Criminalizing Competition

Free culture activist Nina Paley, in a recent cartoon, parodies the philosophy behind “intellectual property.”

EUNICE:  “Copying a song instead of buying a copy is stealing!” 

MIMI: “Doing  for yourself what you could pay someone else to do is stealing!” 

BOTH:  “Competition is theft!”

Unfortunately, Nina was preempted by reductio creep: The tendency of real world irrationality to outpace our ability to make fun of it.

In 2005, the French bus company TSE sued a group of cleaning women who’d previously taken the bus to work, arguing that carpooling was unregulated competition that deprived the bus company of revenue. Although that that specific case was thrown out, the principle it illustrates — a legal guarantee of rents from a monopoly on the right to do something — is at the heart of capitalism (as opposed to the free market).

Throughout history, propertied classes have relied primarily on artificial scarcities of material resources to extract a surplus from labor.  With the help of state-enforced artificial property rights, a ruling class can control great concentrations of land and capital. These monopolies prevent competition from driving down the price of capital and land to their natural values. Thus the means of production are artificially scarce and expensive, and labor is forced to pay tribute for access to them.

Today, however, the imploding cost of production means that concentrated ownership of land and capital is becoming less and less effective as a means of rent extraction. The desktop revolution has reduced the cost of setting up a “publishing house” or “music studio” a hundredfold. Micromanufacturing with open source desktop CNC tools will soon do likewise to the cost of a factory. Intensive raised-bed horticulture grows many times more food per acre than mechanized agribusiness. In fact most “farming” is a real estate investment in which the government pays rent for the “farmer” to hold land out of use!

In this age of abundance, when the falling cost of machinery and exploding efficiencies of extracting value from inputs threaten to make control of physical resources worthless as a source of rent, rents accrue mainly to “property rights” like the right to do certain things, or criminalizing competition from more efficient ways of doing things.

Under old-style capitalism, rents were extracted by using artificial property rights to restrict access to physical opportunities for production. Now that the cheapening of physical means of production has made this strategy untenable, the ruling classes must instead charge rents on the right to produce with one’s own physical resources.

In today’s global economy, profits from old-style subsidies and artificial scarcities of physical resources haven’t exactly disappeared. Foreign aid and World Bank loans still provide subsidized infrastructure for offshored production. Third World landed oligarchies still nullify traditional peasant property rights and steal land for cash crop production in collusion with subsidized Western agribusiness interests. Thanks to compliant local governments, and the use of World Bank debt slavery to pressure the noncompliant — not to mention legacy titles from outright theft in colonial days — extractive industries make enormous profits mining and logging on ill-gotten land. Half of Big Pharma’s R&D is taxpayer funded, and billions of dollars of high-tech R&D is subsidized with refundable tax credits.

But most profits come from immaterial property in the right to make or do a certain thing. Because of patents it’s illegal to make a physically identical knockoff of an iPhone and sell it for a fraction of the price without all the embedded rents on artificial property. Copyright makes a CD of Word cost $200 instead of ten bucks like an Open Office CD. “Intellectual property,” exactly like your grandfather’s tariff, is just a restriction on who has the right to sell a thing in a particular market. IP performs the same protectionist role for transnational corporations that tariffs once performed for national industrial corporations.

The majority of TNCs’ profits are from royalties or licensing fees. The most profitable industries in the global economy are those with business models based on IP: Pharma, biotech, entertainment, software. Patents give Western corporations a lockdown on the latest generation of production technology, effectively relegating Third World countries to supplying cheap raw materials and sweatshop labor. Trademark and patent laws enable corporate headquarters to outsource actual production to job shops in China or Vietnam, while charging a 1000% markup in retail outlets.

Intellectual protectionism apologists tell us ignoring patent and copyright monopolies is theft.  It’s not. It’s legitimate free market competition. “Intellectual property” is theft.

Citations to this article:

Free Markets & Capitalism?
Markets Not Capitalism
Organization Theory
Conscience of an Anarchist