May 26, 2013

Ranbaxy Laboratories and Admiral Samuel Eliot Morison

Here's an editorial about the immense scandal involving Ranbaxy Laboratories, the Indian maker of many generic drugs, from Live Mint. This is an Indian business journal that I've quoted in the past about how the preliminary PISA tests in a few Indians states show that India has enormous work to do to improve its terrible schools.
Ranbaxy holds up an ugly mirror to corporate India 
The US Food and Drug Administration (FDA) has been kind to Ranbaxy, too kind. The $500 million fine that the company has to pay is actually fairly light sentence for what it has done to the generics business out of India. The rapidly growing industry is now under a cloud. The first consequences of Ranbaxy’s actions are already being felt with the FDA issuing an alert banning import of products made at another pharma exporter Wockhardt’s plant in Aurangabad. It could be just the first of many more strictures against India’s generics companies.
Ranbaxy’s is no ordinary misdemeanour. The US department of justice said the company had “pleaded guilty today to felony charges relating to the manufacture of certain adulterated drugs”. Felony is a serious criminal charge. 
By accepting to pay a criminal fine and forfeiture and agreeing to settle civil claims, Ranbaxy may have succeeded in effecting damage control. That does not, however, mitigate the seriousness of its actions. 
The implications of its guilt cast serious doubts not just over the conduct of generics exporters from India, but over the way business is conducted in this country. First up, it proves beyond doubt that there is no monitoring, by an independent agency, of business practices of wannabe Indian multinationals.
Expecting companies to voluntarily follow all the rules of the book is naiveté. 
... Our markets are riddled with companies in every industry segment flouting norms of ethical behaviour. Falsification of data submitted to regulators, is so common a practice that Ranbaxy must have wondered what the fuss was all about. And used to getting away with lax governance and ethics standards at home, no Indian company will automatically turn lily-white merely because it is selling in a developed market. 
The Ranbaxy affair also raises issues of executive conduct. ... 
Nor does current Japanese owner Daiichi Sankyo, come out clean in all this. For a $4.6 billion deal (to buy a controlling interest in Ranbaxy), the due diligence it did in 2008 appears to have been rather skimpy and inadequate. Or, did it simply choose to turn a blind eye to what by then was publicly known?  
But the bitter truth is that we have been too elastic in condoning corruption all around so that it has become deeply and shamefully a part of the ethos of Indian firms. Not all the regulation in the world will stop fraud. Corporate integrity is about culture and sadly ours is a culture where unethical behaviour is condoned and rewarded....
As Indian firms seek to do business abroad, their culture of deceit will come back to bite them. 

Back when I was in high school, I read Professor Admiral Samuel Eliot Morison's 1965 trilogy Oxford History of the American People. Morison was the ultimate Boston Brahmin, related to all sorts of famous Eliots such as Harvard's reforming president Charles Eliot and poet T.S. Eliot. He was the last Harvard professor to ride to work everyday on horseback. After Pearl Harbor, he suggested to his sailing buddy FDR that he should write the official history of the Navy in the new war, but with an inside perspective available only to somebody who had experienced the war at sea. So, in his mid-50s he joined the Navy and saw combat. Like movie star General Jimmy Stewart in the Air Force Reserve, he stayed in the Naval Reserve after the war and rose to the rank of admiral in 1951.

Morison's Oxford History was deeply biased. The heroes of Volume III covering the century after Appomattox were guys very much like himself and his relatives, WASP Progressives, Republican and Democrat, who, in his view, in the 19th and 20th Century had modernized government, tamed the Robber Barons, stopped snake oil salesmen from poisoning their customers, checked the ethnic urban political machines, and limited immigration to keep management from exploiting labor. Thus, WASP Progressives built the efficient, fair, and unified America that had won the Big One and could win the Cold War.

Morison's bias toward reforming nationalists is not a popular prejudice anymore. Libertarians consider his economics unsophisticated. His assumption that the immigration restrictions of the 1920s were pro-labor reforms -- just as anti-trust was a pro-consumer reform -- is almost inconceivable to 21st Century minds. Finally, the Protestant ethnicity of most of his Progressive heroes has become unforgivable. No doubt, most of Morison's heroes felt positively toward eugenics, thus permanently tainting the entire breed with the new version of Original Sin.

All that said, though, Morison still had a point: reforming nationalism won WWII and then finished building the most middle class and free society in history in the postwar era, the age of Tom Wolfe's "Happiness Explosion."

Now, though, the big wars are over and thus nationalism is in disrepute. Who needs it?  Globalism reigns as the highest ideal -- just ask everybody you meet at Davos. Lowering the wages of American workers so billionaires can become even bigger billionaires is, as we all know, Good for the Economy.

You have to consider this kind of global mental atmosphere before judging the Indians' lack of progress too harshly. Indian elites read many of the same English language publications that American elites do, and thus where would they even hear about the concept of reforming nationalism?

Some countries that are less entrenched in the Anglosphere than India seem more aware of the old Anglo-Saxon lessons. For example, South Korea is currently having a scandal in which politicians' plagiarizing on their old academic dissertations is being exposed. Why now? Probably because Germany had the same scandal just a little while ago, and the Koreans think the Germans are worth emulating.

29 comments:

FirkinRidiculous said...

Steve, when I requested that you reference more books in your work, I didn't mean for you to tell us about stuff you read thirty years ago.

Anonymous said...

The Chinese despise Indians. It's almost like they are planting these stories to vindicate their bigotry toward Indians.

gubbler, champion of all things checheny(except criminality) said...

You see, Chechens are so much more fun than Hinds, Kores, and Mexies.

IA said...

Nice, Steve.

The West self-corrected. They had to determine FROM THEIR OWN TRADITIONS how to define "the good."

The problem with the rest of the world (ROW) is that they have no tradition to combat the traditions of the West.

Thank Gaia for progressives, though. In a few years, no one in the West will have the faintest idea what their traditions are, other than racist, sexist, homophobic bigotry.

FirkinRidiculous said...

The Chinese despise Indians.

Yes, it all goes back to the battle of boiled rice.

Anonymous said...

The Chinese despise Indians.

They see them as untrustworthy.

Anonymous said...

speaking of those korean guys::
http://www.youtube.com/watch?v=4sS8bK32YQM

hilarious! and needed!

Anonymous said...

The Chinese despise Indians.

One might think that "people of color" would have more affinity with one another.

gubbler, champion of all things checheny(except criminality) said...

Curry Lime.

zoink said...

I am happy to see you and HS/Lion move away from libertarianism and toward progressive regulatory-state capitalism. I made the same evolution about ten years ago as well. Libertarianism is the enemy of the American people, as we saw most recently with the WSJ/Cato/Norquist lynch mob going after Jason Richwine.

Deregulation, from drugs to finance, has been one disaster after another, with the very wealthy the only group ever benefiting.

Airline deregulation is usually proffered as a counter-example of a successful deregulation.

It really isn't a good example however.

First, airlines are still very heavily regulated from safety to the rule that foreign-owned airlines cannot fly domestic routes.

Second, the particular regulations that were repealed, price and route controls, were pretty stupid, and generally were put in place to subsidize small town air travel on behalf of the rural-interest bias of the Senate.

Third, the average big US airline has gone bankrupt about once every 6 years since the 1980's. The only reason we still have these airlines still is that the industry is inherently sexy compared to things like insurance, so investors keep blowing their money funding airlines out of bankruptcy.

Fourth, Western countries like Germany that still have heavily regulated airlines don't seem to be suffering much.

Anonymous said...

"His assumption that the immigration restrictions of the 1920s were pro-labor reforms -- just as anti-trust was a pro-consumer reform -- is almost inconceivable to 21st Century minds."

Need to change that to "...inconceivable to the mindless 21st Century."

Anonymous said...

Should Chinese distrust of Indians give us pause? Or can it be chalked up to classic bigotry and inter-ethnic rivalry?

Duke of Qin said...

Anonymous, its the other way around.

The Chinese mistrust the Indians, viewing them in Stevosphere parlance as swarthy gold chain wearing folk but otherwise pay them no attention

It is the Indians that hate the Chinese, as the numerous editorial ink and vitriol spilled by Indians proves.

No doubt you yourself as brimming with barely concealed racial animus. Otherwise, who else would come to the immediate but completely stupid conclusion that it is the loquacius Chinese who are out slander the Indians who as well all know absolutely defenseless in the face of verbal aggression, particularly in English.

Dave Pinsen said...

"I am happy to see you and HS/Lion move away from libertarianism and toward progressive regulatory-state capitalism. I made the same evolution about ten years ago as well. Libertarianism is the enemy of the American people, as we saw most recently with the WSJ/Cato/Norquist lynch mob going after Jason Richwine.

Deregulation, from drugs to finance, has been one disaster after another, with the very wealthy the only group ever benefiting.

Airline deregulation is usually proffered as a counter-example of a successful deregulation.

It really isn't a good example however."


That's an oversimplification. The subject of regulation deserves a bit more unpacking than that. The Libertarian position isn't worth wasting many pixels on, but it is worth considering the mainstream liberal and conservative positions, both of which are problematic.

The mainstream liberal position in recent years has been to characterize all regulation as necessary for health/safety/environmental/consumer protection and to protest deregulation as an attack on those protections. The mainstream conservative position has generally been to characterize regulations as red tape restraining business. The reality is a bit more complex.

Anyone but an autistic/libertarian can see the value in basic health, safety, and financial regulations. Minimum price / competition-limiting regulations (such as those that applied to airfares and brokerage commissions before the wave of deregulation that started in the 1970s) are not as clear cut, but can serve societal goals as well. For example, IIRC, Australia has prevented its four largest banks from merging for years. That might have kept banking fees a tiny bit higher on Aussies than they would have been otherwise, but it was done to ensure that one of those banks didn't become so big that it was "too big to fail", endangering the rest of the economy.

But regulations themselves can endanger the economy, as Steve has noted regarding those designed to prod lenders into offering mortgages to marginal borrowers because of their ethnicity. And the growth of the regulatory state leads to more power in the hands of unelected bureaucrats and administrative judges, and more potential for corruption. It also favors established, large corporations, that have the resources to navigate regulations, over smaller upstarts.

Really, there are meta issues behind all this that are often ignored by mainstream pundits. National culture and trust levels are probably more important in how well a regulated economy works than the extent of the regulations themselves. You'll probably find similar health and safety regulations in countries with wildly different levels of health and safety due to corruption, bias, or laxity in enforcement. You may find similar disparities between different states in the US.

Here in NJ, regulators just announced that an investigation revealed 29 bars/restaurants were serving rubbing alcohol">rubbing alcohol mixed with caramel food coloring as scotch. It would be interesting to see if there is any commonality between the owners of these establishments -- maybe most come from places where this sort of thing is common? Or maybe they are Cato Association members?

as said...

You have to consider this kind of global mental atmosphere before judging the Indians' lack of progress too harshly. Indian elites read many of the same English language publications that American elites do, and thus where would they even hear about the concept of reforming nationalism?

India is the ultimate multi-cultural state ruled by a deracinated bureaucratic elite.

India should really try to emulate Russia or Yugoslavia and split into at least 20 or 30 (relatively) ethnically homogeneous states.

What's need is some kind of ethnic nationalism.




as said...

As far as this particular scandal goes though, I guess we're just not honest or trustworthy enough.

Anonymous said...

India is the ultimate multi-cultural state ruled by a deracinated bureaucratic elite.

Is the Indian elite deracinated? I thought they were hyper-ethnocentric and xenophobic.

Anonymous said...

Otherwise, who else would come to the immediate but completely stupid conclusion that it is the loquacius Chinese who are out slander the Indians who as well all know absolutely defenseless in the face of verbal aggression, particularly in English.?

No one implied the Chinese were out to slander the Indians. Their opinion of Indians, however, is well known.

Your own English could use a little bit of work.

hardly said...

The Indian right-wing is the country's best hope. There you will find ethnic nationalism, and all the progressive reforming zeal that you want. And they don't fall for the globalist-universalist nonsense.
The only "drawback" is that it has a visceral hatred for muslims. Because of which it has difficulty finding support among the elite.
But given the chance, it will rein in the robber barons and generally set the country on the same track that Franco set Spain, Pinochet set Chile, and the other dictators set South Korea, China and Singapore.
India's best run, least corrupt state is in the western end of the country. Gujarat state has had a rightwing government for several years now, it is constantly rated the cleanest state for business and society in India. With comparisons common to Chinese provinces like Guangdong, although of course Gujarat is several decades behind Guangdong.
And Indians dont really hate Chinese people. No one cares about them all that much. When you have so many Muslims in your country and around your country, all your hatred gets used up and you don't have any left over for expending on Chinese people.

Jeff said...

"Anyone but an autistic/libertarian can see the value in basic health, safety, and financial regulations. Minimum price / competition."

Here you are dead-wrong. If abortion is legal, then barely anything should be illegal. For whatever philosophy enables the legality of abortion will enable the legality of nearly anything else. Once I see people strike out against abortion, then I will believe them. Abortion is murder. The Gosnell trial showed the realities. Moreover, if people can bitch about Red Bull, then surely we can worry about the psychological effects of abortion on the psyche of the mother.

People say abortion is a special case. Not really. Abortion is at least (and not counting the killing of the baby):

1. the process of inserting something into the body
2. the trading of services for consideration
3. medical services
4. the implementation of various tools during the procedure

We regulate to hell out of everything on that list. For example, #4, it is a violation of Federal Law to use various fertilizers in a manner inconsistent with the label. So if you want to ban abortion, then merely ban the use of the implements in a particular manner. This would be wholly legal.

I could have made $200 million selling a compound similar to ephedra. I am probably one of the only people on earth who would spend most of his money educating people on how awful is our upper class. Your desire for massive, unrelenting regulation has resulted in a society where not a single person of wealth uses their money to call alarm to the utter dishonesty of the upper class and our government. Consider the CIA, it is at once, home to the highest caliber individual within the Federal Government, but at the same time an unbelievable failure. The CIA failed to predict every major event of the past 50 years. How can that be? Simple: if you work for the Federal Government you make great money, get great benefits (~20 paid holidays, 5-6 weeks vacations, solid medical, unbelievable retirement) and you get the same pay regardless of if you work hard or don't work hard. Thus the primary mission is to not rock the boat. It is the exact same at the FDA. Remember a few years ago, the FDA was actively going after it's own employees! So many people in these organizations are making $140,000/year ($280,000 for a couple) and doing nothing. The Federal Government is a giant money suck and only the ignorant or the naive do not realize this fact.

To suggest that regulation is about safety is a joke. Regulation is about crushing competition and enriching (or launching into the upper middle class) all the regulators. If you people that regulation is about safety then ban abortion which kills babies. If you don't believe a fetus at week 20 is a baby, then ask yourself if a woman pregnant at 20 weeks, and involved in a car accident would shriek with fear about "her baby" or would she shriek with concern for the "growing mass of cells within my uterus?"

Until abortion is outlawed, leave me alone. I will take my chances. First and foremost, American and Western European companies don't act like the Indian company because of who staffs them. To deny this is to miss reality.

Svigor said...

Or maybe they are Cato Association members?

Schnitt read out the names of the restaurants involved on the air. Only one had an ethnic connotation. It was Jersy, so you can guess which.

Anonymous said...

I think Indian hostility towards Chinese may in part be due to the fact that nobody is even seriously comparing India and China anymore - nobody, that is, who actually knows the economics.

India's GDP per capita is lower than some African countries, quite a few even. China's statistics is manipulated to be lower than they are, but even so, there are places on the East Coast, even beyond the typical Shanghai and Shenzhen, which are increasingly first world in status.

Second, look at Chinese technology. Sure, a lot of it is stolen, but you also need smarts to do it right.

Huawei is today on par with Ericsson when it comes to installing 4G infrastructure and as a company, is already bigger than them. Lenovo is the world's biggest PC brand and are now shifting to mobile and they do high quality stuff.

MediaTek is a rising conductor company. China has very decent screen manufacturers, too.

Their software companies tend to be less innovate, however, and most just copy Google. So when Google went out with Google Glass, Baidu just went ahead and copied the concept and are now developing their own. Baidu is also growing like it is because the Chinese government is xenophobic and essentially just bans Western companies from entering their space. Not hard to win competition if the government restricts it to only Chinese companies.

Nevertheless, what does India have? Supposedly their IT sector is great but when you scratch the surface you notice that it's mostly about outsourcing grunt work at the low level.

And beyond that, China is building their own automotive sector with force, they have the world's largest producers of solar energy and much more.
They have a real, and increasingly sophisticated, manufacturing sector.

Americans who think the Chinese will be creamed just because wages start to rise are in for a rude surprise.

Indians, however, don't have any of that. And now their growth is faltering too. China has reached a position of wealth where they can afford slightly lower growth rates, India has not. India should grow at 10% or so for at least 20 more years before they catch up to where China is today on a per-capita basis. But they won't.

And India's obsession with China and the jealously that comes with that doesn't help, when the two countries are increasingly - and I would say already - not even in the same category anymore.

Dave Pinsen said...

"Here you are dead-wrong. If abortion is legal, then barely anything should be illegal. For whatever philosophy enables the legality of abortion will enable the legality of nearly anything else. Once I see people strike out against abortion, then I will believe them. Abortion is murder. The Gosnell trial showed the realities."

You are conflating the issues of legalization and regulation, but what Gosnell did was illegal in any case, which is why he was convicted.

Anonymous said...

India should really try to emulate Russia or Yugoslavia and split into at least 20 or 30 (relatively) ethnically homogeneous states
there are 40 different violent separatist movements, and i suspect, it will eventually come to that - or democracy (such as it is there) done away with and a strong man mugal/khan ruler.

Anonymous said...

a harvard professor who was not hostile to america. and now his books are considered not only unfashionable, but, despite being well researched, not 'correct'... now that the scots irish run harvard, its so much betta. it's the worlds biggest hedge fund, don't you know...

Jeff said...

Here you are dead-wrong. If abortion is legal, then barely anything should be illegal. For whatever philosophy enables the legality of abortion will enable the legality of nearly anything else. Once I see people strike out against abortion, then I will believe them. Abortion is murder. The Gosnell trial showed the realities."

"You are conflating the issues of legalization and regulation, but what Gosnell did was illegal in any case, which is why he was convicted."

I am not conflating legalization and regulation. If something is Constitutionally-protected then you cannot regulate it to such a degree that a citizen cannot exercise his rights. Therefore, because abortion remains largely free of regulation and has been deemed a Constitutional right, nearly everything else regarding the body must be free and legal. Whatever governing philosophy enables the legality of abortion and prevents the enactment of stiltifying regulations must flow to all other manner of human behavior with regards to the human body. For instance, the FDA banned ephedra because it was dangerous to fat hog women. Yet abortion is dangerous to the fetus and the mother compared to drinking purified water. You may say that ephedra is optional and unnecessary, but then again the same is true for abortion. If a woman has a right to do with her body as she pleases, then she has the right to consume ephedra. If you say, she has the right to consume ephedra, but no one may sell it, then the same could apply to abortion: you have the right to have an abortion, but you cannot buy the service.

The issue is that people are not paying attention to the governing philosophy. When you look at the philosophy you will see that I am speaking about fairness; conflation of legality and regulation and is largely moot at this point, because that which is Constitutionally protected cannot be highly regulated (think speech, and the huge battle over gun rights). What is good for abortion must be good for everything else with regards to the body, otherwise there is tyranny, which is what you have today and with it a small part of society decays.

Anonymous said...

A few points need to be made about India.

Before the British arrived, India was a country (like many others before colonialism) which had a settled traditional way of life with traditional mores and relations between people (whether between castes, the sexes, elders with the youngsters etc etc etc). When the British introduced modern commerce and technology, there was a disruption. But the British countered this as responsible rulers by trying to inculcate among the Indian upper classes the type of morality that the British aristocracy always possessed - which traditionally viewed the lower classes as inferior but a people for whom they were ultimately guardians. This relationship defined many of the upper class Indians of the British era - who, although Western educated, did not lose sight of their resposnibility to the lower orders.

After independence, the British influence almost completely disappeared. For forty years, India was run by a nominally socialist regime in which all kinds of abuse began to grow. And then in 1991, after the collapse of communism, the country was suddenly thrown open by exposure to the West (especially America through American TV). The behaviour of the Indian upper class today is closer to the behaviour of the American upper class (with even less concern for the law) than the old British upper class which tutored the Indian upper class pre-independence. This is a phenomenon which has not been properly studied. I don't think the Chinese ruling class behaves any better (if any thing, the whole Bo Xilai epsiode shows that they are WAY worse). Compare them also to the Oligarchs in Russia or the new rich in Brazil. It's the same story.

Anonymous said...

The Indian right-wing is the country's best hope. There you will find ethnic nationalism, and all the progressive reforming zeal that you want. And they don't fall for the globalist-universalist nonsense.
The only "drawback" is that it has a visceral hatred for muslims. Because of which it has difficulty finding support among the elite.
But given the chance, it will rein in the robber barons and generally set the country on the same track that Franco set Spain, Pinochet set Chile, and the other dictators set South Korea, China and Singapore.
India's best run, least corrupt state is in the western end of the country. Gujarat state has had a rightwing government for several years now, it is constantly rated the cleanest state for business and society in India. With comparisons common to Chinese provinces like Guangdong, although of course Gujarat is several decades behind Guangdong.
And Indians dont really hate Chinese people. No one cares about them all that much. When you have so many Muslims in your country and around your country, all your hatred gets used up and you don't have any left over for expending on Chinese people.


This is absolutely correct. But I would venture to say that this is so because the Indian right-wing is becoming more "homogenous" middle class and less caste based (composed of people who now form the vast Indian urban middle class with exposure to the West). They want India cleaned up and set on a path like Singapore was in the 1960s.

Why do the Indians hate China? This has nothing to do with envy. China has funded Pakistan with money and weapons AGAINST India for decades (including giving them nuclear weapons). The chickens are now coming home to roost for the Chinese. They are becoming increasingly concerned that the radicalisation of Muslims in Pakistan/Afghanistan which they regarded as an excellent tool to be used against India could backfire on them in Xinjang. Indians know that the Chinese state regards India as an insolent enemy and a tool of the United States. Also, the Chinese have still not forgiven the Indian state for giving refuge to the Dalai Lama. Westerners cannot comprehend why the Chinese would hate anyone for giving shelter to the Dalai Lama but those who cannot comprehend this cannot comprehend the Chinese mind. The same people also cannot understand China's fixation with Taiwan.

Anonymous said...

"And India's obsession with China and the jealously that comes with that doesn't help, when the two countries are increasingly - and I would say already - not even in the same category anymore."

Exactly.

I agree with the rest of your post as well.