[Ip-health] Martin Wolf opinion piece in the Financial Times: The fight to halt the theft of ideas is hopeless

Thiru Balasubramaniam thiru at keionline.org
Fri Nov 22 01:54:13 PST 2019

This opinion piece (with 5 charts) by Martin Wolf is best viewed on this
link: https://www.ft.com/content/d592af00-0a29-11ea-b2d6-9bf4d1957a67


Opinion Intellectual property

The fight to halt the theft of ideas is hopeless
China will not accept inferiority — and the west should not want it to

What do paper, printing with moveable type, gunpowder and the compass have
in common? The answer is that they were Chinese inventions. Without them,
the European advances from the 15th century onwards would have been far
harder, if not impossible.

This story illustrates why we should want productive knowledge to flow
across the world. Knowledge also “wants to be free” because unlike a
commodity, my use of your idea does not prevent you, or anybody else, from
using it. In the jargon, knowledge is “non-rival” in consumption, which
gives it the character of a “public good”.

But creating that new idea may well have been costly. If you knew that I
(and everybody else) could use it without compensation, you could be less
inclined to develop the idea at all. This is a “free-rider problem”.
Intellectual property rights exist to solve it, by creating a temporary
monopoly in the idea.

Yet, as the Australian economist Nicholas Gruen notes, by solving the free
rider problem, we lose the “free-rider opportunity”: the ability to build
freely upon other peoples’ ideas. In the long run, the latter dominates. We
are the beneficiaries of a vast stock of ideas, from the wheel onwards.
Arguably, this is the defining characteristic of humans.

A trade-off exists, then, between solving the free-rider problem, by
granting temporary monopolies, and exploiting the free-rider opportunity,
by making ideas freely available at once. For this reason, temporary
monopolies are not the only way to motivate innovation. Alternatives
include subsidised research and targeted prizes. The intellectual property
rights regime we have has merits. But it is an imperfect compromise among
conflicting interests, one of which — that of incumbent firms — is likely
to be most powerful.

The Nobel laureate Joseph Stiglitz goes further, arguing that, by reducing
the newly available set of ideas from which others can draw and by
increasing the extent of the enclosure of the “knowledge commons”, tighter
intellectual property regimes may lead to lower innovation, and even lower
levels of investment in innovation. Free-rider opportunities really do


This worry is not new. In the 18th and early 19th centuries, the UK was the
leading country and the US striving to catch up. In the late 18th century,
England duly criminalised the export of textile machinery and the
emigration of textile mechanics. But one Samuel Slater emigrated covertly
in 1789, to start a modern textile industry in the US (the “technology”
industry of the era). Other British ideas crossed the Atlantic, notably
railways, just as Chinese ideas had come to Europe centuries earlier. Yet,
in the late 18th and 19th centuries, protection against imports was the
chief tool of US industrial policy (under Alexander Hamilton’s influence).

How does this compare with China today? Since accession to the World Trade
Organization in 2001, China’s trade policies are less protectionist than
those of the US in the 19th century. It has also made an effort to
implement its WTO obligations on intellectual property. But, in the eyes of
its partners, this has been grossly inadequate. That is partly because
Chinese legal regimes are defective and partly because China is determined
to catch up on today’s more advanced countries, just as the latter sought
to catch up in the past.

China will not accept permanent inferiority. We should not want it to be
permanently inferior either. We should instead want the energies of the
Chinese people to build on our ideas. That is how progress occurs. It
should happen. Indeed, it is already happening.

Here are four conclusions.

First, current intellectual property rights are not a moral or economic
absolute. They are a compromise. It is arguable that protection is now
excessive: copyright is too long and patents are granted too easily. This
reinforces monopoly.

Second, China’s desire to gain access to the best technology is inevitable
and, in the long run, likely to be beneficial. In any case, the leakage of
knowhow is inevitable. The flow will not stop.

Third, China is already a source of new knowhow. For this reason, its own
interest in protecting intellectual property is growing. This ought to be
the foundation of a new settlement between China and its partners. In the
long run, we should expect the idea flow to become ever more two-way.

Finally, people in advanced countries should fixate less on protecting the
knowhow they have and more on the resources and institutions that will
sustain innovation. The value of existing knowledge erodes as it flows.
Further advances are essential. Intellectual property rights are only a
partial solution. An assault on free scientific inquiry will do damage that
no such property rights can offset.

As I argued last week, the high-income countries need to combine, in order
to reach a new settlement with an advancing China, on the basis of mutual
advantage, within the WTO. Protection of intellectual property must be part
of that discussion. But demands have to be reasonable. China is rightly
determined to become an engine of innovation. In some areas, it has
succeeded. We can seek to make this harder. We must not try to stop it.

martin.wolf at ft.com

Thiru Balasubramaniam
Geneva Representative
Knowledge Ecology International
41 22 791 6727
thiru at keionline.org

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