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.
.

EU, US, and Japan challenge China at WTO over rare earth quotas

Rare earths are critical for the production of many high-tech products. Beijing has set quotas on the export of the minerals. Now a joint case by the EU, U.S. and Japan is being filed with the WTO challenging the quotas. The joint filing by the three is not only rare but the first so far!

The group argues that China which produces 95 per cent plus of the global supply is pushing up prices. China replies that it is enforcing quotas to limit environmental damage through excessive mining. Apparently China suddenly has a laudable interest in the environment! A Chinese foreign ministry spokesperson said:"We think the policy is in line with WTO rules,""Exports have been stable. China will continue to export, and will manage rare earths based on WTO rules," he said.

The 17 rare earth metals are used in many electrical and renewable energy devices. Critics claim that prices are kept low in China whereas quotas make the earths more expensive for foreign competitors.

Ivor Shago chair of mining services at Rare Earths Global said that the U.S. should have decided itself to produce rare earths many years ago."They took a deliberate decision about 20 years ago not to develop [rare earth mining] and instead to buy the completed products,""Because of the deliberate decision that was taken, in China we have developed skills and expertise that the others do not have." Nevertheless it remains to be seen whether China is taking advantage of that fact in contravention of WTO rules. For more see this BBC article.

Capitalism Cannot Satisfy Us

This is perhaps surprising coming from a director of the WTO. Of course he is not a Marxist as he makes clear at the end. He seems to be sympathetic to John Rawls. I have always taken him to be a reformer of capitalism basically drawing upon the contract theory tradition ( a tradition rejected by Hegel Marx and others) to arrive at a type of social democratic state. I expect given the present day orientation in the US Rawls would be though of as a socialist since the state is heavily involved in the economy and regulation.


From Truthout: http://www.truthout.org/docs_2006/120707G.shtml

"Capitalism Cannot Satisfy Us"
Daniel Fortin and Mathieu Magnaudeix interview Pascal Lamy
Challenges

Thursday 06 December 2007

World Trade Organization Director Pascal Lamy, one of
globalization's shrewdest observers, rehabilitates the Marxist
criticism of capitalism.

A man of the Left and director general of the World Trade
Organization, Pascal Lamy is at the heart of globalization. His sense
of things? Marxism remains pertinent as a tool for analysis of modern
capitalism. His conviction? We must look for alternatives to this same
capitalism.

Challenges: Does Marx, as a certain number of recent authors have
written, remain the best thinker about contemporary capitalism?

Pascal Lamy: Not the best, because history has shown us that he
was not the prophet some vaunted. But from the perspective of
nonpredictive explanatory power nothing comparable exists. If one
wants to analyze the globalized market capitalism of today, the
essential tools reside in the intellectual toolkit Marx and some of
those who inspired him created. Of course, everything is not perfect.
There are stacks of criticisms to level against Marx, and he was
probably a better philosopher and economic theoretician than he was a
political thinker....

What do you retain from Marx?

Before everything else, the idea that market capitalism is a
system based on a certain theory of value and the dynamic and the
dysfunctions it may generate. A system where there are owners of
capital who buy labor and holders of their own labor power who sell
that. That relationship implies a theory of profit which ensues from
alienation: the system has the tendency for the rich to become richer
as they accumulate capital and for the poor to become poorer when they
own nothing but their labor. All that remains largely true. No one
since Marx has invented an analysis of the same significance. Even
globalization is only a historical stage of market capitalism as Marx
imagined it.

But what good does it do to criticize capitalism? Isn't it
accepted by everyone?

Market capitalism is a system that possesses virtues and quirks:
efficiencies, inequality, innovation, short-termism.... Its recent
financialization has brutally changed the equilibrium laboriously
hammered out between capital and labor. The institutions developed to
protect workers have proven ever more inadequate and ineffective.
Hence the priority I gave to the goal of mastering globalization
during my term as European Trade Commissioner. At the time, in 1999,
that surprised people. We must listen to those who talk about
alternative modes of growth, those who sign up against this enormous
consumerist weight that materializes, commodifies everything, who are
against this system that puts people into relation with symbols they
are sold thanks to the media and the Internet, so that in essence they
buy nothing but their own image all day long. There's a kind of
psychic cannibalism in all that that provokes dissolute behavior. Many
people are unhappy because they are constantly being compared to their
neighbors, with a fabricated image of themselves they cannot achieve.
I belong to those who think we must continue to seek alternatives and
that politics must be involved in these questions.

Alternatives to capitalism or alternatives to the way capitalism
operates?

Alternatives to capitalism. Capitalism cannot satisfy us. It is a
means that must remain in the service of human development. Not an end
in itself. A single example: if we do not vigorously question the
dynamic of capitalism, do you believe we will succeed in mastering
climate change?

Isn't that Utopian?

So? From a theoretical point of view, I don't believe we can
satisfy ourselves with limiting the historic horizon by saying that
market capitalism is a stable model, give or take a few amendments. It
feeds on too many injustices. But we can also be realistic and observe
that up until now, whatever has been either theorized, or written, or
applied as an alternative to capitalism has not worked. The reality
test must remain essential.

But all the same, we don't want to throw everything in capitalism
out....

Of course not. I'd like to see us get beyond reciprocal
anathematization. The Berlin wall fell close to twenty years ago. It's
time to be able to discuss reality without falling into caricature.
Capitalism is even a very effective system. All the more so as it is
now globalized, which produces more economies of scale. With the same
capital, one may use more work in bigger batches. That certainly
creates inequalities, but also it also creates purchasing power and
growth. Capitalism has brought between 300 and 500 million people out
of poverty in the course of the last twenty years. That's the case in
India and China, somewhat less so in Africa; it's a reality and we
mustn't deny it. We have to be clear-headed enough to acknowledge the
drawbacks, but also the advances of this system.

With respect to China's rise in power, isn't that an instance of
the sublimation of capitalism before its self-destruction at the heart
of Marxist theory?

If Marx analyzed today's China in its reality and its plan and he
talked about it with Tocqueville, he would tell him that America is
ultimately very social-democratic compared to the model China
incarnates. In the United States, you have a form of social assistance
for the poorest people; you have food stamps; largely private
contingency systems, certainly, but also some public ones for those
who are most destitute. None of that exists in China.

Chinese leaders talk about a transition phase...

When I talk to Chinese leaders, they tell me that, for them, this
economic transformation phase entails risks of social, regional and
environmental imbalances. And they are worried. They say: "We have to
deal with the issue, but we've succeeded in bringing millions of
people out of poverty, and done so consistently over thirty years. No
one else has done that (which is true); credit us with the fact that
it's a point on our trajectory."

You believe them?

I understand them.

But go on; do you associate with them regularly?

I believe they are very concerned about the resolution of these
questions, but I also believe that the resolution of these questions
is intrinsically necessary to the development of the Chinese system.
If these social questions of social, environmental and regional
imbalances are not dealt with, then it's the system itself that is at
stake. The Chinese save too much and don't consume enough. That's one
source of the imbalance in global trade.

Why, according to you?

Because they save up for their retirement, for their children's
education and for the day they might be sick. That's where we come
back to market capitalism. It's not altogether an accident that Mr.
Bismarck invented social security, that Mr. Ford was in favor of it
and that Mr. Beveridge perfected it. These are necessities for the
operation of the system itself in the absence of the search for an
alternative.

Where is the French Left with respect to Marx?

Let's talk about the Left at a global level. In a phase when
market capitalism is more efficient and less equalitarian than
previously, the present political reality is, from a certain
perspective, much more favorable for the Left. You have, moreover,
events that come to corroborate the least bearable aspects of the
model: either its intrinsic dysfunctions, such as the subprime crisis,
or the phenomena that capitalism and its value system don't allow us
to deal with - the most obvious of those being global warming.

But is the French Left still too Marxist?

Yes, but not in its analysis of capitalism, but rather in the
sense of what Marx wrote about the Commune. What the French Left likes
in Marx, is the aspect "the Revolution is for tomorrow; workers of the
world, unite, strike, break the backs of capitalism and of the
capitalists and take power." That's the myth of the French Left.
That's Marx's fertilization of Gracchus Babeuf in French political
thought because Babeuf was one of those who inspired Marx.

Why has the social-democratic model never prospered in France, do
you think?

Because the French Left remains obsessed with equality and because
it has a frequently theoretical vision that distances it from, for
example, the labor movement, which is more practical and more dynamic
in its approach. John Rawls is a man whose thinking is accepted by
three-quarters of the world's social-democrats and who continues to be
rejected by the [French] Socialist Party. They tell you, "Rawls is a
right-wing philosopher." And why? Because he talks about equity and
not equality. That's something that deserves debate. Because if the
concrete incarnation of equality is equity, then rejecting equity in
the name of the fact that it's a right-wing notion amounts quite
simply to rejecting reality when it doesn't adhere to one's analysis
of it.

If I am a social-democrat, it's both because I believe deeply in
the necessity and the possibility of changing the world, and also
because I believe that all politics is grounded in the facts.

Translation: Truthout French language editor Leslie Thatcher.