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Labour party looks to Biden for inspiration

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When senior figures in Britain’s Labour party feel despondent at the scale of the electoral task ahead of them after their heavy defeat in 2019, they look to Joe Biden’s victory in the US presidential election for inspiration.

Lisa Nandy, shadow foreign secretary, addressed the shadow cabinet last week on lessons that the UK’s main opposition party can take from the Democrats.

Keir Starmer, the Labour leader, has also urged his party to study Mr Biden’s broad approach, saying after the US election result: “The Democrats’ path to victory this week was paved by a broad coalition, including many of the states and communities that four years ago turned away from them.”

Sir Keir thinks he can apply the Democratic strategy of winning back US states such as Pennsylvania and Michigan, home to socially conservative, working class voters, in areas like the midlands and northern England, which went Tory in 2019.

That means copying Mr Biden’s emphasis on “family, community and security”, Sir Keir said, and avoiding endless arguments about “culture war” issues such as trans rights and the destruction of historic statues.

Ms Nandy’s speech to the shadow cabinet probed the Trump-inspired January 6 riot at the US Capitol and whether it could happen in the UK.

She said there were parallels in the UK with how rightwingers in the US had “preyed on a lot of very deeply held grievances and resentments” in blue collar communities, for example immigration and long-term economic decline.

“Britain is not America in any sense, British people are far less susceptible to conspiracy theories and there is a much lower ceiling on the amount of disruption that people will tolerate over here,” she told the Financial Times.

“Nevertheless, there are the same trends in terms of people feeling low levels of trust in politics, politicians, the media, the judiciary.”

Labour expects the ruling Conservative government to try to ramp up some of the divisions between urban metropolitan voters, many of whom voted Remain in the 2016 Brexit referendum and Labour in the 2019 general election, and those elsewhere — who often voted Leave and Tory.

“What Biden’s trying to do in the US is what we’re trying to do here, which is to bring people back together after a very very long period in which people have been broken apart by all sorts of events, but particularly by their political leaders,” Ms Nandy said.

She argued that Mr Biden and his vice president-elect Kamala Harris were right not to compromise in saying what they stood for — for example Black Lives Matter, trans rights and abortion — but prioritising their core messages of family security and economic security, even during a pandemic.

The incoming Biden team has been cautious about engaging with overseas politicians after the controversies around Donald Trump’s dealings with Russia. And the Labour leadership is keen to play down the extent of any “special relationship” between the party and the Democrats: it knows that the Biden administration’s initial focus will be on working with Britain’s Conservative-run government.

Sir Keir has not met Mr Biden but has been briefed by John Anzalone, a pollster for the incoming president, on how the Democrats won back white, male, working-class voters.

Meanwhile Ed Miliband, shadow business secretary and a keen follower of US politics, talks regularly with former US secretary of state John Kerry. David Lammy, shadow justice secretary, is friends with Democrats such as Ben Rhodes, a national security official under former president Barack Obama, and Patrick Leahy, father of the Senate, as well as members of the “black caucus” in the US Congress, such as Jim Clyburn.

Mr Lammy said Labour had learnt from Mr Biden’s Democrats not to “fall into traps on the culture wars” and stick to the economy.

“It’s only when people feel secure (on the economy and security) that you have the licence to say some of the things you might want to say on Black Lives Matter or whatever. And those basic things I think the Democrats understand incredibly well.”

He also applauded Sir Keir’s touch, popular in the US, of making announcements in front of the national flag.

While Labour MPs do not want to exaggerate their own influence in Team Biden they contrast their fraternal relations with the Democrats with the US party’s doubts about prime minister Boris Johnson.

Mr Lammy said Mr Johnson had said “silly things” in the past about Mr Obama, the last Democrat president, which have not been forgotten. He said his allies in Washington regarded Mr Johnson as a “shape-shifter” who cannot entirely be trusted.



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Analysis

Biden hopes to revive long march of women back into US workforce

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When the pandemic arrived in Levittown, Pennsylvania last year, Nicole Heary hurried to readjust her work schedule as a front-end manager at a grocery store so that she could also look after her children.

The 46-year-old single mother of six, including three kids still in school, signed up for a 4am-to-8am shift so that she could be home in time for their remote learning. In the evenings she returned for another four-hour shift. And every weekend she worked, to keep at least two weekdays free to better monitor her children’s virtual classrooms.

Heary did not lose her job because of the coronavirus crisis, unlike 20m other Americans. But she said the experience revealed just how much her career was yoked to the needs of her children — and had been stifled by a lack of support for working parents in the world’s largest economy. 

“Even though I advanced, I would always have to come back, because as moms, we take the hit,” Heary said. “Whenever something happens, when childcare fails, or whatever happens, it’s always Mom,” she added. 

Heary’s travails — and those of millions of struggling households — are what pushed Joe Biden last week to introduce a $1.8tn scheme to pour government funds into childcare, education and healthcare. He calls it the American Families Plan.

As the US economy roars back from the depths of the coronavirus crisis, with expectations that new payroll data will show almost 1m jobs added last month, Biden is making the strongest effort of any recent president to boost female participation in the labour market and improve conditions for women already in the workforce through direct government spending. 

His plan would expand a tax credit for children, offer subsidies for childcare expenses and childcare providers, fund universal pre-kindergarten education, and guarantee paid family and medical leave — social spending where the US has lagged behind many advanced economies. 

“The challenge is that in the United States, we have a labour force where the majority of women are breadwinners or co-breadwinners for their families. And yet, we don’t have the infrastructure to support families that no longer have a full-time stay-at-home caregiver,” said Heather Boushey, a member of the White House Council of Economic Advisers. “We underwent this massive economic transition, but we didn’t adjust the environment [and] the landscape in which families are engaging in the economy.”

Line chart of CPI for urban wage earners and clerical workers (1990=100) showing US childcare costs have climbed

A bitter and intense political fight is expected over the measures and it is far from clear that Biden will prevail, even if polls show the package is popular.

Republicans are criticising the plan for excessive spending, taxing the wealthy to pay for it and even for ruining the social fabric by encouraging parents — and especially women — to leave their children in the care of others. Josh Hawley, the junior Republican senator from Missouri, has blasted the plan as “lefty social engineering”.

“Our public policies should promote the family rather than hurt it, and we can start by giving parents the power to raise their children as they see fit,” he wrote in an article for Fox News last month. “Democrats . . . try to make family life more affordable by pushing both parents into the full-time workforce while subsidising commercial childcare.”

The argument has echoes of the 1970s, when, under pressure from conservative Republicans, president Richard Nixon vetoed legislation that would have created a national child care network on the grounds that it encouraged Soviet-style “communal” child-rearing.

Conservative economists argue the plans will also be counterproductive. “We know the recipe of what is needed to get women back into the workforce, and that is a strong economy, and we had a strong economy not long ago. The policies that contributed to that were lower taxes, less regulations and less government spending,” said Kelsey Bolar of the Independent Women’s Forum, a conservative policy group. 

Line chart of Labour force participation rate (%) showing US women’s participation in the workforce has stagnated

Yet there is little doubt that the long march of American women into the workplace ground to a halt in recent decades. After rising sharply during the 1970s, 1980s and 1990s, female labour force participation hit a peak in April 2000 at 60.3 per cent and has never reached those heights again.

To Biden administration officials, the shortcomings of the US way have been glaring. “Right now families rely on an ad hoc system, there are different standards across states, millions of families live in what are called ‘child care deserts’ where there isn’t even a slot available or sufficient funds available,” Boushey said. “The quality is not good enough for American children.”

Bar chart of % of GDP showing US lags G7 nations in public spending on family benefits

The international comparisons are particularly troubling for the US. According to the OECD, it spends far less than the average of advanced economies on family benefits, while net child care costs as a share of women’s earnings are much higher than average for developed economies. Meanwhile, the US is the only OECD country without any national paid leave benefit. 

“Every woman that wants to be working should have the ability to do that. I think that’s good for our society,” says Beth Bengtson, founder of Working for Women, a charity. “Everybody that’s worked in trying to help women get into the workforce knows these have been tough issues all along. But no one’s actually put something out there and said, ‘Hey, we’re actually going to address this and here’s a way that we could start tackling it’.”

Nicole Heary

In Levittown, Heary’s younger children — aged 7, 8 and 13 — are now back in school five days a week as the economy reopens. She is not naturally drawn to Democratic policies — in fact, she said she is a life-long Republican who voted for Donald Trump in 2016 and for a third-party candidate in last year’s election.

But she backs Biden on this.

“This act does give me a little hope not only for my children’s future, but also for the future of other women in the workforce,” she said. “You know that there may be things in place that would not necessarily require them to gear their careers towards their children, and have to constantly stop and start.” 



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Pharma industry fears Biden’s patent move sets precedent

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Profits in the pharmaceutical industry are protected by a fortress of patents that guarantee drugmakers a stream of income until they expire. On Wednesday, Joe Biden broke with decades of US orthodoxy and made a crack in the wall.

His administration’s decision to support a temporary waiver of Covid-19 vaccine patents prompted instant outrage in the pharmaceutical sector, which argues that the move rides roughshod over their intellectual property rights and will discourage US innovation while sending jobs abroad.

“Intellectual property is the lifeblood of biotech, it’s like oxygen to our industry,” said Brad Loncar, a biotech investor. “If you take it away, you don’t have a biotech sector.”

Biden’s top trade adviser Katherine Tai said that while the US government still “believes strongly” in intellectual property protections, it supported waiving patents for Covid-19 vaccines to help boost global production of jabs.

The move comes as some countries, including India, struggle to tackle further waves of the virus even as others have rolled out successful vaccination campaigns that are driving down infections, hospitalisations and deaths.

The waiver proposal was put forward at the World Trade Organization in October and has since been supported by more than 60 countries who say worldwide vaccine production must increase dramatically. Washington’s support marks a pivotal step in making the proposal a reality and Tai said the US would engage in negotiations to hammer out the details at the WTO.

Tedros Adhanom Ghebreyesus, the WHO’s director-general, told the Financial Times the decision was a “monumental moment” in the fight against Covid-19. “I am not surprised by this announcement. This is what I expected from the administration of President Biden.”

However, the pharma industry did not expect it; the US has tended to fiercely protect domestic companies’ intellectual property rights in trade disputes. Industry leaders described the decision as a heavy blow for innovation that would do little to boost global production because there is a shortage of manufacturing facilities and skilled employees.

In an earnings call Thursday, Stéphane Bancel, chief executive of Moderna, said a patent waiver “will not help supply more mRNA vaccines to the world any faster in 2021 and 2022, which is the most critical time of the pandemic”.

“There is no idle mRNA manufacturing capacity in the world,” he said.

“The administration’s steps here are very unnecessary and damaging,” said Jeremy Levin, chair of biotech trade association Bio. “Securing vaccines rapidly will not be the result, and worse yet, it sets a principle that companies who invested in new tech will stand the risk of having that taken away.”

Shares in the big makers of Covid-19 vaccines were hit by the announcement. Frankfurt-listed shares in BioNTech closed down 12 per cent on Thursday while Moderna and Novavax pared losses after tanking on Wednesday in New York, trading 2.4 per cent lower and 1 per cent lower, respectively. CanSino Biologics, a Chinese private company that developed a single-shot adenovirus-vectored vaccine with Chinese military researchers, fell 14 per cent on Thursday. Fosun Pharma, which has a deal to supply BioNTech vaccines in China, lost 9 per cent.

Sven Borho, a managing partner at OrbiMed Advisors, a healthcare investment company, said pharma executives feared the administration’s move set a precedent that would make it easier to suspend patents in the future.

“They are worried in the long term that this is a foot in the door — ‘OK, we did it with Covid-19, let’s do it with the next crisis, and the next one’,” he said. “And then suddenly it’s a cancer drug patent that needs to be invalidated. They fear it is a mechanism that sets the stage for actions in the future.”

Peter Bach, director of Memorial Sloan Kettering’s Center for Health Policy and Outcomes, said there was a potential trade-off that pitted the imminent need to contain the pandemic against the risk that drugmakers would be more cautious when investing in pioneering therapies in the future.

“If this action allows for more access and more people to have their lives saved today in 2021 and the consequence is down the road we may not have some new gene therapy for 100 kids, then that’s the trade-off worth discussing,” Bach said.

The battle over intellectual property rights is the first big international patent dispute since a clash over expensive HIV treatments between drugmakers and several countries including Brazil and South Africa in the late 1990s.

Countries struggling to contain the epidemic wanted to make their own generic versions of HIV drugs but the companies who developed them interpreted the moves as a breach of patent agreements, spawning a welter of litigation that frustrated efforts to generate a supply of cheap pills.

Members of the pharmaceutical industry argue that suspending Covid-19 vaccine patents in an effort to boost production abroad will harm jobs in the US biotech sector. Donald Trump’s administration firmly opposed the waiver last year. 

Levin said that US technology “could generate jobs in America but by transferring it abroad there’ll be significant detriment to creating very high quality jobs [here]”.

The mRNA technology used in BioNTech/Pfizer and Moderna’s vaccines is being trialled to treat other illnesses such as cancer and heart disease, and pharma lobbyists have claimed suspending their patents would allow other countries to piggyback on US research breakthroughs.

The long-term consequences are unclear. Umer Raffat, an analyst at Evercore ISI, noted the waiver was not permanent, and that other influential players, including the EU and UK, had not yet supported the Biden administration’s move.

OrbiMed’s Borho said: “This is a unique circumstance. I think this will ultimately be narrow and just on the Covid-19 vaccines. I don’t think the Biden administration wants to undermine broad patents for biotech or the pharma industry.”

Backers of the waiver applauded the US government’s decision as an important step towards boosting the global supply of Covid-19 vaccines.

“The pharmaceutical industry has said the pandemic is no time for business as usual,” said Zain Rizvi, access to medicines specialist at Public Citizen. “Funded by billions in taxpayer dollars, [vaccine makers] have a moral imperative to stop opposing efforts aimed at expanding . . . production.”



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Covid paralyses Asia as western economies prepare for blast-off

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Throughout 2020, Asia’s success in controlling Covid-19 made it the champion of the world economy. While Europe and the US were mired in deep recessions, much of Asia escaped with a shallower downturn or even kept growing.

But as western economies gear up for a vaccine-induced rebound which is set to take their output back to its pre-pandemic scale by the end of this year, parts of Asia are still paralysed by coronavirus. As a result, although the region’s output is already above its pre-pandemic level, slower growth is expected in the coming months.

As it launched its new regional outlook last week, the Asian Development Bank said that the region’s economies were diverging and that more Covid-19 waves were a big risk.

“New outbreaks continue, in part due to new variants, and many Asian economies face challenges in procuring and administering vaccines,” said Yasuyuki Sawada, the ADB’s chief economist.

The ADB projected growth of 5.6 per cent across developing Asian economies in 2021, led by growth of 8.1 per cent in China and 11 per cent in India. But the continued threat of coronavirus means risks to that outlook are skewed to the downside.

“Six months ago, or eight months ago, I would have said Asia is going to be ahead of the game because Asia can control Covid,” said Steve Cochrane, chief Apac economist at Moody’s Analytics in Singapore.

But the picture has changed, with India suffering a severe wave of the virus, and cases still high in countries such as Indonesia, the Philippines and Thailand. Thailand is unable to reopen its crucial tourist industry.

More subtly, countries such as Japan are only controlling the virus with restrictions that keep parts of the economy in hibernation. “Some countries need vaccines to control Covid,” said Cochrane. “Others need it so they can open up to international travel and tourism.”

The promise of more than 6 per cent growth in the US this year, as a result of President Joe Biden’s fiscal stimulus, would normally have Asian exporters licking their lips.

Line chart of GDP rebased (2019 = 100) showing Asian economies were less affected by the early stages of the pandemic

The outlook, however, is more subdued than record US growth would usually imply: Americans already bought plenty of goods during the pandemic, while higher US interest rates would mean tighter financial conditions in Asia.

“Adding stimulus at this stage, from the goods perspective, is a real test of whether wants are insatiable,” said Freya Beamish, chief Asia economist at Pantheon Macroeconomics. As the economy opens up, US consumers will probably pay for the services they were denied during lockdown — such as meals out and haircuts — rather than replacing their television again.

There will still be some spillover from the US stimulus, said Beamish, noting that service providers needed equipment, too. “We suspect that people will find new goods to buy and that Asia will benefit from that.” But she added: “We suspect that China will benefit proportionately less from the services recovery than from the manufacturing recovery.”

Whether the extra US demand for goods turns out to be large or small, it is clearly positive. By contrast, higher US interest rates and a stronger dollar would threaten many emerging Asian economies with a repeat of the 2013 “taper tantrum”.

Increased financial integration and foreign currency borrowing mean that the pain of rising US interest rates is quickly felt on the other side of the Pacific.

“A stronger dollar is no longer an unalloyed blessing for Asia,” said Frederic Neumann, co-head of Asia economics at HSBC in Hong Kong. “It helps exports but tightens financial conditions.”

However, inflation is subdued across most of emerging Asia, and the ADB said the risk of a US-induced shock to financial conditions “remains manageable at present”. It said economies such as Sri Lanka and Laos would be vulnerable if such a shock occurred.

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Some Asian economies are well-placed for the next few years, especially Taiwan and South Korea, which are exposed to the semiconductor cycle. “Judging from semiconductor shortages, it doesn’t look like the electronics cycle will break down in the next two or three quarters. That tides them over this rough patch,” said Neumann.

But other Asian economies will find themselves in the less familiar position of relying on domestic demand to grow. One of the biggest question marks is China itself, where first quarter numbers suggest the economy has lost a little momentum.

“Chinese domestic demand still has a way to go,” said Cochrane. “Our forecast right now is for 8 per cent growth in China in 2021, but it depends a lot on policymakers and how quickly they pull back on stimulus and introduce frictions in areas like construction.”



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