Kurzarbeit – A Realistic German Approach To UBI?

Kurzarbeit - A Realistic German Approach To UBI?

The state-funded German safety net Kurzarbeit is a social insurance program whereby employers reduce their employees’ working hours instead of laying them off. It has ensured safety to millions of workers amidst the pandemic.

Crux of the Matter

Under Kurzarbeit, the German government compensates around 60% of the foregone net wages of an employee & 67% if the employee is a parent. The program can be initiated when employers need to cut wage costs and working times amid economic slowdown or any crisis like the COVID-19.

Main Features
Kurzarbeit is a crisis management tool to protect workers’ income and support aggregate demand. Since workers do not lose their jobs, they are secured while companies also retain their human capital.

The strong performance of employment during the global financial crisis bolsters domestic demand, with stable labour income supporting private consumption, and reduced the need for precautionary savings; thus opening the way to a rapid recovery.

A worker receives 60% of his or her pay for the hours not worked, whereas receives full payment for the hours worked. For example, a worker would only face a 10% salary loss for a 30% reduction in hours. In 2009, the German government was highly appreciated for saving nearly 500,000 jobs and keeping the unemployment rate below 8% during the recession using Kurzarbeit.

It has provided greater income protection during Covid-19. It provides 60% income for the first 3 months of reduced working hours, 70% income from 4th to 6th months, and 80% income from the 7th month. The maximum duration of the program is 21 months. During the pandemic, the coverage was expanded to temporary workers as well. Kurzarbeit can be applied for if employees’ working hours are reduced by more than 10% compared to 30% before Covid-19.

Critics say that Germany ‘s excessive reliance on Kurzarbeit can potentially reduce flexibility in the labor market, and increase the divide between workers in more and less-protected segments of the labor market.

Kurzarbeit subsidies could discourage restructuring of underperforming companies.

Jacob Kirkegaard, Peterson Institute for International Economics.

Following the pandemic, the German government has made this scheme more flexible, more attractive to employers, and more generous to employees while expanding coverage across sectors and across different types of jobs.

Universal Basic Income
On the contrary to Kurzarbeit, UBI is a periodic cash payment unconditionally delivered to every adult regardless of economic and employment status. UBI was proposed in the Economic Survey of India published in January 2017.

Incorporating UBI would bring more people into the formal banking system and also increase rural access to formal credit. Basic income increases the resilience to economic shocks but also increases the risks of a rise in inflation due to increased demand.

Current social welfare schemes like MNREGA, Ujjwala, Awas Yojana, etc. cost India about 4-5% of GDP, but UBI is expected to cost almost 6-7% of GDP. Experts say the ongoing social welfare schemes focus on long-term improvement on human development, rural infrastructure, employment and can’t be substituted by cash transfer. Seeing Germany as an example one can say that Kurzarbeit will prove to be highly expensive in the Indian context.

While some consider UBI as a universal right for everyone; some argue whether it should be distributed to rich or not. Many also believe that money should not be given to those who do not contribute to society through their labor and it is feared that employed workers would drop out of the labor force leading to encouraging idleness.

The idea of UBI is not new but in the past few years, it has been discussed widely on global platforms as a means of redistributing income. Unlike Kurzarbeit, UBI is based on the idea that society, as a first priority, should look out for its people’s survival.

  • A pay-as-you-earn tax (PAYE), in Australia and the United States, is a withholding tax on income payments to employees. Amounts withheld are treated as advance payments of income tax due. They are refundable to the extent they exceed tax as determined on tax returns.
  • On 4 October 2013, Swiss activists celebrated the successful collection of more than 125,000 signatures, forcing the government to hold a referendum in 2016 on the decision to incorporate the concept of basic income in the federal constitution. They did so by dumping 8 Million coins on a public square in Bern, each coin representing each person of Switzerland’s population. 
  • If unpaid care work performed by women were compensated at even the minimum wage around the world, this would boost measured global economic output by $12 trillion. Hence the Scottish economist Ailsa McKay argues that basic income is a way to promote gender equality.

What Happened At Galwan?

What happened at Galwan valley?

Several speculations were being made over the recent clash between Indian and Chinese troops on June 15 in Ladakh’s Galwan Valley at Patrol Point 14. Following the Army press briefings and conversations with Army personnel in the Valley, the things have become more clear and for a better explanation, it is broken down in 3 phases.
Complete Coverage: India And China Encircling Each Other

Crux of the Matter

Phase 1
Ten days prior to the clash, lieutenant general-level talks were held in which it was proven that a Chinese observation post was on the Indian side of LAC along the Galwan River. It was decided to create a de facto ‘buffer zone’ and the Chinese dismantled the post following the disengagement at Patrol Point 14 where both armies had mobilised very close to the LAC.

The process decided during the previous meeting for disengagement had started from Galwan Valley. It was to be implemented after meetings between the commanders on the ground. During the implementation process, both sides clashed over the existence of a Chinese Observation Post in the ‘buffer zone’.

The 16 Bihar infantry battalion was deployed in the valley with its commanding Officer Colonel B Santosh Babu who even held talks with his Chinese counterpart a day after the Chinese dismantled the camp. On June 14, the camp unexpectedly re-emerged overnight and on June 15 Colonel Babu decided to personally lead a team wondering whether there has been a mistake.

The battalion was friendly and familiar with the Chinese officers due to regular meetings but when Colonel Babu along with 35 men reached they noticed fresh faces who were deployed for the first time there. The new unit was very aggressive and upon questioning, a Chinese soldier pushed the Colonel backward thereby raising the heat and temper.

Seeing the Commanding Officer being disrespected and assaulted the Indian team pounced on the Chinese leading to a proper fist-fight lasting for around 30 minutes with injuries on both sides. The Indian team prevailed and also burned the Chinese post to ashes. Colonel Babu asked the injured men to return back and asked for backup. This incident raised suspicions in his mind about more movements on the Chinese side.

Phase 2
Colonel Babu’s suspicions were correct and more troops were waiting in positions and as soon as they arrived, large stones began to land. Around 9 PM (on June 15) Colonel Babu was hit by a large stone on his head and he fell into the Galwan River. This led to the second brawl of fighting with the use of metal spiked clubs by the Chinese lasting for nearly 45 minutes until both sides disengaged.

The bodies of Colonel Babu and other jawans were carried back to the Indian side, while the rest of the Indian team remained on the Chinese side taking stock of the situation. And when things were at an emotional peak the Indian side heard the noise of quadcopter drone which became an immediate trigger for the third brawl.

The Indian backup comprising of Ghatak platoons who lead attacks and function as ‘shock troops’ from both the 16 Bihar as well as 3 Punjab Regiment arrived in large numbers. As suspected, the Chinese side also called a backup and the Indian team had to step deeper into the Chinese side to ensure they didn’t let large numbers of Chinese troops get close to the LAC.

Phase 3
The drone was moving through the valley, possibly using night vision or infrared cameras to map the damage and the third phase began around 11 PM. Troops continued fighting along the ridgelines and the intensity of the fight led to men on both sides fall into the narrow Galwan river having a sub-zero temperature.

After 5 hours of fighting, Indian and Chinese combat medics arrived to move their dead and injured and the remains of soldiers were exchanged. The physical separation of the fighting groups led to 10 Indian men comprising of 2 Majors, 2 Captains, and 6 Jawans being held back the Chinese side even after the disengagement.

Indian army lost 20 of its brave soldiers and Chinese casualties were more than roughly double of ours. The chaos in the darkness led to several injured men from both sides remaining with the other and by dawn on June 16, the Indian troops withdrew back across the LAC. The Major Generals from both sides then ensured that their men were provided medical treatments.

The tactical debrief report records that the Chinese troops involved in the brawl were not the regular unit deployed involved in multiple rounds of talks previously. It is suspected that there is larger intent to capture Indian territories by using more aggressive, less situationally acclimatized troops to spearhead an aggressive action.

In order to reduce tensions along the LAC, XIV Corps Commander Lt General Harinder Singh and his Chinese counterpart are conducting talks in search of a breakthrough. Currently, the disengagement process has begun and the Patrol point 14 is at peace.

  • A Ghatak Platoon, or Ghatak Commandos, is a reconnaissance platoon that is present in every infantry battalion in the Indian Army. Their name was given to them by Gen. Bipin Chandra Joshi. They act as shock troops and spearhead assaults ahead of the battalion.
  • The Seventeen Point Agreement is the document by which the delegates of the 14th Dalai Lama, sovereign of the de facto state of Tibet, reached an agreement in 1951 with the Central People’s Government of the newly established the People’s Republic of China on affirming Chinese sovereignty over Tibet.
  • Maryul of Ngari was a west Tibetan kingdom based in modern-day Ladakh and Tibet Autonomous Region. The Maryul kingdom was based in Shey and evolved into the modern Ladakh.

The Moral Quandary Around Govts Using Facial Recognition

The Moral Quandary Around Govts Using Facial Recognition

Facial recognition technology has been around from Facebook’s photo tagging and identification to Apple’s Face ID feature. The unwarranted monitoring of citizens through the use of face recognition software is on the rise in the United States and it is seen as a serious threat to citizens’ privacy.

Crux of the Matter

Facial recognition technology provides a sophisticated surveillance technique that can be more accurate than the human eye which is now expanding at an explosive rate. Tech giants like IBM, Microsoft, and Amazon have invested heavily to develop these systems with an aim to enhance public safety as they battle to lead in a key emerging business.

Across the USA, the rise of the use of this technology to identify people by matching unique characteristics of their facial patterns to databases of images has sparked controversies and debates.

In India, the Uttar Pradesh government used public surveillance cameras to identify miscreants of the violence that began in Delhi. New Delhi is also among the top cities in India with a high number of CCTVs. According to some estimates, 200 mn CCTVs of Skynet have been installed in Mainland China. Skynet is reportedly one of the world’s largest surveillance agencies using FRT. Miscreants in 2011 London Riots were traced using CCTVs – there is 1 CCTV for every 14 people according to some estimates.

How Does It Work?
Facial recognition technology (FRT) creates a template of the target’s facial image and compares the template to photographs of preexisting images of a known face. The known photographs are found from driving license databases, government identification records, or social media accounts. Apart from its numerous other uses, it has the potential to be a useful tool in tackling crime rates by identifying criminals.

Growing Concerns
Privacy advocates have raised concerns on its use and misuse by US law enforcement agencies. US law enforcement agencies in several states like Texas, Florida and Illinois have been using FRT to scan photos of individuals without their consent using different databases to identify and arrest individuals at protests.

Apart from privacy, it is been long argued that use of FRT could lead to the wrongful arrests of people who bear only a resemblance to a video image. Recently, in the nationwide protests over the death of George Floyd and subsequent protests, the enforcement agencies were seen to use FRT to identify miscreants.

Summachar’s Coverage: History of Racism in US

Moreover, recent studies have shown that facial-recognition systems are said to misidentify people of color more often than white people which is a serious concern keeping in mind the ongoing protests and debates over racism. Critics also have raised concerns over implications of the right to freedom of association and right to privacy guaranteed under the First Amendment of the US constitution. Also, the Fourth Amendment prohibits an unlawful search of a place where a person has a reasonable expectation of privacy.

Where Does The Law Stand?
While many US police departments see this innovation as a way to make the law and order more efficient; San Francisco, Somerville, Massachusetts, Oakland, and California are the cities that have banned local law enforcement agencies from using FRT. 

The US Congress until now hasn’t introduced any legislation regarding either the use or a ban on the technology but the lawmakers on both sides of the aisle have raised concerns in recent oversight hearings. Though researchers and activists have raised concerns about the risks associated, the FBI and US Department of Homeland Security continue to use this technology to screen travellers and process immigration.

Congress and legislatures nationwide must swiftly stop law enforcement use of face recognition, and companies like Microsoft should work with the civil rights community to make that happen.

The American Civil Liberties Union

Neutral Stand Of Tech-giants
With growing voices to end police brutality and racial profiling, the tech-giants namely IBM, Amazon, and Microsoft have decided to limit the use of FRT and not sell it to any police department in the US until there is a federal law regulating it.

Microsoft was the first one to call for regulating FRT two years ago while backing the legislation in California to allow limited use of FRT. Recently, Microsoft clarified that it has not sold any such technology to police departments and it plans to put in place review factors to determine the use of FRT beyond law enforcement.

We will not sell facial-recognition technology to police departments in the United States until we have a national law in place that will govern this technology. The bottom line for us is to protect the human rights of people as this technology is deployed.

Brad Smith, Microsoft President

IBM has reported that it will be exiting the facial-recognition business over concerns about its uses for mass surveillance and racial profiling. Amazon has banned police from using its FRT for a year and has said that it will give Congress enough time to implement appropriate rules.

Technology has penetrated every aspect of governance and especially for law enforcement, technology brings in many advantages, but also raises questions over privacy and credibility. The courts and policymakers need to strike the right balance between the need for information and the right to privacy.

  • Woody Bledsoe was an American mathematician, computer scientist, and prominent educator. He is one of the founders of artificial intelligence (AI). He pioneered Facial recognition technology and in pattern recognition.
  • In Russia, there is an app ‘FindFace’ which can identify faces with about 70% accuracy using the social media app called VK. This app would not be possible in other countries that do not use VK as their social media platform photos are not stored the same way as with VK.
  • In December 2017, Facebook rolled out a new feature that notifies a user when someone uploads a photo that includes what Facebook thinks is their face, even if they are not tagged. “We’ve thought about this as a really empowering feature,” Facebook officials said. “There may be photos that exist that you don’t know about.”

Big Businesses Get Bigger Amidst Pandemic

Big Businesses Get Bigger Amidst Pandemic

While the governments and economists around the world are still trying to estimate losses and measure the impact of the Covid-19 and the subsequent lockdowns, the ‘Too big to fail’ companies have turned this crisis into an opportunity to attract large investments, increasing market shares and have recorded exponential profit growth.

Crux of the Matter

Financial systems are arguably far more complex and though fundamental problems of systematic risks remain the same, at times of crisis like the 2008 recession which no one anticipated, conditions change unpredictably. The pandemic has already shaken up business and consumer behavior on a massive scale and we have started to see the drastic changes across industries.

The phrase ‘Too Big To Fail’ became widely popular after the 2008 financial crisis and is used to describe a company that has a presence in the global economy and its failure would be catastrophic or a company that stands tall no matter what the crisis. Governments provide support such firms in a crisis by facilitating a merger, injecting capital, or providing credit because they recognize the consequences of the failure on the broader economy. People tend to trust such bigger companies, with many investing their liquid funds in such companies in times of crisis.

The post-corona economy will be transforming each and every sector and also it may shrink a sector but make the share for a big player even bigger. The disaster is expected to knock out small players as midsize players are running on fumes, brick-and-mortar stores are struggling to get financing and startups are disappearing.

The Top Gainers
In the entire retail sector today, the small retailers are facing the highest risks whereas the big players like Walmart, Amazon, Cosco, that have an e-commerce presence have hired additional 500,000 people and grown exponentially, providing an opportunity to a selective few executives to dominate the market like never before.

According to the Institute for Policy Studies, from March 18 to April 29, around 30 million Americans have filed for unemployment whereas, on the contrary, the S&P 500 has jumped nearly 23% profiting the US corporations and billionaires whose wealth has reportedly increased by 9.3% following the lockdown.

As the pandemic has accelerated online purchases, Amazon has emerged as the largest gainer with its founder Jeff Bezos‘s wealth increased by more than $25 billion since January 1. Moreover, it has also hired additional 75,000 workers to meet growing demands.

Apart from Amazon, Tesla CEO Elon Musk‘s wealth has increased by $10 billion, Former Microsoft CEO Steve Ballmer‘s by $4 billion, and Zoom Founder Eric Yuans‘s by $3.5 billion. 78% of Americans are living paycheck-to-paycheck during Covid-19, and 20% have zero or negative net worth whereas since January 1, 8 US billionaires have gained $1 billion in additional wealth and all the billionaires in the US have recorded a total wealth increase of over $406 billion.

Some of the tech giants like Microsoft, Google, Facebook, Apple are also recording huge growth in their net worths with continued investments in ‘too big to fail’ companies. Even in India, Reliance Industries has raised Rs.1.04 lakh crores investments from global firms in less than 10 weeks and aims to acquire a 48% market share by 2025. Its Chairman Mukesh Ambani has also entered the Forbes World’s Top 10 Richest People list after claiming the 9th spot with a net worth of $64.6 billion.

Even in India the unemployment rate reached 23.48% in May and to tackle the situation, the Indian government has reached out to more than 1,000 companies in the US to offer incentives for manufacturers seeking to move out of China which will ensure jobs and positive growth of FDI which has recently crossed $490 billion.

Opportunity For Indian Pharmas
Pharmaceutical companies are inevitably playing a large role in the crisis and India’s existing advantages in pharmaceuticals can be leveraged by betting on the growth of the global healthcare industry. India accounts for about 10% of the world’s pharmaceutical production by volume and 1.5% by value and according to the Indian Brand Equity Foundation, pharmaceutical exports of India from 2012 to 2019 have grown from $10 billion to $19 billion.

India is the world’s largest supplier of generic drugs and controls around 18% of the global market and also is a leading producer of vaccines in the world catering to about 50% of global vaccine demands. Due to the pandemic, there are a number of small pharma companies in order to expand have partnered with big players, and are at risk of becoming ‘too big to fail’.

In a post-COVID economy, India’s existing advantage of large-scale pharmaceutical production will allow to significantly leverage its soft power by investing in the growth of the healthcare sectors of other nations by boosting pharma exports.

With the ‘too big to fail’ companies continuing to churn out profits and the coronavirus continuing its growth trajectory; sooner or later is expected that the small firms will be in a deep unrecoverable crisis and the power would be shifted in the hands of only a few. Saying so, not everything will go to the top firms and once the virus passes there will be social transformations that will alter the structure of the global business.

  • Margin Call is a 2011 American drama thriller film written and directed by J. C. Chandor in his feature directorial debut. The story takes place over a 24-hour period at a large Wall Street investment bank during the initial stages of the financial crisis of 2007–08. The film explores capitalism, greed, and investment fraud.
  • The Robin Hood effect is an economic occurrence where income is redistributed so that economic inequality is reduced. The effect is named after Robin Hood, said to have stolen from the rich to give to the poor.
  • The Matthew Effect is a social phenomenon often linked to the idea that the rich get richer and the poor get poorer. The term was coined by sociologist Robert K. Merton in 1968 and takes its name from the Parable of the talents or minas in the biblical Gospel of Matthew.

India And The Elusive UNSC Permanent Seat

India And The Elusive UNSC Permanent Seat

Garnering 184 votes out of the 192 votes India won the election for the non-permanent seat in the prestigious United Nations Security Council (UNSC) along with Ireland, Mexico, and Norway. For the 8th time, India will be becoming a part of the UNSC for 2021-22.

Crux of the Matter

Starting from 1st January 2021, India will begin its two-year term at the UNSC which is responsible for maintaining world peace and ensuring security. Previously, India has been a part of the UNSC 7 times as a non-permanent member for the years 1950-1951, 1967-1968, 1972-1973, 1977-1978, 1984-1985, 1991-1992 and 2011-2012.

Structure of the UNSC
The United Nations Security Council is one of the six principal organs of the United Nations comprising of 5 permanent members and 10 non-permanent members. It was created after World War II to address the failings of the League of Nations. China, France, Russia, the United Kingdom, and the United States of America having veto power are the permanent members.

The remaining 10 members are elected by the United Nations General Assembly on a regional basis with five replaced each year to serve a term of two years. A retiring member is not eligible for immediate re-election and to be approved a member must receive at least two-thirds of all votes cast for that seat.

The regional distribution of seats is as follows: 5 for African and Asian states; 1 for the Eastern European States; 2 for the Latin American and Caribbean States; and 2 for Western European and other States.

Curious Case of China
The idea of a UNSC was first cemented in 1942 when during the Second World War, the US, Soviet Union, the UK, and China signed a short document known as the United Nations Declaration. And after the end of the war in 1945, the UNSC was formed with the four states along with France.

In 1949, a communist revolution changed the leadership in China and the older leadership, headed by Chiang Kai-Shek had escaped to modern-day Taiwan and established the Republic of China (ROC). And the new communist leadership controlled all of Mainland China, thus establishing the People’s Republic of China (PRC). From 1949 to 1971, ROC continued to represent China at the UNSC. And the US or its allies did not recognize PRC as a legitimate state.

India At The UN
India, a founder-member of the UN, is one of the fastest-growing economies and the world’s largest democracy with 1.3 billion population. Over the years India has significantly contributed towards the UN’s endeavors in support of international peace and security.

PM Jawahar Lal Nehru always believed that the UNSC could emerge as a medium of resolving interstate conflicts. In order to replace China, India was offered a permanent seat at the UNSC, each by US & USSR but PM Nehru declined the offer both the times saying he did not want India to get embroiled in hazardous Cold War conflicts and become a pawn in the superpowers’ great game risking its own security.

India was certainly entitled to a permanent seat in the security council but it would be dangerous for this to come at the cost of China.

Pandit Jawahar Lal Nehru, Former Prime Minister, India

Though this decision did not harm us initially, its effect was visible once China started cornering India and misusing its veto power. India – the world’s largest democracy, home to over 15% of the world’s population, and possessing nuclear weapons – has taken a global leadership role numerous times to champion the concept of ‘peaceful co-existence’ making it the least questionable and most deserving to be incorporated as a permanent member.

Over the past decades, different countries have vouched for India’s permanent seat and India has garnered support from countries like the USA, UK, Germany, Australia, and Nordic countries like Sweden, Denmark, Iceland, Norway, Finland, etc. UNSC reflects a post- World War II framework that has become obsolete and India’s case for permanent membership is a veritable interest in the changed geopolitics of the 21st century.

India’s contribution to the working of the UN has been substantial and despite being a founding member of the UN, the permanent membership has always remained elusive.

  • The UNSC is one of the six principal organs of the United Nations (UN). The other 5 are – the General Assembly, Economic and Social Council (ECOSOC), Trusteeship Council, International Court of Justice (ICJ), and the UN Secretariat.
  • UNSC held its first session on 17 January 1946. Although the Security Council was largely paralyzed in its early decades by the Cold War between the US and USSR and their allies, the Council generally was only able to intervene in unrelated conflicts.
  • China’s seat was originally held by Chiang Kai-shek’s Nationalist Government, the Republic of China. However, the Nationalists were forced to retreat to the island of Taiwan in 1949, during the Chinese Civil War. The Chinese Communist Party assumed control of mainland China, thenceforth known as the People’s Republic of China.