Enclosure of the Commons – 21st Century Edition

I was pondering for a presentation on Thursday why it is that inequality between countries has grown so markedly over the last 100 years. There are many reasons why the richer countries have grown, but it is harder to explain why poor countries do not catch up as quickly as they did during the previous 2,000 years.

A candidate explanation of why poor countries catch up more slowly now is that rich countries have taken steps which slow down the transfer of technology. By tightening intellectual property rules and expanding those restrictions to an increasing proportion of economic value, rich countries are, in effect, yanking up the ladder behind them.

I see today that James Surowiecki makes a similar point in the May 14 edition of The New Yorker:

The great irony is that the U.S. economy in its early years was built in large part on a lax attitude toward intellectual-property rights and enforcement. As the historian Doron Ben-Atar shows in his book “Trade Secrets,” the Founders believed that a strict attitude toward patents and copyright would limit domestic innovation and make it harder for the U.S. to expand its industrial base. American law did not protect the rights of foreign inventors or writers, and Secretary of the Treasury Alexander Hamilton, in his famous “Report on Manufactures,” of 1791, actively advocated the theft of technology and the luring of skilled workers from foreign countries. Among the beneficiaries of this was the American textile industry, which flourished thanks to pirated technology. Free-trade agreements that export our own restrictive I.P. laws may make the world safe for Pfizer, Microsoft, and Disney, but they don’t deserve the name free trade.

Does this matter? I think it probably does. David Houle wrote last month about the growing economic importance of information in the value of economic production:

In 1975, at the very beginning of the Information Age, 16.8% of the market capitalization of the S&P 500 was from intangible assets. By 1995, that number had grown to 68.4%, and in 2005 it was up to 79.7%, where I imagine it will level off in the years ahead. In the historically short time of thirty years there has been a fundamental shift in the concept of value, not unlike the transition from the land values of the Agricultural Age to the production values of the Industrial Age.

The twentieth century has seen a new enclosure of the commons – robber barons have built fences around the key economic assets of the community, and they have got rich charging people for using them. In the past, when mankind learned how to get more food from the land (e.g. learning about irrigation, crop rotation or seed soaking) these ideas were not protected by patents. When we learned how to improve our health (e.g by improving access to clean water, or using antibiotics) these ideas were not protected by patents. When we learned how to organize factories, or build roads, or design windmills – all these ideas could be transplanted and adapted by poorer countries, so that they too could benefit from them.

Now at the start of the 21st Century, many of the key technologies that drive economic value are locked away by patents and intellectual property rights – agricultural technologies, business software, vaccines to prevent disease. As a result, the poor can no longer simply adopt these techniques and adapt them for themselves.

The cruel irony is that it would do us no harm to allow others to share in the benefits of our innovations. We worry about intellectual property rights because we want to protect our ability to recover the costs of innovation from the rich: the poor (who cannot afford to reward us for our cleverness anyway) are just innocent bystanders.

4 thoughts on “Enclosure of the Commons – 21st Century Edition”

  1. We should never have allowed TRIPs to go forward. Let the poor countries introduce IP protections when they’re developing their own IP to be protected: until then do indeed let them "rip off" rich country inventions.The sums actually "lost" by their doing so are entirely trivial anyway. Software copying, for example. When the calculations are made about how much that costs software companies, the assumption is made that all copied versions whould have been bought at full price.

    Don’t peple know yet that demand curves slope downwards?  

    Owen replies: I completely agree.

  2. i write this hesitently, becuase it really know nowt of what I speak, but is there a question over the extent to which today’s IP protected technologies are also the technologies that would help poor countries grow? I mean organising factories, building roads and generic drugs aren’t patented (I’m not on solid ground when I talk about drugs so please correct me where I am wrong), and while cheap access to under patent vaccines would no doubt do plenty of good, to what extent would it be an engine of growth?

    I know the literature relating adult mortality to growth, but would relaxing IP rules have an effect on growth beyond marginal impact on adult mortality? I mean, do you have in mind domestic drug development becoming a source of income for poor countries, if given a kick start with some up to date IP?  or just poor countries getting cheaper access to drugs (which is good enough!), but not the underlying technology?

    If poor countries were to become drug developers in their own right (which is what would be needed if access to the IP would help poor countries grow an industry), then would Glaxo be giving a leg up to a competitor would could start selling back into the West?

    In the case of businenss software, I can’t see Oracle ever opening the source code of their software to poor countries, for example, because if they did that information would leak straight back to their competitors who could exploit it – so what did you have in mind with software? There’s open source, which is great, but Microsoft and SAP cannot release their source code to anyone can they, rich or poor? For sure they could sell dirt cheap copies in poor countries, and I think that they should, but again to what extent will cheaper software accelerate growth in poor countries? it would help, yes.

    Or am I missing the point and you were thinking of something else? Perhaps you mean just allowing pirated copies to be made, but not opening up the code, but if so, again surely that would only have a modest impact on growth?

    Agricultural technology may be a different matter altogether.

    And with things like software and drugs, do the patent owners sometimes have a valid worry that if the technology were to be granted to companies in poor countries, then the software and drugs thus produced would start finding its way back to home markets, where it would cost in lost busisess? (I’m not contesting Tim’s point about lost business in poor countries)

    If your business is investing in the creation of intellectual property, you’re not necessariy a robber baron for seeking to protect that investment are you?

    Please don’t take this as a defence of current IP practises by the way, I only mean to raise a question the degree to which a feasible sharing of the kinds of innovations you mentioned would be wealth creating in poor countries.

    And I’m a bit confused as to whether you are suggesting that western software companies ought to grant access to the underlying technology, or just go easier on the pirating. 

    I think there’s a difference between opening up the code (which is what I thought you might mean by "sharing the benefits of our innovations") and just allowing pirate copies to be produced mechanically. But I could very well be wrong – years ago I was an IT journalist for a while, but I was never very techie. I don’t know whether the distinction holds with drugs – perhaps if you know enough to copy the compound, then there’s nothing else the IP owner can tell you.

    For all i know, perhaps those who make pirate copies of Windows also have full access to the source code. In which case most of this comment is redundant.  

  3. What Owen means, if I may interpret, is that a lot of technological learning on which sustainable economic growth depends involves understanding how existing technologies work, adapting them to your particular circumstances and then producing your own versions (rip offs or incremental innovations, depending on your taste).  Think cars, think machinery, think chemistry, think manufacturing processes, think biotechnology think of almost anything.  Switzerland, Holland, the US, Korea, Taiwan and other countries exploited the essentially voluntary nature of IP legislation prior to TRIPS to maximize their opportunities for this kind of learning.  The modern Indian pharmaceutical industry developed in large part because of the expertise Indian chemists were able to acquire in reverse engineering products patented in the developed world but which Indian law gave only weak patent protection to.  The German chemical industry of the 19th century developed in the presence of rather similar patent laws to those prevailing in India in 1970 – 1995.
    The key issue is thus how countries can develop their own technological capacities which initially must depend on learning from countries with more advanced capacities.  TRIPS places limitations, and imposes costs, on countries trying to build that capacity.

Leave a Reply

Your email address will not be published. Required fields are marked *