Against Monopoly

defending the right to innovate

Monopoly corrupts. Absolute monopoly corrupts absolutely.

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What not to do about China's IP violations

The New York Times lead editorial today is entitled China and Intellectual Property link here. It is a familiar litany of complaints about their theft of U S "property" with no suggestion that there might be another side to the question.

If we were in China's position, still poor and backward in so many areas, we too would try our hardest to skate around the obstacles to using the latest innovations. Innovation is the key to rapid development and national material progress. We ourselves have violated the IP of other countries when we were behind and trying to develop. Of course, that was before we had fully developed the mythology of IP as "property" and that copying without paying was robbery.

The day is coming when the China will have developed to the point where its own domestic enterprises will decide they want their IP protected and will press their government to try to compel other countries to do the same. In the meantime, China will try to get away with as much as it can, recognizing that it can trade other actions in return for giving it a pass.

It is too bad that the China probably will not recognize that its interest is in either no IP protections or a vastly limited set which narrowly defines new IP and restricts its term to only a few years. But this rationale depends on the notion that IP is beneficial only as an inducement to innovate. And that the motivation is limited to the present value of the future stream of income, which approaches zero in no more than ten years.

The present IP system in the US is marred by its harmful and excessively long term, by its grossly ambiguous and generous definition of what constitutes innovation, by the capture of the system by big business which dearly loves its monopolies, and by a legal system that grows fat on litigation.

Unfortunately, there is little reason for one to expect China to define its interest in IP protection in terms of the public's welfare. Given its nationalist roots, the authorities there are more likely to define their national interest as in extracting rents from other countries in order to enhance their relative national power. The world-wide cost is the rents it can extract from consumers around the world.

The Times closes its editorial with this, "The United States has made some progress at the World Trade Organization against the theft of intellectual property in China. But it must be much more vigilant and aggressive."

We should all mourn the deep ignorance and sophistry that lies behind that conclusion.


There are other aspects concerning the protection of so-called intellectual property that will, bite us, in the end. First, is our deficit spending. Essentially we are exporting to China the money to buy our corporate assets of which so-called intellectual property is an integral component. See my post: China and US Fiscal Responsibility.

You may also be interested in this U-tube video: Chinese Professor. I think it is pretty reminiscent Apple's 1984 add introducing the Macintosh computer.

Perhaps, even more absurd, the US has become manic concerning "national security". Logically, if we were concerned that our deficit spending is providing the capital for China to buy our intellectual property we would balance the budget. The NY Times wrote: "Some in Congress and the national security establishment fear that Huawei's close ties to the Chinese military might allow China to tamper with American communications gear." and "China's $2.2 billion investment Chesapeake Energy involves a potential transfer of technology and intellectual knowledge to Beijing that some people in Washington may find uncomfortable, and that unease could trip up the deal." It's ridiculous to insist on "strong" IP when we are creating an environment that allows the Chinese buy our IP.

Like the Hitler parodies, the Chinese Professor is generating a bunch of parodies. The one below is closer to the intent of this post since "intellectual property" is actually mention. (40 seconds into the video)

Chinese Professor - Thanks the Corporations

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