Dean Baker on Inequality, IP, and Foreign Trade

Writing in Truthout, Dean Baker tackles the sentiment that Chinese “theft” of US firms’ intellectual property is justification for President Trump’s current trade war and that something should be done about Chinese “theft” (on which Trump and “elite” opinion are closely aligned):

The so-called theft takes two forms. On the one hand, the complaint is that China does not adequately protect patents and copyrights internally. As a result, massive amounts of software, recorded music and video material, and other copyright protected items are sold without authorization.

The other form of theft is through requirements that companies looking to set up operations in China partner with Chinese firms and thereby share their technology. For example, Boeing is required to partner with Chinese manufacturers in its operations there, which then gives the Chinese manufacturers the ability to be competitors in future years.

For IP hawks, Chinese practices put U.S. firms at a competitive disadvantage by running off with inventions and innovations produced by US firms. Baker, on the other hand, views this “so-called theft” as a great equalizer. For those concerned about inequality of income and wealth, the policy of allowing China free access to intellectual products is a wonder drug: accelerating catch-up growth in less developed countries while taking a sledgehammer to the wealth of American IT billionaires.

Additionally, while we’re familiar with the intellectual property vs. monopoly debate, Baker points to IP as a form of protectionism (lending further credence to the monopoly view):

After all, these are forms of protectionism, and we know that protectionism raises prices and reduces economic growth. Patents and copyrights are in fact incredibly costly forms of protectionism. Instead of raising prices by 10 or 25 percent, like the tariffs currently on the table, patents and copyrights increase the price of the protected items by several thousand percent above the free market price.

Indeed, IP is protectionism that applies to competitors both foreign and domestic.