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.
"...in 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.
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A Rant on Degrees of Violence.

Michael Perelman is an American economist who teaches in California. Obviously upset about recent events in this blog entry he considers the different degrees of violence that individual terrorists cause and the way their actions are discussed in the press compared to the violence of state actors such as the US. No one seems to worry too much about justifying US drone attacks even though they kill many innocent people along with a few terrorists. The financial disaster caused by Wall Street greed has also caused violence to many.

We hear lots of talk about bailing out Greece. However, it is the banks who invested in Greece because it gave high returns who are being bailed out and they are being bailed out through cutting pensions and other benefits of the Greek working class. The Greek working people are being punished for managing to negotiate good contracts with the government and others. When a corporation generates good profits this is a plus when unions negotiate favorable terms this is regarded as unsustainable and to be taken away and given back to capital. This is what a bailout is all about. This is from Perelman's blog.

A Rant on Degrees of Violence

We live in a violent society. When people become alienated they often do violent things. When the person is “one of our own,” the violence is seen as a matter of individual responsibility. A man — Joe Stack — becomes troubled because the financial problems and flies an airplane into an Internal Revenue Service building. The response seems to be that he is mentally unbalanced or expressing justifiable indignation in an unacceptable way.

A young Pakistani immigrant suffers financial and family problems, turns to religion, and tries to explode a car bomb in crowded Times Square. The response focuses on the religious angle because his religion is not the dominant one in the country.

What if he had used a drone instead? Obviously, most of the victims have been innocent. Of course, we have no knowledge that our own drone attacks predominately kill “guilty parties”? And then again, if the drone attack had been successfully pointed at Wall Street, it would have undoubtedly kill people whose destructive activities have resulted in many destroyed lives. Would that be justified? Our own young people who operate the drones might be seen by some as heroes.

The analogy of Wall Street and the military may be unduly provocative. And yet, the banks resemble a victorious government demanding reparations from a defeated enemy — in this case, the losers of the class war. Why should ordinary people have to pay for the destructive behavior of the rich and powerful?

I don’t know if the people who recently burned the Greek bank were police provocateurs or militants angry with the government. In the former case, the objective was to harm the people who are presently being harmed by the financial crisis. In the latter case, they were behaving stupidly.

The man who flew the plane into the IRS building was upset about how much he was paying to support the government. I suspect that he, or the people who expressed sympathy for his cause, are less concerned about military expenditures than the social programs, comparable to what the Greek government is forced to cut.

Returning to the war theme, how much violence has been the product of people returning from the wars, serving the interests of Wall Street and the rest of big business. Timothy McVeigh was justifiably regarded as an outlier, but more common violence, such as individual homicides and suicides, seem to be far more common among people exposed to the violence of war.

How much more guilty are the supposedly respectable people who promote our wars abroad than the disturbed young man who attempted to kill a couple hundred people at most? Instead, his incompetent attempt at violence will be used to justify far greater violence abroad.

How can we put an end to such hypocrisy and the violence it entails?

Finally, what about the everyday violence experienced by people denied the opportunity for a decent chance in life? What about inadequate healthcare or education? Isn’t that a form of violence? If a capitalist society rewards some people with multibillion-dollar annual incomes of the official unemployment rate is near 10%, is it time to see that capitalism itself is a form of violence?

An Account of Chico Education Protests.

This is a first hand account of the education protests at the Univ. of California Chico. Finally students seem to be mobilizing to protest the savage cutbacks in education. For quite a long while students have seemed to be rather complacent concerning events that are beginning to impact upon them directly. As Perelman points out it would seem that the protests are rather narrowly centered on the concerns of university students while all levels of education are suffering the same cutbacks as are other groups throughout California. A broader base would only strengthen the movement to protest the cuts. Michael Perelman is an economist. This is from his blog.

Brief Thoughts about Chico’s Education Protest

I was thrilled to see the large outpouring of emotion from the demonstration protesting the evisceration of the University. I have not seen anything like this since the Vietnam protests of the early 70s.

In Chico, before I came, people were so disgusted with the apathy about the war, that they carried out what may perhaps have been the world’s only grovel-in.

The organizers did an outstanding job of preparation and execution; they did so with considerable maturity.

Still, I wished that they had a broader perspective. For example, I did not have any sense of a connection with the local community college or with K-12 education.

In many ways, California is undergoing a self-induced (by a powerful minority) structural adjustment. The problem is not a matter of taking advantage of students and faculty. People are resisting the same forces in Iceland and Greece. Even worse, structural adjustment is only episodic in such advanced countries. In poorer nations, structural adjustment is the norm.

Just as national austerity is not the result of an impoverished state, but perverted priorities, which emphasize war and pork barrel politics. In California, where massive funds go to irrigate agriculture lands to grow crops which could be more economically grown elsewhere. Oil funds, which were intended for higher education, have also been siphoned off for water. To make matters worse, the state is intending to float multibillion bond offerings for water.

In an institution, where education is the norm, students should be getting to learn about how much they have in common with people whose struggles are far worse than their own.

The most common chant: “Whose University is it? Ours.” I found this approach naïve. Students and faculty need to reach out to a broader swath of people experiencing structural adjustment. Home health care workers are getting screwed. Unemployed workers are worse off than most students ….

Imagine if the antiwar protests were just about not wanting to be drafted. Would they have any effect?

Michael Perelman: Venting over 4 decades of right-wing activism

This has a great deal of truth but is also overdone in places. The Tea Party movement for example has as its favorite Ron Paul a person who speaks eloquently against the Afghan and Iraq war and the trampling on legal rights involved in the war on terror. There is still plenty of freedom of speech and as sold out as is much of the mainstream press there is now a vibrant blogosphere and alternative media on the internet. At least the Tea Party shows the general public at least is beginning to stir even though they may be subject to right wing influences and demagogues. It is a reason for the left to rejoice and take advantage of the situation rather than just rant, although perhaps the latter is good therapy! This is from Michaelperleman.wordpress.

Michael Perleman is a California economist and author of many books.

Enough Already: Venting Over Four Decades of Right-Wing Activism


Today, Richard Nixon would be considered a flaming liberal. In Nixon’s day, Barack Obama would have passed as a typical conservative; except, if you remove considerations of civil rights from consideration, he might even be a fairly hard line conservative.

The Bill of Rights is pretty well shredded. Freedom of speech is fast becoming the special privilege of corporations. Economic pressures, fueled by greedy shareholders, have eviscerated the press, leaving freedom the press virtually meaningless.

The most important part of the Fifth Amendment is probably the takings clause, which is interpreted to restrict the right of the government to regulate property.

Perhaps, the Second Amendment is the most important amendment, giving people the right to arm themselves with anything short of a nuclear weapon.

All this right-wing nonsense might be somewhat understandable if it were necessary to provide for a good life; however, the economy is becoming as dysfunctional as the ridiculous political system.

Watching people rebel politically or in the streets in Iceland and Greece, while people in the United States express their frustrations with the tea party, makes me noxious. My problem with the tea party movement is one of political jealousy. Many of the participants share my frustration at the class bias of the system, but they seem confused, mistaking late capitalism or socialism. Sure, the tax system is rigged against ordinary people, but it works in favor of the same people who are running the tea party movement.

Unfortunately, the left (if there is such a thing) seems unable to articulate a strong call to action. Instead, our anger bubbles up periodically — today, over the evisceration of education; tomorrow, over an escalation or extension of the war; or maybe even the promotion of a protest candidate, but a systematic program is nowhere to be found in the public dialogue.

What is to be done (but vent)? I hope not.

Michael Perelman: How to Create a Crisis

This is from Michael Perelman's blog a US economist. Unfortunately the paper often of little or no real value creates real debt via the government bailout that involves borrowing that the US citizen must eventually repay. In fact the taxpayer is paying to rescue the people who brought about the crisis in the first place. Many of those same people are in charge of this bailout.


Matter and Antimatter: How to Create a Crisis: A Thanksgiving Rant
Posted November 27, 2008Filed under: economics
Skilled physicists do not know how to take nothing and turn it into matter and antimatter, but finance behaves as if it had the capacity to do something similar. Imagine a simple market economy about to create a bubble. I want to tell the story of this bubble, only to put the current, crazy stimulus package into perspective.
Somebody says to me they have a piece of paper worth $1 million. I can buy for half the price. I borrow the money to cover most of the cost. People are willing to lend me the money confident in the belief that my paper will increase in value. Other people are engaging in the same transaction, spreading confidence that these papers are now increasing in value, say to $600,000.
The seller of the paper now has a half-million dollars, having given up nothing but blank piece of paper. I have a capital gain of hundred thousand dollars. My lenders have a credit with a half-million dollars. We are all better off, even though nothing has been produced.
Feeling secure in the increasing value of our paper, I along with the other “investors” now start consuming more, spreading prosperity for the economy. Virtually everybody is enjoying the benefit of the bubble. Within a short period of time, people throughout the economy making decisions based on the increasing appearance of health and the economy.
At some point, people realize that this paper is nothing more than a blank sheet of writing paper. The bubble may have stimulated some investment that is capable of producing real economic benefits, but mostly it has induced people to consume and commit themselves to pay back debts.
Remember, this prosperity was built out of nothing. In the end, matter and antimatter collided. The lenders have lost their money. The speculators and consumers are in debt. Most lack the wherewithal to repay their debts. But in the case of the current bubble, the economy does not have the productive capacity to put everything together. The loans came from abroad and so did many consumer goods.
At the same time, the government loans are ultimately dependent on another set of loans, also largely from abroad. How will these loans ever be repaid? Will new loans keep coming as the bubble engulfs the rest of the world?
Should the government come in and give me a half-million dollars so that I can repay my loan? Should I be rewarded for my stupidity and naïveté? Will that policy really make the economy healthy? Or will it policy just facilitate the creation of even greater bubbles?
Obviously, the most sensible decision would be to put the money into making a more healthy economy, one less susceptible to speculation — something impossible under capitalism, but that is another question. Eventually, somebody will have to pay the piper. The policy today seems to be an effort to shield the very people who created the crisis, placing the burden on the most innocent.
The graphic picture of the stimulus package that I posted yesterday suggests a government response just as foolish as the speculations that set off the bubble in the first place.
Happy Thanksgiving.