Hi, Alberto-
Nice to be back to economics.
IMHO, Doctorow has a valid point. Intellectual Property is the source of the majority of profits being made in the United States at this time, and shareholders of firms that are built around IP ae making the vast majority of profits that have driven the Dow to new highs for the last couple of DECADES.
I wish he were not spouting expletives ALL the time – it seems to be the way to ensure that readers take in what you are saying, but I was taught 'way back when that expletives are a lazy writer’s method to galvanize the audience. And that aside, it ensures that your audience is all always only “fellow travelers”, and prevents anyone else form being persuaded by what you are actually getting at. But anyway…
United States businesses make most of their money from IP, and so the US government has been fighting hard to defend IP globally. In principle this is a great thing – it means that the design of a product can be separated from the manufacture of a product. Inasmuch as it is a very reasonable position that most of the value of a product resides in its design, this enables the value of the most valuable component of a given product can be allocated to its most valuable part. It enables the US, which has a lot of design infrastructure and a highly skilled, highly paid work force for designing products, to expand and enhance that part of the economy and take advantage of the long-standing US comparative advantage in resources of production of “high human capital” to expand the American economy. Very good, so far. But as we know, unless carefully regulated this can be manipulated to produce all sorts of negative effects. One is the manipulation of the location of the IP to a place other than where it was actually produced, to take advantage of tax benefits – this has definitely caught the attention of global regulators, and a lot of effort is being put into minimizing it. This is for obvious reasons – governments depend on tax revenues, and look less kindly on companies that try to take their income from them.
But it is in the area of consumer protection, as Doctorow points out, that companies can have the most pernicious effects. I don’t need to say it over again. Even if you are able to delete the scatology, the point is clear and well-made: companies have takes full advantage of the lack of consumer protections to increase their profits.
That this happens is NOT due to “corporate greed” as such – as I am always pointing out, all humans are greedy all the time – the only difference is how influential they are in being able to capitalize on their greed. This, after all, is the reason why Marxism was a failure (sorry, Corey) – it had as hard a time balancing the interests of various groups in its way as more capitalist countries have had reining in capitalists. In Communist countries, as anyone who has ever lived in one can easily attest (generally with the same level of invective as Doctorow spills on Capitalists), the Party Elite are the ones who take greatest advantage of the surplus generated by production. Look at China – this is precisely what has been going on there for decades.
Another factor that Doctorow doesn’t take into account, but which is absolutely important, is the toll that this focus on extracting the surplus through IP protection takes on productivity. If a worker does not take home as much as they are worth, they are less inclined to work as hard. If a consumer is continually being milked for their surplus, they are less interested in acquiring the product. Productivity growth has been much lower in advanced economies than new technology would seem to make likely – surely a major factor is the imposition of such IP controls that favor producers.
So sure, Corey, this is a reason why the current iteration of the mixed economy in the USA, which is heavy on capitalism, is failing to provide a reasonable distribution of the surplus: it is too heavily influenced by those who make money from the generation of the surplus – and currently the surplus is most easily generated by IP. That said, don’t suppose that capitalists alone can benefit. We see in the US a revival on the Democratic side of the idea of unions. There is a lot of rhetoric about how they should revive, their influence has declined, etc. – all of which makes sense and is valid. Workers should also have a “fair” share in the surplus generated by their own production. But this is dangerous. In significant ways, workers and industrial capitalists are on the same side of the story – both want to be fed from the surplus generated by production and the benefits it confers on consumers. But nowhere in this fight is a real voice on behalf of consumers, the third party in the equation. Very broadly, the Republican Party represents the interests of producers; the Democratic Party represents the interests of workers (plus also producers, though to a somewhat lesser extent); consumers are represented by no one. This is because producers and workers each have a vital interest in this fight, can clearly see the benefit of working as a group on their own benefit (and sometimes together), but the interests of consumers are generally broad and diffuse, such that each consumer does not recognize a vital benefit in protecting their own interests.
This raises another point, which was cogently described by the conservative Nobel-winning economist James M. Buchanan: government workers, under the heading of “Public Choice Theory”. The problem in Communist systems has been that the surplus has been scooped up by government workers – this has also been a huge issue in developing countries, under the heading of “corruption” (a value-laden term, obviously). The point is that every person who runs a government department wants to increase the number of workers and budget of their department. In a government, there is not the same curb on expansion that exists in a company – a company has an incentive to keep departments within their bureaucracy at something like the value they contribute to the product produced – otherwise there is a reduction in the profits to everyone else – even in a company whose profits have been inflated by IP or other monopoly control this is true, though to a lesser extent – they are selling something, and need customers. A government in theory has access to all of the surplus in the country, via the tax system, and so they have much less constraint on spending from this perspective.
Ultimately, in order to function more efficiently, a government needs to balance ALL FOUR of these interests. To some extent this is happening, but the rhetoric around each group is so toxic that it makes it hard to realize that all of us are in it together.
