaceutical companies in the period 2009 to 2018 made a combined profit of $588 billion. He doesn’t offer any context for this number, doesn’t explain why only the 18 largest would be relevant (excluding the likes of Eli Lilly, Boeringer Ingelheim and Merck Group) and chooses a ten-year period to inflate the scary-big number he wants.
He doesn’t bother to cite a source, so I can’t verify his profit claim or do an exact match, but according to this table, the total revenue over the period 2011 to 2020 of the 18 largest pharmaceutical companies was $6 299 billion.
That means $588 billion represents a 9.3% net profit margin. That is hardly a testament to the excessive greed of which Naidoo accuses the industry.
More generally, one study found the net income margin of the pharmaceutical industry is higher than the average for all industries, but when controlling for company size, year and R&D expense, it was only 3.6% higher, which is hardly egregious.
Other analyses (such as here and here) also find the pharmaceutical industry to be only moderately profitable, with numerous industries exceeding its profit margins, sometimes by a long way.
Ironically, the industries in which Jay Naidoo made his millions, namely technology, investments and asset management, are more profitable by far than the pharmaceutical industry.
Bitter complaining about how unfair the world is, from a millionaire socialist, is supremely hypocritical. And even if Naidoo wasn’t spectacularly rich thanks to his work in government, his BEE handouts and his involvement in capitalist industries, it would be misguided.
If countries that are poor because of socialism, corruption, war or incompetent government are jealous of countries that are prosperous because of liberal democracy and free market capitalism, the answer is not to beg for handouts. The answer is to adopt the policies that made those countries rich and capable of looking after their own people in the first place.
Perhaps then South Africa would be able to buy enough vaccines for its population, or even develop and retain the skills necessary to create highly advanced vaccines itself. Perhaps then it wouldn’t have to force foreign companies by law to licence their products for local manufacture, or expropriate other people’s intellectual property without compensation.
Poverty is not an excuse for thievery, and thievery is not justice, Mr Naidoo.
The views of the writer are not necessarily those of the Daily Friend or the IRR.
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