"The United States is the most serious protec-tionist. In 1998, the US Copyright Term Ex-tension Act extended the period of copyright protection from the life of the author plus fifty years to the life of the author plus seventy years. The Disney Corporation led the fight for this extension since the copyright on Mickey Mouse, created in 1928, was due to expire. As a result the new law became known in some circles as the Mickey Mouse Protection Act."++++++++++++++++++++++++++++++
by Chalmers Johnson
Link to Part 01
(February 14, Colombo, Sri Lanka Guardian) Rather than acknowledging that free trade, pri-vatization, and the rest of their policies are ahistorical, self-serving economic nonsense, apologists for neoliberalism have also revived an old 19th century and neo-Nazi explanation for developmental failure - namely, culture. Chang believes that this reflects the popularity of Samuel Huntington’s thesis that we are ex-periencing a “clash of civilizations” or Francis Fukuyama’s contention that trust extending beyond family members critically affects eco-nomic development. Fukuyama argues, aston-ishingly, that the absence of such trust in the cultures of China (the fastest growing econ-omy on Earth today), France, Italy, and (to some extent) Korea makes it difficult for them to run large firms, which are key to modern economic development. This is not so different from the 19th century German economist and sociologist Max Weber, who in 1904 identified the Confucian/Buddhist countries of China and Japan as economically backward because they did not have the Protestant ethic.
Chang argues that culture simply does not work as an explanation for economic success. Extremely broad categories such as “civiliza-tion”, “Christian”, or “Muslim” obscure more than they reveal, and the modern histories of Germany, Japan, China, and many other coun-tries suggest that Protestant-work-ethic-type cultures are the results of economic develop-ment, not their cause. In the early 19th century, the British endlessly generalized about Ger-many and Germans, calling them “a dull and heavy people” and “indolent”, saying “the Germans never hurry”, they are a “plodding, easily contented people ... endowed neither with great acuteness of perception nor quick-ness of feeling”, they are “not distinguished by enterprise or activity”, they are “too individu-alistic and unable to cooperate with each other”, they are “overly emotional”, and “the [German] tradesman and shopkeeper take ad-vantage of you wherever they can, and to the smallest imaginable amount rather than not take advantage of you at all. ... This knavery is universal”.
It is discouraging to see this kind of thought rampant again in economic discourse, this time directed against the poor people of Africa, Latin America, and elsewhere. Commentators who denigrate the Philippines as East Asia’s only Catholic and therefore Latin American-type culture forget that only a half-century ago it was the second richest country in Asia (after Japan). Cultural explanations offer powerful support for the List/Chang proposition that economically successful nations are almost pathologically afraid of competitors coming up from below and therefore try to block their progress by kicking away the ladder. It is time to recognize, particularly in the English-language economic press, that a “level playing field” leads to unfair competition when the players are unequal. We have no trouble rec-ognizing that a boxing match between people with more than a couple of pounds difference in weight is unfair. Why should we accept that the United States and Honduras should com-pete economically on equal terms?
One of the strengths of Chang’s new book lies in the half-dozen lucid chapters on particular, often rather technical aspects of development and international trade. These add up to a jar-gon-free primer on contemporary economic thought leavened with a sound knowledge of history. The best of these are on trade liberali-zation, foreign investment, public versus pri-vate enterprises, patents and copyrights, and macroeconomics. The most interesting of these are on trade liberalization and what today are rather ostentatiously called “intellectual prop-erty rights”.
We live in an allegedly enlightened age of free trade. Nonetheless, European citizens support their dairy industry with subsidies and tariffs to the tune of sixteen billion pounds sterling a year. This amounts to more than one pound per cow per day, when half the world’s people live on less. The pattern is repeated with regard to a vast range of agricultural commodities grown in rich, developed countries. The US subsi-dizes corn and exports it to Mexico, where it is the staple diet of most of the people. These exports, however, drive small Mexican farmers into bankruptcy and encourage their illegal immigration into the United States, where a racist backlash is directed against them. In many cases, the American proponents of farm subsidies are one and the same people who stir up hatreds against Mexican farm workers. Ja-pan is one of the world’s richest countries, with a remarkably even per capita income dis-tribution, but it still lavishly subsidizes its ex-tremely inefficient rice growers and prevents the import of rice that could easily compete on price with domestic rice. This system helps perpetuate the one-party rule of the Liberal Democratic Party by mobilizing rich, protected farmers, who vote for the conservatives.
What’s wrong with such practices? All coun-tries have domestic political interests, and suc-cessful politicians cater to them. The problem is the hypocrisy surrounding “free trade” and the lies that distort political rhetoric in virtually all economically advanced countries. Accord-ing to Chang, “Belief in the virtue of free trade is so central to the neo-liberal orthodoxy that it is effectively what defines a neo-liberal economist. You may question (if not totally reject) any other element of the neo-liberal agenda - open capital markets, strong patents, or even privatization - and still stay in the neo-liberal church. However, once you object to free trade, you are effectively inviting ex-communication.” Under the Anglo-American-dominated World Trade Organization, a great deal of trade liberalization has taken place, but it has virtually all come at the expense of in-fant industries or cash crops in developing countries and has enriched exporters and con-sumers in rich countries. Not surprisingly, the system allows for protection and subsidies much more readily in areas where the rich countries want them and rejects any exceptions for developing countries. This is the main rea-son for the current revolt by virtually all Latin American countries against further US inter-ference in their economic policymaking.
Reduction of tariff revenues also plays havoc with national budgets in poor countries. Be-cause they lack efficient tax collection capa-bilities and because tariffs are the easiest taxes to collect, developing countries rely heavily on them. Add to this lower levels of business ac-tivity and higher unemployment that results from IMF-ordered trade liberalizations, which reduce income tax revenue. When such coun-tries are then put under further IMF pressure to reduce their budget deficits, falling revenues mean severe cuts in spending, often eating into vital areas like education, health, and physical infrastructure, damaging long-term growth.
Neoliberal theorists believe that when it comes to golden straitjackets “one size fits all” - ex-cept for those countries rich enough to afford a private tailor. The chief effect of the golden straitjacket has been not to promote growth but to turn healthy countries into basket cases. “In the long run”, writes Chang, “free trade is a policy that is likely to condemn developing countries to specialize in sectors that offer low productivity growth and thus low growth in living standards. This is why so few countries have succeeded with free trade, while most successful countries have used infant industry protection to one degree or another.”
Another salient aspect of the neoliberal canon has a much less hoary history than free trade. The idea of the state intervening to grant a mo-nopoly to an inventor or a creative artist to ex-ploit his or her device is relatively new and was once thought to be contrary to the idea of liberalism. Chang observes, “The technologi-cal ‘arms race’ between backward countries trying to acquire advanced foreign knowledge and the advanced countries trying to prevent its outflow has always been at the heart of the game of economic development”. During the 18th century, this competition took on a new dimension with the emergence of modern in-dustrial technologies that had much greater potential for productivity growth than tradi-tional technologies. The result was a vicious international competition to recruit skilled for-eign workers, machine smuggling, and indus-trial espionage. The origins of patents, copy-rights, and protection of trademarks are to be found in Britain’s attempts to protect its ad-vanced technologies by erecting legal barriers against their outflow. The other industrializing countries in Europe and the United States had to violate those laws in order to acquire supe-rior British technologies.
The first measure to protect IPRs (intellectual property rights) was a 1719 English ban on the migration of skilled workers. The law made it illegal to recruit experienced workers for jobs abroad - known as “suborning”. Emigrant workers who did not return home within six months of being warned would lose their right to lands and goods in Britain and their citizen-ship would be revoked. This was followed by a new act in 1750 prohibiting the export of “tools and utensils” in the wool and silk indus-tries, extended by the Tools Act of 1785 to the export of many different types of machinery. The development of science in conjunction with industry meant that a lot of disembodied knowledge could be written down in a lan-guage that could be understood by anyone with appropriate training. Once an idea is written down in general scientific and engineering lan-guage, it becomes much easier to copy. It thus became more important to protect the ideas themselves than the workers or machines employing them. Beginning with some Ger-man states in the 16th century and with Britain in 1623 with the Statute of Monopolies, gov-ernments granted ten years of protected mo-nopoly to inventors of “new arts and ma-chines”. Britain introduced the first copyright law in 1709 and the first trademark law in 1862.
It is not obvious that providing incentives to inventors and accepting the social costs of mo-nopolies increase innovation or do anything more than enrich corporations who can file endless patent infringement suits and slow down change by making frivolous but pat-entable minor changes in old techniques. Ac-cording to Chang, “The patent lobby talks non-sense when it argues that there will be no new technological progress without patents”. For example, nonprofit organizations, such as uni-versities, subsidize a great deal of research. Several classical students of innovation, such as the economist Joseph Schumpeter, dis-counted the importance of patents. Schumpeter believed that the natural if short-lived monop-oly that comes with invention was more than enough. One thing is certain: Extending the term of protection for existing work, which is advocated by all the Bad Samaritan rich coun-tries, cannot create new knowledge.
The United States is the most serious protec-tionist. In 1998, the US Copyright Term Ex-tension Act extended the period of copyright protection from the life of the author plus fifty years to the life of the author plus seventy years. The Disney Corporation led the fight for this extension since the copyright on Mickey Mouse, created in 1928, was due to expire. As a result the new law became known in some circles as the Mickey Mouse Protection Act.
Despite the enormous sums paid to lawyers for work on patent law, it should be understood that as a practical matter patents are important in only three industries - computer software, entertainment, and the pharmaceutical industry. But they are a critical stumbling block for economic development. Some 97 percent of all patents and the vast majority of all copyrights and trademarks are held by eco-nomically advanced countries, which use them to deny medicines, textbooks, and computers to un-derdeveloped countries, exploit epidemics such as HIV/AIDS to extract excess profits, and kick away the ladder for countries trying to catch up. As Chang concludes, “The most detrimental impact [of the patent system] lies in its potential to block knowledge flows into technologically backward countries that need better technologies to develop their economies. Economic development is all about absorbing advanced foreign technologies.” Among the best things we could do today to help the Third World would be to shorten the period of protection, drastically raise the originality bar, and make compulsory licensing and imports of generics easier.
With “Bad Samaritans”, Chang has succinctly and comprehensively exposed the chief structures of economic imperialism in the world today. What is now required is the leadership to undermine and dismantle the barriers that keep so much of the world so poor.
Link to Part 01
(February 14, Colombo, Sri Lanka Guardian) Rather than acknowledging that free trade, pri-vatization, and the rest of their policies are ahistorical, self-serving economic nonsense, apologists for neoliberalism have also revived an old 19th century and neo-Nazi explanation for developmental failure - namely, culture. Chang believes that this reflects the popularity of Samuel Huntington’s thesis that we are ex-periencing a “clash of civilizations” or Francis Fukuyama’s contention that trust extending beyond family members critically affects eco-nomic development. Fukuyama argues, aston-ishingly, that the absence of such trust in the cultures of China (the fastest growing econ-omy on Earth today), France, Italy, and (to some extent) Korea makes it difficult for them to run large firms, which are key to modern economic development. This is not so different from the 19th century German economist and sociologist Max Weber, who in 1904 identified the Confucian/Buddhist countries of China and Japan as economically backward because they did not have the Protestant ethic.
Chang argues that culture simply does not work as an explanation for economic success. Extremely broad categories such as “civiliza-tion”, “Christian”, or “Muslim” obscure more than they reveal, and the modern histories of Germany, Japan, China, and many other coun-tries suggest that Protestant-work-ethic-type cultures are the results of economic develop-ment, not their cause. In the early 19th century, the British endlessly generalized about Ger-many and Germans, calling them “a dull and heavy people” and “indolent”, saying “the Germans never hurry”, they are a “plodding, easily contented people ... endowed neither with great acuteness of perception nor quick-ness of feeling”, they are “not distinguished by enterprise or activity”, they are “too individu-alistic and unable to cooperate with each other”, they are “overly emotional”, and “the [German] tradesman and shopkeeper take ad-vantage of you wherever they can, and to the smallest imaginable amount rather than not take advantage of you at all. ... This knavery is universal”.
It is discouraging to see this kind of thought rampant again in economic discourse, this time directed against the poor people of Africa, Latin America, and elsewhere. Commentators who denigrate the Philippines as East Asia’s only Catholic and therefore Latin American-type culture forget that only a half-century ago it was the second richest country in Asia (after Japan). Cultural explanations offer powerful support for the List/Chang proposition that economically successful nations are almost pathologically afraid of competitors coming up from below and therefore try to block their progress by kicking away the ladder. It is time to recognize, particularly in the English-language economic press, that a “level playing field” leads to unfair competition when the players are unequal. We have no trouble rec-ognizing that a boxing match between people with more than a couple of pounds difference in weight is unfair. Why should we accept that the United States and Honduras should com-pete economically on equal terms?
One of the strengths of Chang’s new book lies in the half-dozen lucid chapters on particular, often rather technical aspects of development and international trade. These add up to a jar-gon-free primer on contemporary economic thought leavened with a sound knowledge of history. The best of these are on trade liberali-zation, foreign investment, public versus pri-vate enterprises, patents and copyrights, and macroeconomics. The most interesting of these are on trade liberalization and what today are rather ostentatiously called “intellectual prop-erty rights”.
We live in an allegedly enlightened age of free trade. Nonetheless, European citizens support their dairy industry with subsidies and tariffs to the tune of sixteen billion pounds sterling a year. This amounts to more than one pound per cow per day, when half the world’s people live on less. The pattern is repeated with regard to a vast range of agricultural commodities grown in rich, developed countries. The US subsi-dizes corn and exports it to Mexico, where it is the staple diet of most of the people. These exports, however, drive small Mexican farmers into bankruptcy and encourage their illegal immigration into the United States, where a racist backlash is directed against them. In many cases, the American proponents of farm subsidies are one and the same people who stir up hatreds against Mexican farm workers. Ja-pan is one of the world’s richest countries, with a remarkably even per capita income dis-tribution, but it still lavishly subsidizes its ex-tremely inefficient rice growers and prevents the import of rice that could easily compete on price with domestic rice. This system helps perpetuate the one-party rule of the Liberal Democratic Party by mobilizing rich, protected farmers, who vote for the conservatives.
What’s wrong with such practices? All coun-tries have domestic political interests, and suc-cessful politicians cater to them. The problem is the hypocrisy surrounding “free trade” and the lies that distort political rhetoric in virtually all economically advanced countries. Accord-ing to Chang, “Belief in the virtue of free trade is so central to the neo-liberal orthodoxy that it is effectively what defines a neo-liberal economist. You may question (if not totally reject) any other element of the neo-liberal agenda - open capital markets, strong patents, or even privatization - and still stay in the neo-liberal church. However, once you object to free trade, you are effectively inviting ex-communication.” Under the Anglo-American-dominated World Trade Organization, a great deal of trade liberalization has taken place, but it has virtually all come at the expense of in-fant industries or cash crops in developing countries and has enriched exporters and con-sumers in rich countries. Not surprisingly, the system allows for protection and subsidies much more readily in areas where the rich countries want them and rejects any exceptions for developing countries. This is the main rea-son for the current revolt by virtually all Latin American countries against further US inter-ference in their economic policymaking.
Reduction of tariff revenues also plays havoc with national budgets in poor countries. Be-cause they lack efficient tax collection capa-bilities and because tariffs are the easiest taxes to collect, developing countries rely heavily on them. Add to this lower levels of business ac-tivity and higher unemployment that results from IMF-ordered trade liberalizations, which reduce income tax revenue. When such coun-tries are then put under further IMF pressure to reduce their budget deficits, falling revenues mean severe cuts in spending, often eating into vital areas like education, health, and physical infrastructure, damaging long-term growth.
Neoliberal theorists believe that when it comes to golden straitjackets “one size fits all” - ex-cept for those countries rich enough to afford a private tailor. The chief effect of the golden straitjacket has been not to promote growth but to turn healthy countries into basket cases. “In the long run”, writes Chang, “free trade is a policy that is likely to condemn developing countries to specialize in sectors that offer low productivity growth and thus low growth in living standards. This is why so few countries have succeeded with free trade, while most successful countries have used infant industry protection to one degree or another.”
Another salient aspect of the neoliberal canon has a much less hoary history than free trade. The idea of the state intervening to grant a mo-nopoly to an inventor or a creative artist to ex-ploit his or her device is relatively new and was once thought to be contrary to the idea of liberalism. Chang observes, “The technologi-cal ‘arms race’ between backward countries trying to acquire advanced foreign knowledge and the advanced countries trying to prevent its outflow has always been at the heart of the game of economic development”. During the 18th century, this competition took on a new dimension with the emergence of modern in-dustrial technologies that had much greater potential for productivity growth than tradi-tional technologies. The result was a vicious international competition to recruit skilled for-eign workers, machine smuggling, and indus-trial espionage. The origins of patents, copy-rights, and protection of trademarks are to be found in Britain’s attempts to protect its ad-vanced technologies by erecting legal barriers against their outflow. The other industrializing countries in Europe and the United States had to violate those laws in order to acquire supe-rior British technologies.
The first measure to protect IPRs (intellectual property rights) was a 1719 English ban on the migration of skilled workers. The law made it illegal to recruit experienced workers for jobs abroad - known as “suborning”. Emigrant workers who did not return home within six months of being warned would lose their right to lands and goods in Britain and their citizen-ship would be revoked. This was followed by a new act in 1750 prohibiting the export of “tools and utensils” in the wool and silk indus-tries, extended by the Tools Act of 1785 to the export of many different types of machinery. The development of science in conjunction with industry meant that a lot of disembodied knowledge could be written down in a lan-guage that could be understood by anyone with appropriate training. Once an idea is written down in general scientific and engineering lan-guage, it becomes much easier to copy. It thus became more important to protect the ideas themselves than the workers or machines employing them. Beginning with some Ger-man states in the 16th century and with Britain in 1623 with the Statute of Monopolies, gov-ernments granted ten years of protected mo-nopoly to inventors of “new arts and ma-chines”. Britain introduced the first copyright law in 1709 and the first trademark law in 1862.
It is not obvious that providing incentives to inventors and accepting the social costs of mo-nopolies increase innovation or do anything more than enrich corporations who can file endless patent infringement suits and slow down change by making frivolous but pat-entable minor changes in old techniques. Ac-cording to Chang, “The patent lobby talks non-sense when it argues that there will be no new technological progress without patents”. For example, nonprofit organizations, such as uni-versities, subsidize a great deal of research. Several classical students of innovation, such as the economist Joseph Schumpeter, dis-counted the importance of patents. Schumpeter believed that the natural if short-lived monop-oly that comes with invention was more than enough. One thing is certain: Extending the term of protection for existing work, which is advocated by all the Bad Samaritan rich coun-tries, cannot create new knowledge.
The United States is the most serious protec-tionist. In 1998, the US Copyright Term Ex-tension Act extended the period of copyright protection from the life of the author plus fifty years to the life of the author plus seventy years. The Disney Corporation led the fight for this extension since the copyright on Mickey Mouse, created in 1928, was due to expire. As a result the new law became known in some circles as the Mickey Mouse Protection Act.
Despite the enormous sums paid to lawyers for work on patent law, it should be understood that as a practical matter patents are important in only three industries - computer software, entertainment, and the pharmaceutical industry. But they are a critical stumbling block for economic development. Some 97 percent of all patents and the vast majority of all copyrights and trademarks are held by eco-nomically advanced countries, which use them to deny medicines, textbooks, and computers to un-derdeveloped countries, exploit epidemics such as HIV/AIDS to extract excess profits, and kick away the ladder for countries trying to catch up. As Chang concludes, “The most detrimental impact [of the patent system] lies in its potential to block knowledge flows into technologically backward countries that need better technologies to develop their economies. Economic development is all about absorbing advanced foreign technologies.” Among the best things we could do today to help the Third World would be to shorten the period of protection, drastically raise the originality bar, and make compulsory licensing and imports of generics easier.
With “Bad Samaritans”, Chang has succinctly and comprehensively exposed the chief structures of economic imperialism in the world today. What is now required is the leadership to undermine and dismantle the barriers that keep so much of the world so poor.
Concluded
_____
[Chalmers Johnson, president of the Japan Policy Research Institute and professor emeritus at the University of California, San Diego, is the author of numerous books.]
_____
[Chalmers Johnson, president of the Japan Policy Research Institute and professor emeritus at the University of California, San Diego, is the author of numerous books.]
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