Securing India

G.Srinivasan

Richard Kozul-Wright In the post-war era of universal improvement built on cooperation among nations and focused attention to curb monopolistic tendencies among firms out to squeeze consumers, the world economy has had a relatively smooth run in general and most developing countries in particular.
But the advent of the economic liberalization and deregulation ushered in the late 1980s under the so-called Washington consensus that advocated one-size fits all paradigm of development worsened the situation and wrought wider disparities among and within nations in terms of income inequality and marginalization of millions of people Though the millennial dawn of the first decade of this century had tried to alter this undesirable and lopsided development through
technology and information technology in particular, the Schumpeterian paradigm of “creative destruction” that technology inflicted in which many a business and practice was extirpated and another created turned out to be a mixed bag and not the panacea for the ills of humanity.

No doubt, the technological changes had undoubtedly set off long-term gains in p r o d u c t i v i t y , incomes and jobs but they also gave rise to a new rentier class of monopolists who refuse to subject themselves to any regulations!
The new technology-led development pattern most of the countries in the universe are embracing is in a way laying its own tantalizing trap for the exploitation of many by a handful of few. This is amply illustrated by the latest Trade and Development Report (TDR) of the United Nations Conference on Trade and Development (Unctad).

The Geneva-based UN body has always been an outlier among the UN institutions in calling a spade a spade.
Unctad’s Globalization and Development Strategic Division Director Richard Kozul-Wright and Senior Economic Affairs Officer Rashmi Banga contend that in earlier episodes—mechanization, mass production, automation and electronics—the key inputs, whether cotton, iron, coal or oil, had a visible quality that in combination with significant amounts of productive labour and diligent managerial capabilities, helped the process of adding (and distributing) value in a well-defined network of spatial and social relations where public policies could mold the landscape of winners and losers.
But in the extant digital revolution, the key input, which is ‘data’, is intangible, requires scant labour to create value and the capital behind it is innately footloose. This has spawned a world of disembodied networks and diminished bargaining power of those producing the input, particularly in developing countries where the laws and regulations over the ownership of data and the capacities to use it profitably are weak or missing outright.

The Unctad report cites the growth and operation of Uber—the world’s biggest taxi service which owns no taxis but remotecontrol cab aggregators which exposed the chinks in the national firms, especially in developing countries such as India where infant platforms tend to receive little or scant state support. Many a taxi service providers such as the famous TSR in Delhi had to cut down their operations for want of patronage as the Uber drivers get governed by no work norms or regulations but only with a motive to maximize earnings by making as many trips as one could do in a day.

In this new-fangled world, the prime-mover advantages commanded by the digital giants such as Amazon, Alibaba, Google, and Facebook in gleaning data permit them to deploy big data analytics to outsmart rivals who are deemed minnows and even block potential ones from contesting the monopolistic might of the few at the top! Unctad points out that the firstmover advantages in the form of benefits from controlling and scaling large volumes of data tend to create a few highly profitable large firms and “winner-takes –most” concerns.
Such advantages can also become self-reinforcing, as data gleaned from one market can facilitate entering new markets or even new business lines. The resulting increases in market concentration may sizably heighten the financial power of a few leading firms and cause increased rent-seeking, anticompetitive practices and attempts to block actual or potential competitors. This meant that established competition and antitrust policies may be unsuited to the digital economy!

In this regard, the Unctad report cites the growth and operation of Uber—the world’s biggest taxi service which owns no taxis but remote-control cab aggregators which exposed the chinks in the national firms, especially in developing countries such as India where infant platforms tend to receive little or scant state support. Many a taxi service providers such as the famous TSR in Delhi had to cut down their operations for want of patronage as the Uber drivers get governed by no work norms or regulations but only with a motive to maximize earnings by making as many trips as one could do in a day.

It is small wonder that Apple became the first company to be valued at more than one trillion dollars, matching the combined output of Saudi Arabia and South Africa. Interestingly, the largest and most powerful marketplaces are mostly based in the United States, with a few in China. E-commerce platforms have grown steadily and the largest ones have vast numbers of users, such as Alibaba Tmall (400 million but confined to China), Amazon (304 million users globally) and eBay (167 million users worldwide). Similarly, the main service marketplaces are based in the U.S or Asia and deal mainly in finance, housing and accommodation, logistics and transport. Seven out of the eleven of the largest payment platforms are based in the U.S and the rest in the European Union (EU).The structure of these emerging digital ecosystems is based on data ownership and management, including the reuse or sharing of data for more products or more functions within the manufacturing process.

Data, like ideas and knowledge more generally, and unlike most physical private goods and services, are non-rivalrous and can be reproduced at no or minimal cost, although they are excludable and can thus be a source of monopoly.

This is what has given enormous clout and heft to prestigious platforms’ owners of original genre! That the super platforms can bear losses for a longer time just to wipe out competition is also attested by the recent purchase of India’s Flipkart by Wal-Mart, following the hostile takeover bid by Amazon. This also demonstrates burgeoning anticompetitive practices of global tech giants which ride on predatory pricing and sunk losses to eliminate competition in national markets. It is also an open secret that these tech giants enjoying enormous monopolistic power are slapped hefty fines running into billions of dollars in European nations by the Competition Commission of the EU.

Dani Rodrik Harvard University Professor Dani Rodrik says if a comparison is made between the new technologies with the traditional model of industrialization, it could throw up quite interesting facts.
This is presumably so as the latter has been a powerful engine of economic growth in developing countries. First, manufacturing is tradable, which means domestic output is not constrained by demand (and incomes) at home.
Second, manufacturing knowhow was relatively easy to transfer across countries and in particular from rich to poor economies. Third, manufacturing did not make large demands on skills. These three features collectively made manufacturing a fantastic escalator to higher incomes for developing nations in the post-war era of shared prosperity across the globe. Rodrik deplores that new technologies present a very different picture in terms of the ease of transferring know-how and the skill-sets they imply.
It is rather a travesty that as these digital super platforms are getting brazenly predatory, many developing nations are being asked to enable their entry, often with favorable tax and other spurs, in anticipation of attracting big investments, generating jobs and building technological muscles. But Unctad argues that evidence for such spillovers is limited.

India has already made a few baby steps such as the Personal Data Protection Bill, 2018 and the Data Protection Committee’s report contains the frame work. The recent draft Ecommerce policy shows government’s thought process on storing data in India. The RBI in April mandated that all data generated by the payment systems in India is to be stored in India. But many advanced countries cry foul over India’s data localization policy.

In view of the emerging dismal scenario in which as more data gets generated and more consumers get attracted, this in turn bring in more producers to the eternal benefit of the super platforms which keep growing by feeding on data and are able to batten on their monopolistic sinews to the detriment of society at large. Hence, Unctad plumps for a menu of options including national ownership of data and clear regulations on data localization for fostering an inclusive data-intensive economy. It also suggests development and protection of infant national platforms through effective competition policies and targeted support system. These ought to be designed to advancing small producers/platforms and not just safeguarding the consumers only.
India has already made a few baby steps such as the Personal Data Protection Bill, 2018 and the Data Protection Committee’s report contains the frame work. The recent draft E-commerce policy shows government’s thought process on storing data in India. The RBI in April mandated that all data generated by the payment systems in India is to be stored in India.
But many advanced countries cry foul over India’s data localization policy as protectionist as they sense troubles for their mighty monopolistic tech giants.

But this in way should detract domestic authorities from safeguarding the safety and security of India’s data generated from Indians and the government should build the requisite data storage capacities and firewalls with all the panoply of other facilities for national security reasons and to help shape the country’s digital economy’s contours on sound lines.

*The author is a former, Deputy Editor, The Hindu Group and a freelance economic journalist, New Delhi.



		EDITOR'S MAIL EDITOR'S COMMENT REALPOLITIK GLOBAL AFFAIRS FRANKLY SPEAKING BANK FRAUDS DATA WARFARE QUALITY OF GOVERNANCE POLITICO-ECONOMIC WISDOM QUALITY OF EDUCATION TAMIL POLITICS KARNATAKA BYPOLLS OPPOSITION PARTIES ANDHRA POLITICS CHANDIGARH DIARY HIMALYAN ECOLOGY HITS & MISSES OBITUARY BOOK BAZAAR BONE MARROW TRANS.. A PAGE FROM HISTORY SIGNS OF THE TIMES REMEMBERING PRES KALAM INTERNATIONAL FILMS YOGA IN DAILY LIFE ART OF LIVING Issue:December' 2018 Subscribe Now	DATA WARFARE Securing India G.Srinivasan Richard Kozul-Wright In the post-war era of universal improvement built on cooperation among nations and focused attention to curb monopolistic tendencies among firms out to squeeze consumers, the world economy has had a relatively smooth run in general and most developing countries in particular. But the advent of the economic liberalization and deregulation ushered in the late 1980s under the so-called Washington consensus that advocated one-size fits all paradigm of development worsened the situation and wrought wider disparities among and within nations in terms of income inequality and marginalization of millions of people Though the millennial dawn of the first decade of this century had tried to alter this undesirable and lopsided development through technology and information technology in particular, the Schumpeterian paradigm of “creative destruction” that technology inflicted in which many a business and practice was extirpated and another created turned out to be a mixed bag and not the panacea for the ills of humanity. No doubt, the technological changes had undoubtedly set off long-term gains in p r o d u c t i v i t y , incomes and jobs but they also gave rise to a new rentier class of monopolists who refuse to subject themselves to any regulations! The new technology-led development pattern most of the countries in the universe are embracing is in a way laying its own tantalizing trap for the exploitation of many by a handful of few. This is amply illustrated by the latest Trade and Development Report (TDR) of the United Nations Conference on Trade and Development (Unctad). The Geneva-based UN body has always been an outlier among the UN institutions in calling a spade a spade. Unctad’s Globalization and Development Strategic Division Director Richard Kozul-Wright and Senior Economic Affairs Officer Rashmi Banga contend that in earlier episodes—mechanization, mass production, automation and electronics—the key inputs, whether cotton, iron, coal or oil, had a visible quality that in combination with significant amounts of productive labour and diligent managerial capabilities, helped the process of adding (and distributing) value in a well-defined network of spatial and social relations where public policies could mold the landscape of winners and losers. But in the extant digital revolution, the key input, which is ‘data’, is intangible, requires scant labour to create value and the capital behind it is innately footloose. This has spawned a world of disembodied networks and diminished bargaining power of those producing the input, particularly in developing countries where the laws and regulations over the ownership of data and the capacities to use it profitably are weak or missing outright. The Unctad report cites the growth and operation of Uber—the world’s biggest taxi service which owns no taxis but remotecontrol cab aggregators which exposed the chinks in the national firms, especially in developing countries such as India where infant platforms tend to receive little or scant state support. Many a taxi service providers such as the famous TSR in Delhi had to cut down their operations for want of patronage as the Uber drivers get governed by no work norms or regulations but only with a motive to maximize earnings by making as many trips as one could do in a day. In this new-fangled world, the prime-mover advantages commanded by the digital giants such as Amazon, Alibaba, Google, and Facebook in gleaning data permit them to deploy big data analytics to outsmart rivals who are deemed minnows and even block potential ones from contesting the monopolistic might of the few at the top! Unctad points out that the firstmover advantages in the form of benefits from controlling and scaling large volumes of data tend to create a few highly profitable large firms and “winner-takes –most” concerns. Such advantages can also become self-reinforcing, as data gleaned from one market can facilitate entering new markets or even new business lines. The resulting increases in market concentration may sizably heighten the financial power of a few leading firms and cause increased rent-seeking, anticompetitive practices and attempts to block actual or potential competitors. This meant that established competition and antitrust policies may be unsuited to the digital economy! In this regard, the Unctad report cites the growth and operation of Uber—the world’s biggest taxi service which owns no taxis but remote-control cab aggregators which exposed the chinks in the national firms, especially in developing countries such as India where infant platforms tend to receive little or scant state support. Many a taxi service providers such as the famous TSR in Delhi had to cut down their operations for want of patronage as the Uber drivers get governed by no work norms or regulations but only with a motive to maximize earnings by making as many trips as one could do in a day. It is small wonder that Apple became the first company to be valued at more than one trillion dollars, matching the combined output of Saudi Arabia and South Africa. Interestingly, the largest and most powerful marketplaces are mostly based in the United States, with a few in China. E-commerce platforms have grown steadily and the largest ones have vast numbers of users, such as Alibaba Tmall (400 million but confined to China), Amazon (304 million users globally) and eBay (167 million users worldwide). Similarly, the main service marketplaces are based in the U.S or Asia and deal mainly in finance, housing and accommodation, logistics and transport. Seven out of the eleven of the largest payment platforms are based in the U.S and the rest in the European Union (EU).The structure of these emerging digital ecosystems is based on data ownership and management, including the reuse or sharing of data for more products or more functions within the manufacturing process. Data, like ideas and knowledge more generally, and unlike most physical private goods and services, are non-rivalrous and can be reproduced at no or minimal cost, although they are excludable and can thus be a source of monopoly. This is what has given enormous clout and heft to prestigious platforms’ owners of original genre! That the super platforms can bear losses for a longer time just to wipe out competition is also attested by the recent purchase of India’s Flipkart by Wal-Mart, following the hostile takeover bid by Amazon. This also demonstrates burgeoning anticompetitive practices of global tech giants which ride on predatory pricing and sunk losses to eliminate competition in national markets. It is also an open secret that these tech giants enjoying enormous monopolistic power are slapped hefty fines running into billions of dollars in European nations by the Competition Commission of the EU. Dani Rodrik Harvard University Professor Dani Rodrik says if a comparison is made between the new technologies with the traditional model of industrialization, it could throw up quite interesting facts. This is presumably so as the latter has been a powerful engine of economic growth in developing countries. First, manufacturing is tradable, which means domestic output is not constrained by demand (and incomes) at home. Second, manufacturing knowhow was relatively easy to transfer across countries and in particular from rich to poor economies. Third, manufacturing did not make large demands on skills. These three features collectively made manufacturing a fantastic escalator to higher incomes for developing nations in the post-war era of shared prosperity across the globe. Rodrik deplores that new technologies present a very different picture in terms of the ease of transferring know-how and the skill-sets they imply. It is rather a travesty that as these digital super platforms are getting brazenly predatory, many developing nations are being asked to enable their entry, often with favorable tax and other spurs, in anticipation of attracting big investments, generating jobs and building technological muscles. But Unctad argues that evidence for such spillovers is limited. India has already made a few baby steps such as the Personal Data Protection Bill, 2018 and the Data Protection Committee’s report contains the frame work. The recent draft Ecommerce policy shows government’s thought process on storing data in India. The RBI in April mandated that all data generated by the payment systems in India is to be stored in India. But many advanced countries cry foul over India’s data localization policy. In view of the emerging dismal scenario in which as more data gets generated and more consumers get attracted, this in turn bring in more producers to the eternal benefit of the super platforms which keep growing by feeding on data and are able to batten on their monopolistic sinews to the detriment of society at large. Hence, Unctad plumps for a menu of options including national ownership of data and clear regulations on data localization for fostering an inclusive data-intensive economy. It also suggests development and protection of infant national platforms through effective competition policies and targeted support system. These ought to be designed to advancing small producers/platforms and not just safeguarding the consumers only. India has already made a few baby steps such as the Personal Data Protection Bill, 2018 and the Data Protection Committee’s report contains the frame work. The recent draft E-commerce policy shows government’s thought process on storing data in India. The RBI in April mandated that all data generated by the payment systems in India is to be stored in India. But many advanced countries cry foul over India’s data localization policy as protectionist as they sense troubles for their mighty monopolistic tech giants. But this in way should detract domestic authorities from safeguarding the safety and security of India’s data generated from Indians and the government should build the requisite data storage capacities and firewalls with all the panoply of other facilities for national security reasons and to help shape the country’s digital economy’s contours on sound lines. *The author is a former, Deputy Editor, The Hindu Group and a freelance economic journalist, New Delhi.