Technology, Inequality, and Monopoly

In a new working paper, Dean Baker outlines the costs and consequences of our current intellectual property regime with a focus on inequality. Information technology is frequently blamed for driving the rise of inequality, but technological progress need not create a huge class divide between the owners of capital and the rest of us–as long as the capitalists’ intellectual property is constrained:

This paper raises three issues on the relationship between intellectual property and inequality. The first is a simple logical point. Patents, copyrights, and other forms of intellectual property are public policy…The second issue is that there is an enormous amount of money at stake with intellectual property rules. Many items that sell at high prices as a result of patent or copyright protection would be free or nearly free in the absence of these government granted monopolies… The third issue is that the effect of these protections is to redistribute income upward…Instead of being a sidebar pursued by a small clique of economists and people concerned about access to medicines, rules on intellectual property should play a central role in debates on inequality. There is a huge amount at stake in setting these rules and those concerned about inequality should be paying attention.

His first point is a familiar argument to readers of Rent Check: IP laws are a creation of government policy. The second section of this paper puts the cost of our current regime in dollars and cents. Baker estimates the total costs of IP enforcement, though difficult to fully calculate, at around $1 trillion. This figure includes familiar cases, such as pharmaceuticals ($315 billion), but Baker also identifies the downstream costs related to copyright–to pay for the rights to your favorite TV shows and movies, your cable or internet provider has to pay the rents.

Finally, the money that goes to IP holders has brought fantastic wealth to those at the top of the income distribution. Based on the top quarter of the Forbes 400, he finds that up to $789 billion of the wealth (43.5% of the wealth of the top 100) can be directly or indirectly attributed to IP-related industries.