Monthly Archives: July 2014

A Patent Omission

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Soviet Buran (left) and US space shuttle (right)

A recent story by the Planet Money team at NPR posed the question: what would happen to business and innovation if there were no patents?

For those who don’t follow the rise and flow of intellectual property law, this has been a trendy subject in recent years. Driven in large part by the complex — and aggressive — litigation between Apple, Google and Samsung over smart phone and software design, many smart people have posited that instead of protecting intellectual property and innovation in market economies, patents and other intellectual property protections have built fortresses around technology and impeded both creativity and economic growth.

There’s certainly an argument to be made for intellectual property reform. (For example, there’s a strange coincidence that copyright protections keep getting extended every time Mickey Mouse stands on the verge of entering the public domain.) But the Planet Money team skips that argument, probably because it would put to sleep their listeners, already bored by their overlong story of 15 minutes. Instead, they pose the much bigger question about no patents at all.

Patents are issued on machines and processes (trademarks and copyrights are on brand designs and creative products) and are issued by every major economy in the world. They provide limited protection to the innovator from unlicensed copying. These are especially important, as Planet Money notes, in software and pharmaceuticals, where development costs are high and production costs are low. Patents have been issued as early as the 15th century and are written into the U.S. Constitution specifically “to promote science and the useful arts”. So the fringe intellectuals who oppose patents, as quoted by Planet Money, believe that every advanced industrial economy that has provided patent protection has been wrong for more than 500 years.

That’s all well and good. But patent opponents are essentially arguing for a case that does not now exist. True, we do that routinely in political (and economic) debate. Try this, we say, it will be better my way. It’s hard to make solid economic arguments using only models because we can’t predict the future. But that’s what the opponents of patents are doing: Trust us.

Except there are several examples from history that the Planet Money team could have explored for the effect of patent-less economies. They simply ignored them. That’s too bad, because the debate over patents seems to come in waves of every 50 years or so. For example, the Netherlands specifically abandoned patents in 1869 but reinstated them in 1912. Germany didn’t adopt patents until 1877, Switzerland until 1907. How did this state of affairs affect these countries’ development? Planet Money doesn’t seem interested.

But probably the best example of a patent-less economy is the Soviet Union. From about 1922 until the collapse of communism 70 years later, the Soviet Union abolished all intellectual property protections. It was a socialist economy — the state owned everything, including ideas. Instead, the government issued “certificates of invention”, a sort of “Hero of Soviet Labor” for innovators that included a small stipend. That way we can measure creativity and innovation in the world’s largest socialist economy.

The results are stark. With the exception of sloped armor, a minor advance in antibiotics, and the AK-47 (for which I can find no record Mikhail Kalashnikov received a certificate of invention), the Soviet Union produced almost nothing new for 70 years. Virtually every major advance the nation built was stolen — aircraft (Tu-4), weapons (atomic and hydrogen bombs), computers and software (5e series, Agat, MOS) and spacecraft (Buran, see above). When the country opened up in the early 1990s, it was clear the advanced parts of the economy trailed the West by 30-40 years. The rest of the country was still living in the 19th century. Socialism was an economic calamity and had its worst effect on the innovative sector. Russia adopted intellectual property protections immediately.

That’s not to say the Soviets didn’t try. As the patent-less nations of the 19th century also did, Soviet innovators sought patent protection abroad for their innovations. The Soviet Union filed for 7,000 patents in the United States during the 20th century — comparable, one observer notes, to an advanced country like Belgium or Austria. (The observer fails to note both countries have a fraction of the Soviet Union’s population). But more importantly, there is little evidence that these patents led to commercialization. That is, despite the recognition of innovation by an advanced economy, the Soviet Union could not market the products — the results of these innovations — in advanced Western economies.

Perhaps Planet Money ignored the Soviet example because the effects of socialism were too distorting. Or maybe its results are so stark it simply pours cold water on the argument that patents hinder innovation and economic development. But it is important to look at this example in part because many patent opponents view them as market inhibitors. Yet in a socialist economy without patent inhibitions — indeed, in the worker’s paradise where the laborer owned the means of production — creativity and innovation died. Lesson learned?

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A Divisive Concept

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Islamic State fighters in January 2014 (Mohammed Jalil/EPA via Al Jazeera America)

With Iraq on the edge of calamity, a hoary, dangerously stupid idea has again been floated by people smart enough to know better. With primarily Sunni extremists breathing down the Tigris and Euphrates river valley toward Baghdad and the mainly Kurdish north taking local advantage of the resulting power vacuum, the time has come these observers say to cut up Iraq into independent regions based on ethnicity.

This idea has been floated at least since the insurgency of 2005-2006 if not earlier. Critics and some Iraqis complain that the borders were artificially drawn by European colonial officers that ignored ethnic, linguistic and tribal realities. The result was a series of artificial hotchpotch polyglot countries designed to be politically unstable. So of course it makes sense that they should be carved up again — again by those doing it by armchair mapmakers removed from the region — into something that looks like Europe where the French have France and Germans have Germany — Kurdistan for the Kurds, a large Sunni state for the Sunni Arabs, a large Shiite Arab state, and so on.

Iraq ethnic map (pluralities excluded) (Globalsecurity.org)

Except there are a couple of large, demonstrable problems if we think this through. First, it ignores the ethnic reality of the region, which is marbled and faded rather than neatly divided into segregated blocks of mutually opposed antagonists. Ignorant observers see monoethnic polarities (above) where plural blending actually occurs (see below) and conveniently or blithely ignore the same problems that face us today in the current crisis, just in different configurations and proportions: different people figuring out how to order themselves and get along. The U.S. domestic equivalent would be taking the electoral college results from the last election, determining there is no reconciling the two, and then literally dividing the United States along red and blue states after simply ignoring that each election was contested and forgetting the political pluralities contained therein.

Iraq ethnic makeup (pluralities included) (Kurdish Academy)

This leads me to the second problem. There has never been a single, unitary, state with one ethnic group and one language predominating, ever. Every state, even the most red and most blue, is at some level purple. All countries everywhere throughout history have had to cope with ethnic, linguistic and political pluralities. It is the nature of humanity and political order for people to be different. If we weren’t, we would have no politics, simply “the administration of things”. As long as there has been open communication and trade between nations, different people have lived close to one another and states have had to govern how we live together.  (It is why the tower of Babel figures so prominently in the Old Testament.) Even in the modern European nation-state, governments must contend with ethnic, linguistic and religious minorities. We do not entirely segregate ourselves. We cannot be so neatly divided. Only the fanatics — ethnic, religious, and political — believe we can be separated and purified.

Dividing a country like Iraq does two things. First, it essentially cedes to the extremists of the so-called Islamic State its territorial demands.  They win. Congratulations. Anyone with the monopoly of violence gets what they want. And second, we give license to the inevitable ethnic cleansing that follows as they force out, or people are compelled to leave, anyone who does not conform to their rule.

I know this to be true because it already happened in the Balkans. A map of Bosnia-Herzegovina shows what occurred before and after the war driven during the 1990s by the Serb-dominated Federal Yugoslav Army. What had been a pluralistic, marbled multi-ethnic state became — with the full consent of the international community as ratified by the Dayton Peace Accords — a radically segregated federation of three largely monoethnic cantons. The country’s federal governing system — championed by many for Iraq — is a corrupt, ethnically myopic hash still under the paternalistic protectorate of the European Union. Bosnians themselves are chafing under its weight and have finally had enough.

(National Geographic)

By contrast in Iraq during 2005-2006, when faced with the apocalyptic bloodletting particularly of Sunni minorities in Baghdad, the surge of U.S. forces effectively stopped the violence and, in effect, compelled the communities to live with each other. I am not yet convinced of the ethnic nature of the current conflict in Iraq — I see it for now primarily as a power struggle between a group of religious fanatics backed by former regime elements and the weak central government they are targeting — so we should not fall for this false narrative. But the strength of national and political unity is all the more important when facing this outside threat — whether it is a political or ethnic insurgency.

All the more reason, too, since in a political context people can be led to live with one another just as much as they can be agitated to kill one another. I am inclined to believe most ethnic conflict is primarily political conflict and requires as much leadership and organization as any other political effort. People do not spontaneously murder their neighbors en masse.  They must be mobilized and compelled to do these terrible deeds — witness the former Yugoslavia, Rwanda, Sudan, Burma or anywhere else “ancient hatreds” are alleged to erupt.

The only course when confronted with these centrifugal forces — political, ethnic or otherwise — is to counteract with centripetal force. We have no choice among ourselves than to live with one another, so why would we ask anything less from somebody else? We can help and aid the governments and countries and civil organizations of our friends to build the institutions and societies that will help plural nations to survive and prosper. There are other ways to defeat organizations like the Islamic State. But dismembering a country like Iraq or any other would be an essential loss in the struggle against extremism.  Because they are fighting for the same arbitrary and pure abstractions that do not not exist in humanity and do not exist on any map.

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