From Dean Baker It is our policy on technology that drives inequality, it is not the technology. I rarely disagree with Paul Krugman’s columns, but every now and then he does say something that I have to issue with. In a column last month, Krugman complained about the enormous costs associated with China’s zero COVID-19 policy. He tied it to its reliance on old-fashioned Chinese vaccines that used dead virus material, instead of using the mRNA vaccines developed by researchers in the United States and Europe. There are good grounds for criticizing China’s zero COVID-19 policy. It may have been reasonable in the early days of the pandemic when we had neither vaccines nor effective treatment. However, the massive lockdowns required, which also literally threaten lives (people can’t
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from Dean Baker
It is our policy on technology that drives inequality, it is not the technology.
I rarely disagree with Paul Krugman’s columns, but every now and then he does say something that I have to issue with. In a column last month, Krugman complained about the enormous costs associated with China’s zero COVID-19 policy. He tied it to its reliance on old-fashioned Chinese vaccines that used dead virus material, instead of using the mRNA vaccines developed by researchers in the United States and Europe.
There are good grounds for criticizing China’s zero COVID-19 policy. It may have been reasonable in the early days of the pandemic when we had neither vaccines nor effective treatment. However, the massive lockdowns required, which also literally threaten lives (people can’t get necessary medications and medical care), are hard to justify in the current situation.
But Krugman, and others (several people, who I respect, have picked up this line on Twitter), error in tying the zero COVID-19 policy to China’s rejection of mRNA vaccines. In fact, with the omicron variant currently hitting China, the dead virus vaccines are actually quite effective in preventing serious illness and death.
The case fatality rate in Hong Kong for people who have gotten three doses of China’s vaccines is 0.03 percent. Even for people over age 80 it is just over 1.0 percent. This compares to a rate of 2.9 percent overall and 15.7 percent for those over age 80, who are unvaccinated. These data imply that China’s vaccines are highly effective in preventing death.
The big problem in Hong Kong, and now for mainland China, is not that its vaccines are ineffective, but rather they have done a poor job in vaccinating the elderly. Before the omicron surge, less than a quarter of Hong Kong residents over age 80 had received at least two doses of a vaccine. This explains their high death rates.
While the Chinese vaccines have not been effective preventing the spread of the omicron variant, neither have the mRNA vaccines. Denmark, which has one of the highest vaccination and booster rates in the world, was seeing over 40,000 cases a day at the peak of the omicron wave in February. This would be equivalent to more than 2.3 million daily cases in the United States. Clearly, breakthrough infections in Denmark were the norm.
The mRNA Mythology
It is striking that so many people are anxious to wrongly blame the costs of China’s zero COVID-19 policy on its rejection of US-made mRNA vaccines. To my view, this reflects an incredibly wrongheaded view of medical technology and the pandemic, that has likely cost millions of lives and also substantially worsened inequality.
As I argued in the early days of the pandemic, the United States should have taken the lead in pooling resources worldwide in order to maximize innovation and the deployment of effective vaccines, tests, and treatments. Instead, it doubled down on government-granted patent monopolies as a mechanism for financing research.
Moderna is the main villain in this story. It was paid $483 million for developing its vaccine, then another $472 million to conduct its phase three clinical trials. It also got advance purchase agreements for hundreds of millions of doses at close to $20 a shot, if the vaccines were approved by the FDA. (The shot cost around $1.50 to manufacture and distribute.) Not surprisingly, with this amount of government support, Moderna had generated at least five new billionaires, as of last summer.
The riches that have gone to Moderna’s billionaires, and other well-placed executives and researchers there and at other drug companies, could have instead gone to items like expanding the child tax credit, or subsidies for day care. Alternatively, if we are worried about inflation from an over-stimulated economy, we could have reduced demand in the economy by not giving so much money to the drug industry.
To be clear, I am very happy that we have the vaccines (I got three myself), but the question is whether the route we went was the most efficient. As I argued more than two years ago, we should have been looking to finance open-source vaccine development, with all results being freely shared around the world.
This would have meant that US and European researchers would be posting their results on the web for researchers around the world to view and examine. The same would be the case for researchers in China, Russia, India, Brazil, and elsewhere.
Researchers need to be paid, and we would do that, exactly as we did with Moderna. If Moderna as a company wasn’t interested in taking part, then we would just pay their researchers directly. Moderna would threaten them with lawsuits over violating non-disclosure agreements, but the government could just agree to cover their legal expenses and any potential damages. These lawsuits (against researchers for sharing their knowledge) would also have the great benefit of showing precisely how much Moderna and other drug companies care about human life.
We would also need some agreement on sharing costs among countries. This need not be worked out in advance, we can always have payments going back and forth after the fact. We would just need a commitment in principle. Of course, moving along this route would not have been possible in 2020 when Donald Trump was in the White House. We would have needed a president who actually cared about limiting the human and economic cost of the pandemic, as opposed to just the crowd sizes at his rallies.
If we had freely pooled technology we could have had massive stockpiles of every promising vaccine available at the time they were first approved by the FDA or other health oversight agencies. If all the drug manufacturers in the world had full access to the mRNA technology as the vaccines were being tested, it is very plausible that we could have had a stockpiles of billions of doses of Pfizer and Moderna’s vaccines at the time they were approved. The cost of having to throw out a billion doses (remember they only a $1-$1.50 to produce) of a vaccine that proved to be ineffective, are trivial compared to the benefits of being able to quickly put 1 billion doses in people’s arms.
And, we also could have had large stockpiles of China’s vaccines. They were less effective than the mRNA vaccines, but hugely more effective than no vaccine. If we had rushed to distribute doses of stockpiles of all the vaccines that proved effective, as quickly as possible, it is very likely we could have prevented the mutation that became the omicron variant, and possibly even the Delta variant. This could have saved millions of lives and prevented the loss of trillions of dollars of economic activity.
Patent Monopolies and Right-Wing Populists
What does this story of open-source research have to do with right-wing populists? The support for right-wing populists from Donald Trump in the United States, Boris Johnson in the United Kingdom, and Marine Le Pen in France comes overwhelmingly from white working-class voters. This is typically attributed to racism.
While racism is undoubtedly a large factor in these politicians’ appeal, the question this explanation leaves unanswered is why did these people suddenly become so racist. Or perhaps better put, why did racism come to dominate their political behavior.
In the United States, many people who voted for Trump in 2016, had voted for Barack Obama four years earlier. It may seem like ancient history, but it was not long ago that Obama carried states like Iowa and Ohio by comfortable margins. These states are now considered out of reach for a Democratic presidential candidate. There is a similar story elsewhere, where working class voters, who used to support socialist, social democratic, or communist candidates, now support right-wing populist politicians.
An alternative explanation is that these working-class voters are being left behind by the course of economic development in recent decades. It is clear that this is true, workers without college degrees have not shared to any substantial extent in the benefits of economic growth over the last four decades, but a key issue is whether they were “left behind,” or pushed behind.
Government-granted patent monopolies, along with their cousin copyright monopolies, are a big part of this story. In this period of rising inequality, these forms of intellectual property have played an enormous role in the growth of inequality. To take my poster child, Bill Gates would likely still be working for a living, instead of one of the richest people in the world, if the government did not threaten to arrest anyone who made copies of Microsoft software without his permission.
One of the great absurdities of current policy debates is that people will instantly say that we wouldn’t have any innovation without patent and copyright monopolies. In the next sentence they will tell us that technology is causing inequality. If the contradiction between those two claims is not immediately apparent, then you could be a leading intellectual pontificating on economic policy.
The point is that patent and copyright monopolies are very explicitly government policies. We can make them longer and stronger, or shorter and weaker, or not have them at all. It is absurd to claim both that we need patent and copyright monopolies and that technology is driving inequality. It is our policy on technology that drives inequality, it is not the technology.
The fact that we never even had a serious policy debate over relying on patent monopolies in the development of vaccines in the pandemic shows the extent to which elite ideology dominates public debate. The policies that might challenge the upward redistribution of income are not even allowed to be discussed, even when they might save millions of lives and trillions of dollars.
Instead, we get Moderna billionaires. The debate on inequality is focused on politically far-fetched proposals like a wealth tax. The debate over these policies may fill many pages in newspapers and magazines, and make for many promising academic careers, but the more obvious route would be to not structure our economy in a way that makes so many billionaires in the first place.
Basically, the people who control major news outlets and other arenas of public debate do not want any discussion of the ways we have structured the economy to redistribute so much income upward. They want the working class to believe that they are just losers. We may feel sorry for them and want to have a better social welfare state, but the fact that they are losers is not supposed to be up for debate.
In that context, it is not surprising that working class people would not feel much affinity for the politicians who see them as losers and support the policies that make them losers. The right-wing populists may not have a serious route for improving the plight of the working class, but they can at least present a villain and tell the working class how their situation was imposed on them, rather than the result of their own failings.
Many had hoped that revulsion against Putin and the Russian invasion of Ukraine would be a death blow to the right-wing populists, who were generally very friendly towards Putin. With Viktor Orban winning reelection in Hungary, Marine Le Pen seriously challenging for the presidency of France, and the stench of Donald Trump still haunting US politics, clearly the right-wing populists are not about to fade away. It would be nice if we could have some more serious thinking about the conditions that created the atmosphere for their political ascendency.
 Intellectual property is not the only force driving inequality in recent decades. The weakening of unions, trade policy, a bloated financial sector and other factors have also been important to the rise in inequality. I discuss this issue in more detail in my book Rigged (it’s free).