IP Czar Admits Hamiltonian Nature of “Intellectual Property”

In an April 24 speech, new “Intellectual Property” Czar Danny Marti confessed that the whole point of federal IP policy is to inflate nominal GDP and corporate profits by maximizing what monopolists are able to charge for stuff. He didn’t mean to state it that baldly, of course. But that’s what it amounts to — as you might imagine, from the fact that the venue for his speech was a “Creativity Conference” hosted by Microsoft and the Motion Picture Association of America. That’s the most telling choice of location since Joe Biden supervised a mass takedown of file-sharing websites from Disney headquarters.

What Marti actually said was that sales by “core copyright industries” added over $1 trillion to the Gross Domestic Product, and sales by “IP industries accounted for over 60%… of US exports.”

Well, sure. If your goal is to maximize GDP and the value of overseas sales, you can do that by encouraging everybody to produce everything in the most costly and inefficient manner possible just to keep up the demand for capital and natural resources and prevent their prices from falling; then you follow up by similarly using inefficiency to inflate the need for labor so everybody earns enough working at 40-hour “jobs” to buy everything at prices inflated by wasteful production methods and monopoly rents. And of course you can grant businesses monopoly privilege so that they can pass along these costs to consumers and mark up prices as high as possible without fear of competition.

But that’s a really stupid goal, unless your goal is to prop up corporate revenue, the value of capital assets, and the income of resource extractors. Hmmm….

By definition any monopoly price markup adds to GDP, since GDP is the sum total of how much it costs to produce all goods and services, as reflected in their price. The more inputs that are wasted, and the higher the resulting prices, the higher GDP will be. And the faster stuff wears out and has to be replaced, likewise, the higher GDP will be. When something previously available for free from the commons, or something that we could easily do for ourselves in the informal economy, is enclosed by the artificial property rights of monopolists as a source of rent, requiring us to sell our labor to earn money to buy it from someone else, GDP also goes up by that much.

For example: When the British in Kenya took the best land from the peasants who rightfully owned it and gave it to white settlers for cash crop production, and the former subsistence cultivators were forced to hire themselves out at wages as laborers on the thieves’ plantations in order to buy food, it caused an expansion in the money economy in Kenya that would have gratified Marti.

As Maurice Dobb pointed out, if the state should give a privileged class the authority to set up toll-gates across roads and pocket the revenue, according to the standard marginalist model those gatekeepers would render the “service” of not obstructing transportation that was previously freely allowed, and their “marginal productivity” would be whatever the tolls added to the final price of goods.

Genuine productivity and progress, on the other hand, destroys GDP. In a free economy, here’s how it should work: Profit is self-liquidating, and increased efficiency of producing things with less labor and capital — or even reproducing things like information at zero marginal cost — is passed on to the consumer in the form of lower prices. This means it takes less labor both for people to produce all the things they consume, and to earn the money to buy them.

The state can’t allow this to happen. Its copyrights and patents enable capitalists to monopolize the savings from efficiency as profit rather than passing it along to the consumer, and its regulatory entry barriers suppress competition from more efficient production technologies. That’s because the state — every state — works for the economic ruling classes that control it. Now go back and look again at who hosted that “Creativity Conference” Marti spoke at.

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