Mainstream Weekly

Home > 2021 > Finance corporate capital uses Covid war for maximization of super-profits (...)

Mainstream, VOL LIX No 25, New Delhi, June 5, 2021

Finance corporate capital uses Covid war for maximization of super-profits | Anil Rajimwale

Friday 4 June 2021, by Anil Rajimwale

by Anil Rajimwale

One of the richest persons in the world Bill Gates said five years ago: “If anything kills over 10 million people in the next few decades, it’s most likely to be a highly infectious virus rather than a war,” “not missiles, but microbes.” So corona type viruses were being anticipated for long. Yet nothing was being done. Conspiracy theories are doing rounds, involving China and US in deliberately releasing the ‘war material’ of Corona virus as part of big power rivalries. We cannot yet state anything definite.

It is clear that Corona viruses have become crucial tools of massive profit making and of economic competition between big powers and between giant corporates. In the process mass of people has been turned into guinea pigs for maximizing profits.

It is practically a war situation, without use of arms, with normal life of people disrupted, economies shattered, millions of jobs lost, and worst of all, millions dead. There is lack of oxygen for the first time in history, dead bodies are littered, and there is an intriguing reluctance to help people recover.

Yet giant corporate businesses and MNCs are thriving. They speed up or slow down drug and vaccine production and supply, with sights on accelerating super-profit, while millions die. Questions remain as to why vaccines do not reach common people even after long experience.

Corporate capital grows with Corona!

Lenin had defined finance capital (FC) as merger of banking with industrial capital. There is modification here. Today, FC is touching the clouds with free flight, freeing itself of production! Amidst death and destruction, the corporate is shooting ahead.

The giant finance monopolist Adani, head of the giant Indian conglomerate has just recently beaten China’s Zong Shanshan to become No. 2 in Asia, thanks to Corona.

Globally Adani is the 14th richest while Ambani 13th. And they are ‘progressing’ merrily! On Thursday, May 21, 2021, Adani’s wealth stood at 65.5 billion dollars compared to Zong’s 63.6 bn dollars, up by 33 billion dollars this year alone! Ambani has 76.5 bn dollars. Jeff Bezos is richest with 188 bn dollars, Elon Musk 169 bn and Arnault 163 bn dollars (last two figures slightly dated).

Monopoly corporates have accelerated in the ‘Year of Covid’. Adani Group’s aggregate market capitalization was 20 bn dollars in May 2020, while now, only one year later, it is a whopping 115 bn dollars, a rise of 6 times, with a strong presence in ports, airports, energy resources, packaged food, agribusiness, real estate, financial services gas, defence etc. But why not in helping people in Covid?

In recent decades global population of billionaires has risen more than 5-fold, with largest wealth going past 100 bn dollars, yet Covid crisis has grown worse. 2021 Forbes list up to April 6 shows their number rising by 700 to reach more than 2700. China led the run by adding 238 billionaires, that is one every 36 hours, with a total of 626. US has 724 and India is third with 140. In India the billionaires’ wealth equals 17% of GDP, in US it is 20%, Sweden 30%. Adani ranks 17th with wealth equaling 1.7% of GDP, Mukesh Ambani’s wealth equals 2.8%, Amancio Ortega of Spain is at 5.3%.
Billionaires in the last decade, particularly in last two years, are shifting from manufacturing and technology to real estate, service, gambling and casinos, energy, construction and engineering, mining, etc, a structural shift away from production. They have forced out the weak firms during Covid, accelerating market polarization in FY22.
Top 10 to 15 stocks have gained heavily, even as the broader market underperformed.
In short term, COVID-19 shock may have mitigated corporate savings due to a decline in revenues and profits but in longer runs, giant companies enjoy period of low investment and high profits, leading to massive corporate savings.

Many governments have rushed to the corporate aid to secure liquidity to enable companies to flourish. They can merrily indulge in liquidity and equity.

The companies which are listed on stock markets made bumper profits in the quarter ending in September 2020, registering their highest aggregate profits during the most recessionary times in Indian history. Listed companies made unprecedented profits in the quarter ended September 2020.

Even as the supply chains for most industries are disrupted, India Ratings (IndRa) projected 6 per cent revenue growth for corporates in fiscal year 2021 over FY20, and a high of 21.2 per cent in FY22 over FY21, the year of the pandemic.

World analysts expect ‘S&P 500’ (500 largest companies in US in Standard’s & Poor’s weighting in stock markets) to post profit growth of 24.6% for first quarter of 2021, everything falling apart! ‘FactSet’ Earnings analysts suggest S&P 500 earnings growth of 28%, the best in 10 years, a blockbuster year of earnings. Financial sector is expected earnings growth of 79.5%, with banks kicking off earnings parade later this week.

At the same time, industrial and energy sectors are projected to show 17.3% and 17% profit decline respectively, trend of shift out of production. Industrial sector was down 81% in Q2, 2020. Analysts expect 53.2% profit growth for the second quarter this year. Strong earnings momentum has helped push stocks upward in recent months.
The world stock market is so enthusiastic and buoyant right now, with a forward price-to-earnings ratio of 23.5, a 40% premium to the average since 2020. How so?!
They do not intend coming back to Covid fields to mitigate the pain of the people.

Super-profits for Corporates by polarizing Covid-19

Covid-19 has actually encouraged corporations around the globe to go for super- profits before workers’ safety. Globally, half a billion (50 crore) people are being pushed into poverty as fallout from the pandemic. 40 crores of jobs have already been lost. ILO estimates more than 43 crore small enterprises at risk.

Meanwhile, massive protection to shareholders has fuelled share price boom. Top 100 stock market winners have added more than 3 trillion dollars to their market value since the pandemic. As a result, the 25 richest billionaires have increased their wealth by staggering amounts. Jeff Bezos could personally pay each of Amazon’s 8,76,000 employees a one-time 1,05,000 dollar bonus and still be as wealthy as he was at the beginning of the pandemic!!

World’s largest corporations are making billions at the expense of low wage workers and funnelling profits to shareholders and billionaires, a small group of men in rich nations.
Companies are using government Covid bailouts to pay massive dividends to wealthy shareholders, at a time when hundreds of millions suffer, losing lives, not getting vaccines, even oxygen.

Ten of world’s largest apparel brands paid 74% of their profits, 21 billion dollars, to their shareholders in dividends and stock buybacks in 2019. This year 2.2 million workers in Bangladesh alone were affected when textile orders were cancelled. Shutdowns lowered revenues in the country by 3 billion dollars.

  • In India, hundreds of tea plantation workers have gone unpaid due to Covid-19 lockdown, while the largest Indian tea companies have boosted profits.
  • Chevron announced cuts of 10-15% of its 45,000 global work force despite spending more cash on dividends and share buybacks during the first quarter of the year.
    From 2016 to 2019, 59 of the world’s most profitable companies in the US, Europe, etc distributed 2 trillion dollars to shareholders, with pay-outs averaging 83% of earnings.
    Now is the time to help out small businesses, workers and democratic institutions

Power-shift and pandemic

Jeff Bezos, founder-owner of Amazon, is richest on earth. (Just recently he has been ‘ovethrown’ by Arnault!) His wealth has increased by 92 billion dollars in only five months, between 18 March and 20 August 2020.

Amazon’s market capitalization is over 1.5 trillion dollars.

In many developing countries too, the COVID-19 recovery funds have been used to bail out big business. In eight countries, an average of 63% of pandemic-related state aid went to big businesses, while 26% went to social protection schemes, 10% to small and medium-sized enterprises, and only 1% to informal sector workers. Simultaneously, latest IMF estimates show the world economy shrunk by 3.3% in 2020, exacerbating economic inequalities.

India earmarked 21% of state aid to big businesses, while informal workers got just 2% of state aid.

Despite a pandemic that has rocked world economy, the Big Four of Amazon,
Google, Apple, and Facebook raked in, last quarter, 38 billion dollars in profits on nearly 240 billion dollars in revenue. This despite worst recession in United States since World War II. In the quarter ending September 30, 2020 Amazon’s profits rose nearly 200 percent from a year earlier, Google’s about 60 percent and Facebook’s 30 percent. Amazon saw record revenue of $96 billion, a 37 percent increase compared with last year.

This month, a US Congressional Report accused the giant corporate of ‘anti-competitive behavior’, with some politicians asking them to be broken up.

Meanwhile, unemployment is double the rate it was in the beginning of the year, with industries struggling to stay afloat.

Vaccine: a money-generating tool

This and last year and this was god-send for pharma corporates. Racing to develop vaccine in ‘record time’, Pfizer decided to plunge into making super-profits. On May 4, 2021, the company announced just how much money its vaccine is generating. The vaccine brought in 3.5 billion dollars to Pfizer in revenue in the first three months of this year, nearly a quarter of its total revenue. Pfizer produces mRNA vaccine.

The company did not disclose the actual profits from vaccine, but indicated it would be in the high 20 percent range. That would roughly translate into 900 million dollars in pre-tax vaccine profits in the first quarter.

Pfizer claims it has saved an untold number of lives, but its vaccine is disproportionately reaching the world’s rich.

According to World Health Organization (WHO), as of mid-April, wealthy countries already secured more than 87 percent of the more than 700 million doses of Covid-19 vaccines dispensed worldwide, while poor countries received just 0.2percent!
WHO made clear that Pfizer provided minimal help to the world’s poorest countries. The company pledged up to 40 million doses to Covax, a multilateral partnership aimed at supplying vaccines to poor countries. But it represents less than 2 percent of 2.5 billion doses that Pfizer and its partner, BioNTech, aim to produce this year.

Since deliveries began in February, roughly 9,60,000 doses of Pfizer’s vaccine have been shipped to middle- and low-income countries, receiving vaccines through Covax, “a drop in the ocean”.

Johnson & Johnson, AstraZeneca and Moderna, claiming to sell their vaccines on a nonprofit basis, are selling vaccines at massive profits.

BioNTech received substantial support from the German government in developing their joint vaccine, negating Pfizer claims. Pfizer keeps profitability of its vaccine a secret, US paying 19.50 dollars for each Pfizer dose, Israel about dollars 30 per dose.

The company isn’t disclosing its prices in EU either.

Pfizer profits have triumphed over loftier principles.

Because of storage at low temperature problems, huge amounts of vaccines are being just destroyed.

In India, Pfizer applied for emergency authorization but withdrew the application in February because India’s drug regulator was not willing to waive a requirement that it run a local clinical trial.

Pfizer and India’s government have since resumed talks.

 BioNTech said in March that it had locked in revenue of nearly 10 billion euros, or about 11.8 billion dollars, based on vaccine orders at the time.

Weapon of IPR aimed at people

Vaccine developers have been trying to play down the financial upside, as
companies are eager not to be seen as profiting from the pandemic, especially as pressure mounts on the Biden administration to relax protections on intellectual property and allow poor countries to produce more affordable versions of the vaccines. Pfizer and other pharmaceutical companies have staunchly opposed such proposals.

A group of developing countries led by South Africa and India has proposed to the World Trade Organization that intellectual-property protections be loosened on coronavirus vaccines during the pandemic.

The proposal is intended to pressure pharmaceutical companies to ensure access to vaccines for developing countries, perhaps by offering discounted prices or by partnering with other companies to increase capacity.

The US’s sudden support for a waiver of patent protections for Covid-19 vaccines under pressure of world opinion, has invited ire of the MNCs.

The waiver is an important step enabling rapid scaling up of manufacture and timely availability of affordable Covid 19 vaccines and essential medical products.
Global pharma majors have warned Group of 20 that moves to weaken intellectual property rights protection will reduce investments and hurt innovation. The warning comes in a report prepared by companies including Novartis AG, Sanofi FP, AstraZeneca PLC and Johnson & Johnson, and from organisations such as Europe’s EFPIA pharmaceutical industry association.

India and South Africa, along with 57 other WTO members, have co-sponsored a proposal for a temporary waiver on certain provisions of the Trade-Related Aspects of Intellectual Property Rights (TRIPS) agreement. The waiver, if adopted, will help nations overcome legal barriers stopping them from coming up with their own vaccine for Covid-19.

In a bid to reconcile positions, India is also planning to submit a revised proposal on TRIPS, which is a multilateral agreement on intellectual property.

The US and Europe have been strong supporters of IP protections at the WTO over the years.

Strategy for super-profits

New Covid vaccination strategy, announced earlier this week, has allowed the Serum Institute of India (SII), a private firm, to dominate the vaccine pricing and policy and earn super profits. It is also in contradiction of an earlier stated stand by the National Expert Group on Vaccination Administration for Covid.

With a net margin of 41%, the distinction goes to Serum Institute of India (SII), the country’s leading maker of Covid-19 vaccines. It is in good shape to earn profits from the sale of covid-19 vaccines. With its robust financial position, has it done enough on the investing and pricing to earn the respect and goodwill of the pandemic-stricken nation?

SII, producer of Covishield, will make the vaccine available at Rs 400 per dose to states and Rs 600 per shot to hospitals from May 1. It had signed an agreement to supply nearly 11 crore vaccine doses, from January to April, at Rs 150 per dose to the Centre.
Using the panic situation, the latest pricing announcement makes it clear that the company is looking to earn a greater margin on the vaccine, originally developed by AstraZeneca-Oxford University through 97% public funding by the UK government and EU.

SII had earlier announced that it would want to sell Covishield at Rs 1,000 per dose in the private market.

Perhaps it could not do it in one go but is clearly looking to maximise its profit, with the Centre succumbing under the pressure.

By allowing manufacturers to set their own prices, the country loses the ability of bulk procurement and price negotiations to get the most cost-effective deal.

New procurement policy glosses over the cash injection that Indian taxpayer has made into the two main vaccine manufacturers—the other one being Bharat Biotech.
 Finance Minister Nirmala Sitharaman announced government fund support to the tune of Rs 3000 crores to SII and Rs 1575 Rs crores to Bharat Biotech. But government is not taking any urgent steps to acquire vaccines from major producers nor is it pressurizing the Indian companies to increase production and to collaborate with other Indian manufacturers. This is perhaps because many of them are PSUs. India will not be able to get doses from Moderna and Pfizer simply because of its laxity in pitting orders and falling far behind in the Q, besides the fact that they also are reluctant about it for profit margins. Govt recently “took stock” of Bharat Biotech’s application to WHO for clearance for Covaxin, with 90 percent documents submitted, the rest to be submitted in June. Govt is tight-lipped on the precise steps being taken. There is a demand for involving more Indian companies including PSUs in vaccine production, but govt again refuses to commit. Is it waiting for Adani to fill the gap?!

 Fight shifts to democratization of world order, primarily of Covid field.

Notice: Mainstream Weekly appears online only.