Free Markets, Free Trade, and Intellectual Property Rights

While many politicians and business people applaud the idea of free markets and free trade, in reality free trade agreements stress intellectual property rights (TRIPS) that are intended to give monopoly rights to large corporations.

While maximizing return on capital investment may not be the sole aim of capitalists it certainly is one of the most important aims. Capitalists surely desire.profits and the expectation of profits spurs capital investments. According to capitalist ideologists free markets are also desirable and every country should try to liberalize their economy. The closer the approach to a free market the better. At the same time free trade agreements are also lauded as promoting the global good as such agreements expand trade and global production. However these three aims together are contradictory.
In a perfectly free market when trading reaches an equilibrium profit rates are zero.
" a long run equilibrium every firm's maximal profit is zero."
According to economic orthodoxy(neo-classical theory) then perfect competition would lead to a situation where the profit rate was zero. Is this really what capitalists want? I think not. Free market orthodoxy is simply used as a club against particular government policies capitalists do not like such as certain types of regulations or government expenditures that may interfere with profits. While capitalists may make stupid mistakes as we all do, I doubt that they would make the mistake of opting for a system in which if it worked as it is supposed to the profit rate would be zero. My conclusion is not that of the libertarians that obviously modern capitalism is somehow a big government warped version of some ideal capitalism. My conclusion is quite different. Big government is in the service of and to a considerable extent is a creation of large global corporations and serves global capital. What capitalists are after is a profit and that is most often achieved not through a system of free markets but one where capitalists can collect economic rents.

There are many different kinds of rents but one type that is crucial to modern capitalism is rents that derive from intellectual property rights (IP rights). A pharmaceutical firm for example will patent a certain drug and then it will have the exclusive right to produce and market the drug for a certain number of years. This right provides a monopoly and excludes competitors from marketing the same product at a lower price. A system with economic rents enables capital to gain profits from various types of exclusive rights such as ownership of land, copyrights, or patents. In contrast as a Wikipedia article notes:
.'. if there is no exclusivity and there is perfect competition, there are no economic rents, as competition drives prices down to their floor."
With prices at the floor level there would be no profit either. Free Trade agreements illustrate the importance of rent-seeking in modern global corporate capitalism.

The World Trade Organization administers what is called the TRIPS(Agreement on Trade Related Aspects of Intellectual Property Rights). This agreement was part of the General Agreement on Tariffs and Trades (GATT) in 1994. In effect what this agreement does is establish a law with respect to IP rights that ensures that global capital will be able to collect economic rents. The provisions were disastrous for some developing countries' access to drugs. The TRIPS laws according to the Doha declaration(2001) should be interpreted in light of the aim to promote access to medicines for all.
TRIPS requires that any nation that belongs to the WTO must meet requirements for:.
"... copyright rights, including the rights of performers, producers of sound recordings and broadcasting organizations; geographical indications, including appellations of origin; industrial designs; integrated circuit layout-designs; patents; monopolies for the developers of new plant varieties; trademarks; trade dress; and undisclosed or confidential information."
The agreement also sets out enforcement procedures and dispute resolution processes. All this is supposed to be for the promotion of technological innovation and the transfer or dissemination of technology. So the way in which to stimulate innovation is to prevent competition and provide monopoly rents for global corporations.
Writers on both the right and left of the political spectrum have written about the issue of intellectual property rights.. The economist Michael Perelman has written an entire book on the subject: "Steal This Idea: Intellectual Property Rights and the Corporate Confiscation of Creativity (2002, Palgrave Macmillan; paperback, 2004, Palgrave Macmillan)."
Modern global capitalism is not about free markets. It is about gaining profits especially from monopoly intellectual property rights.


Popular posts from this blog

Danish company uses high tech solution to save water

Interview with UN Envoy Martin Kobler on situation in Libya

Dogs in small Finnish town to be fitted with special wolf-protection vests