11 February 2021

Someone Gets It

Only a few years ago, it would have been unthinkable for someone at a major political publication, even a liberal one like The Nation, to suggest that IP protections need to be relaxed for the good of society, and now we are seeing this.

IP law is literally for the public interest, in the US at least, as is explicitly stated in Article 1, Section 8 of the US Constitution, "To promote the progress of science and useful arts."

IP is not property, it is a way to benefit society, not a way to allow rent-seeking to dominate our society:

The explosion of inequality over the past four decades is appropriately a major focus of the political agenda for progressives. Unfortunately, policy prescriptions usually turn to various taxes directed at the wealthy and very wealthy. While making our tax structure more progressive is important, most of the increase in inequality comes from greater inequality in before-tax income, not from reductions in taxes paid by the rich. And, if we’re serious about reversing that trend, it is easier, as a practical matter, to keep people from getting ridiculously rich in the first place than to tax the money after they have it.

While the Reagan, George W. Bush, and Trump tax cuts all gave more money to the rich, policy changes in other areas, especially intellectual property have done far more to redistribute income upward. In the past four decades, a wide array of changes—under both Democratic and Republican presidents—made patent and copyright protection both longer and stronger.


The effect of these changes was to transfer money from the bulk of the population to the relatively small group of people in a position to benefit from them, either because of their skills in software, biotechnology, and other areas, or because of their ownership of stock in companies that benefit from these rules.

The upward redistribution of wealth arising from intellectual property (IP) is typically disguised in public debates as being the result of “technology.” But blaming technology attributes it to an impersonal force. When we point out that it is due to intellectual property, we make it clear that inequality is a policy choice.


By my calculations, the amount of money transferred from the rest of us to those in a position to benefit from IP comes to more than $1 trillion annually. This transfer comes in the form of higher prices for prescription drugs, medical equipment, software, and many other products. This amount is almost half the size of all before-tax corporate profits, and roughly one-third larger than the current military budget. In other words, it is real money.

Intellectual property does serve an important economic purpose in providing an incentive for innovation and creative work. But we can make patent and copyright monopolies shorter and weaker while still supporting innovation and creativity, instead of going the route of longer and stronger, as we have actually done over the past four decades.


Most of the public money goes to finance basic research, but sometimes the government supports the actual development process, as was the case with Moderna’s coronavirus vaccine. The government paid Moderna $483 million for its research and Phase 1 and 2 trials. It then coughed up another $472 million to cover the cost of Phase 3 trials. Incredibly, the Trump administration still allowed Moderna to have patent monopolies on its vaccine, even though the government had covered the development costs and taken the investment risk. If the vaccine had proven to be ineffective, the government would have borne the cost, while Moderna still would have been paid.


We need to keep this example in mind as the Biden administration develops its foreign policy agenda, especially its relationship with China. Biden has already complained about China’s stealing “our” intellectual property. This sets the stage for potential conflicts that are not at all in the interest of the vast majority of the American people.


While there may be cases where the failure to honor intellectual property can cost some middle-income jobs (for example, if China uses technology to which Boeing has patent rights), the impact is likely to be comparatively small. Arguing that we should protect Boeing’s IP on this basis would be like arguing that we should not tax Jeff Bezos because reducing his income could lead him to lay off some well-paid servants. The benefits that the relatively affluent and very wealthy get from IP protections are vastly greater than the higher wages that some workers may get as a result of working for Boeing or another company with large IP claims.


The rules on intellectual property are a major part of the story of upward redistribution of the past four decades. Contrary to what is typically claimed, they have likely been a major obstacle to technological progress, especially in the areas of health and climate technologies. It would be tragic if the protection of IP was a major cause of a cold war with China. It would be even more tragic if progressives were leading the charge.

The author, Dean Baker, has been saying this for years, and now he is getting a real hearing on this in the court of public opinion.  Huzzah.


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