Artificial Property and Real Inequality

Artificial Property and Real Inequality

In The Nation, Dean Baker has an article about the power of intellectual property rights as a driver of inequality:

The effect of [expanding copyright and patent protections] 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. [Emphasis added]

To take my favorite example, without Microsoft’s government-granted patent and copyright monopolies, Bill Gates would probably still be working for a living. Many other billionaires and millionaires would be far less wealthy if we had different rules for intellectual property. 

The whole article is worth reading in full, but the bolded section above is essential. While there is still plenty of “old money” around, most of the ultra-rich who are most frequently cited as examples of inequality run amok are those with large stakes in firms with large intellectual property portfolios. It’s not just that they own large, successful firms–they own large, successful firms with exclusive rights that prevent competition via imitation without their say-so.

Of particular interest, however, is his dig at Bill Gates. Of course, Microsoft is a beneficiary of intellectual property laws, and the Bill and Melinda Gates Foundation’s endowment is heavily invested in (among other things) pharmaceutical firms. The Gates Foundation, which urged Oxford University to reverse course and sell the exclusive rights to its vaccine to AstraZeneca, is in no small part responsible for Oxford deciding against making its vaccine open, and the institution has a commitment to intellectual property in the pharmaceutical space. Adding to the irony is the fact that promoting equality was (and has been) a major theme in Bill and Melinda Gates’ annual letter for 2021 and 2020.

Charity is praiseworthy, of course, and pushing for a more progressive tax system and other redistribution measures are also worthwhile. But, as Baker points out in the introduction to his article, redistribution to correct for inequalities can only go so far:

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.

If equality is the name of the game, then going after policies which create assets via the assignment of property right to intangibles should be top of the list. 

As evidence for the equalizing effects of removing a property right where there once was one, we can look to the example of abolishing slavery in the United States. The 13th Amendment is an example of the government invalidating the claim to what was once (but obviously should never have been) a property right. Unlike the loss of property that came from destruction during wartime, the material world didn’t change immediately after abolition. Confederate soldiers destroying and looting to prevent war materiel from falling into Union hands was the deprivation of a property right due to a change in the material world; abolition was the loss of a property right due to a change in the legal status of four million people from chattel to citizens. The result?

The Civil War constituted a major rupture for the Southern economy. With the formal abolition of slavery in 1865, wealth from slave-holding evaporated. Land values also declined substantially after the Confederacy’s defeat, reflecting lower levels of agricultural productivity after the war. Overall, these war-related events led to one of the largest compressions of wealth inequality in human history. Compared to 1860, a white household head at the median of the Southern wealth distribution held 38% less wealth in 1870. The wealth of the top 10% wealth-holders fell even by 75% such that the 90:50 ratio dropped from 14:1 in 1860 to 10:1 by 1870.  

Though the differences between abolition and removing intellectual property protections are countless, for the purposes of this analysis it’s clear that making something once owned unownable is an effective tool for reducing inequality.

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By |2021-02-09T06:56:03-08:00February 9th, 2021|Blog, Intellectual Property|