From: michael perelman (michael@ECST.CSUCHICO.EDU)
Date: Wed Sep 04 2002 - 23:41:33 EDT
This is a very primitive version of a paper I am preparing for the URPE sessions in Washington. Any comments would be appreciated. Intellectual Property Rights and the Commodity Form: New Dimensions in the Legislated Transfer of Surplus Value Introductory Karl Marx analyzed how markets first create surplus value and then transfer some of this surplus value from capitalists to rentiers, landlords, and other capitalists. Intellectual property rights are rapidly expanding the scope of the commodity form, often converting the products of what Marx called universal labor into an entirely new type of commodity. This new commodity form radically deepens the contradictions of the capitalist system. I am now going to restrict my discussion here to intellectual property in science and technology. Markets for goods with high intellectual property content are unlike typical commodity markets. The owners of existing intellectual property provide no material good or even a service, yet can nonetheless demand payments for use of their "products." Since intellectual property is a monopoly, owners of intellectual property do not feel the direct force of competition, only cross product competition. In addition, the cost of production is more or less irrelevant in markets for intellectual property, since reproduction costs are trivial compared to market prices. Payments to owners of intellectual property are more like the extraction of rent than the payment for a commodity. But unlike land, intellectual property rights supposedly represent a reward for a creative achievement. As I will discuss later, in almost every case, the creation of intellectual property represents a social effort in which scientists or artists draw upon the work of their predecessors. As a result, rival claimants to intellectual property rights abound. More often than not, they will launch expensive litigation in hopes of obtaining exclusive ownership for themselves, or at least a valuable monetary concession. Within the eyes of the law, intellectual property rights are akin to the ownership of capital goods, except that this ownership expires after a set period of time. Intellectual property, however, differs from real capital goods in an important respect. In the case of a typical commodity, payments flow to the various agents who control the elements of the social labor process that originally contributed to the production of the capital good, despite the fact that some of the surplus value will provide rewards for non?producers in the form of profits, interest, and rents. In the case of the conversion of scientific or technical knowledge into intellectual property, modern capitalism reverts to a winner?take?all arrangement in which the law assigns ownership to a single agent, while offering absolutely nothing to the others who have contributed to its creation. Nonetheless, even more so than in the case of the production of capital goods, scientific and technical knowledge depends upon a social labor process. No one person makes a scientific discovery. Instead, science and technology depend upon a complex network of information flows, reinforced by a publicly supported educational system. Yet the first to make a claim with the patent system is supposed to deserve the exclusive right to the discovery. Intellectual Property as a Public Good Writing in the Theories of Surplus Value, before he had worked out his fully worked out his distinction between price and value, Marx observed: The product of mental labour ?? science ?? always stands far below its value, because the labour?time needed to reproduce it has no relation at all to the labour?time required for its original production. For example, a schoolboy can learn the binomial theorem in an hour. [Marx 1963?1971, i, p. 353] So, unlike land or most commodities that command rents, intellectual property is non?rivalrous. As Marx observed, "Once discovered, the law of the deflection of a magnetic needle in the field of an electric current, or the law of the magnetization of iron by electricity, cost absolutely nothing" (Marx 1977, p. 508). In fact, science and information may be called meta?public goods, in the sense that they become more valuable the more that people use them. Writing well before the hyperbole of the New Economy became commonplace, Marx sensed that the growing importance of science represented a serious contradiction to the law of value. In a remarkable section of the Grundrisse, he observed: To the degree that labour?time ?? the mere quantity of labour ?? is posited by capital as the sole determinant element, to that degree does direct labour and its quantity disappear as the determinant principle of production ?? of the creation of use?values ?? and is reduced both quantitatively, to a smaller proportion, and qualitatively, as an, of course, indispensable but subordinate moment, compared to the general scientific labour, technological application of natural sciences, on one side, and to the general productive force arising from social combination in total production on the other side ?? a combination which appears as a natural fruit of social labour (although it is a historical product). Capitalism thus works towards its own dissolution as the force dominating production. [Marx 1973, pp. 700] Here Marx was not looking at the overthrow of capitalism by dissatisfied workers, but rather by its technological irrelevance. He continued: The theft of alien labour time, on which the present wealth is based, appears a miserable foundation in face of this new one, created by large?scale industry itself. As soon as labour in the direct form has ceased to be the great well?spring of wealth, labour time ceases and must cease to be its measure, and hence exchange value [must cease to be the measure] of use value .... The free development of individualities, and hence not the reduction of necessary labour time so as to posit surplus labour, but rather the general reduction of the necessary labour of society to a minimum, which then corresponds to the artistic, scientific etc. development of the individuals in the time set free, and with the means created, for all of them. Capital itself is the moving contradiction, [in] that it presses to reduce labour time to a minimum, while it posits labour time, on the other side, as sole measure and source of wealth. [Marx 1973, pp. 705?6] Within this environment, capitalists can no longer pretend that they are serving a social function fostering accumulation by driving workers longer or harder or even by organizing them efficiently. Instead, Marx realized that this new stage: calls to life all the powers of science and of nature, as of social combination and of social intercourse, in order to make the creation of wealth independent (relatively) of the labour time employed on it. [Marx 1973, pp. 706] In other words, value theory, which is merely an analysis of how capitalism works, may have some relevance in a primitive stage where the "worker [is reduced to] nothing more than personified labour?time [and where all] individual distinctions are obliterated" (Marx 1977, p. 353). In contrast, at the stage where universal labor becomes dominant, the "material conditions [of production] blow this foundation [based on the minimization of labor time] sky?high" (Marx 1973, p. 706). Another Dimension of Universality Universal labor has another important characteristic. In addition to spreading costlessly throughout society, it often works in strange ways. A scientific idea can cascade for decades and decades inspiring one technology after another. Econometric estimates suggest that the typical technological discovery requires about 20 years before it reaches fruition. More basic scientific research, which lies behind the technology, takes even longer before it begins to affect our daily lives. In this spirit, Lewis Mumford once proposed: "It was Henry who in essentials invented the telegraph, not Morse; it was Faraday who invented the dynamo, not Siemens; it was Oersted who invented the radio telegraph, not Marconi and De Forest. The translation of the scientific knowledge into practical instruments was a mere incident in the process of invention" (Mumford 1963, pp. 217?8). Typically, the new technologies do not develop from a single scientific idea; instead they depend upon the confluence of the number of scientific discoveries, each of which had been further developed by number of other people. By the time the technology is mature enough to pay propose to the patent office absolutely nobody could determine the relative contributions of the various people involved. Intellectual Property and the Falling Rate of Profit Of course, Marx never suggested that the rise of universal labor would be an exclusive cause for transcending the capitalist mode of production, but it certainly does call for a sharp break with the traditional vision of a market?based system of competitive commodity production. Rather than directly threatening the capitalist of production, universal labor has become a major prop for the system in the form of intellectual property rights. In fact, the protection of intellectual property has become a substantial counterweight to the tendency for the rate of profit to fall. The relationship between intellectual property rights and the rate of profit is not new. During the late nineteenth century laissez?faire economists strongly opposed the strengthening of intellectual property rights as a monopolistic intrusion into sacred grounds of free markets. Only after the economy slipped into crisis mode in the last decades of the century did most economists relent, seeing intellectual property rights as a way to avoid the economic catastrophe they saw unfolding. Some principled laissez?faire economists, such as Hayek and Mises, continued their resistance even into the twentieth century, but they were a distinct minority. Not surprisingly, the next surge in strengthening intellectual property rights in the United States began in the latter part of the 1960s, as stagflation began to engulf the economy and earlier trade surplus turned negative. Although many old line industries could not compete effectively in world markets, exports of intellectual property in the form of royalties and copyright fees soared. I have not seen hard data regarding the effect of intellectual property rights on the rate of profit, but I am convinced that it is substantial. Just think about Microsoft and pharmaceutical and industry with their low marginal costs relative to their market prices. The Contradictions of Intellectual Property The general thrust of Marx's scattered comments on universal labor is clear: the "natural" course of market development would be the promotion of universal labor and the obsolescence of markets. Markets, however, are anything but natural. They came into being by the good graces of primitive accumulation. Once begun, they still require the constant nurturing of state power. In the case of managing universal labor, the state performs two vital functions to prop up the market. In the first place, the state directly subsidizes a good deal of universal labor. This arrangement is, in itself, perfectly understandable. As neoclassical economists have long known, individual enterprises have little incentive to employ universal labor because they have difficulty in appropriating its fruits in a commodity form. The capitalist state, however, typically refuses to make the results of universal labor available to all. Instead, it converts the universal labor into private property, even if the work was originally done in the public sector. Over and above subsidizing universal labor and making it private property, the state uses its coercive powers to enforce these intellectual property rights. Since the misappropriation of intellectual property is less obvious than the theft of physical goods, the protection of intellectual property rights is necessarily far more intrusive than comparable efforts to protect physical goods. Within this environment, owners of intellectual property rights often even demand that providers of commodities modify their products in ways that actually diminish their usefulness. The privatization of universal labor, like all other attempts to correct crises, creates further contradictions ?? in this case, it erects a serious barrier to further scientific and technological progress. Let me just enumerate a few of the detrimental effects. First of all, every agent, whether an individual researcher or a major corporation, has a strong incentive to maintain the utmost secrecy ?? thereby stifling the communication, which is the very lifeblood of science. In addition, incredible efforts are wasted in attempting to get around existing intellectual property by techniques such as reverse engineering. Because intellectual property law awards a single individual credit for the complex social process it encourages patent races, which dissipate considerable scientific effort. In addition, the emphasis on intellectual property means that many scientists end up devoting considerable time and energy learning about the legal ramifications of their work ?? efforts that would be better spent in doing science. Excessive litigation represents a more obvious dissipation of potentially productive energies. Corporations attempt to extend the boundaries of their intellectual property rights in much the way imperialist nations wage war in order to increase their territory. Corporations work frantically to amass patents. Many of these patents have no utility whatsoever except to counterattack those who might challenge their right to use some technique. The main battlefield is the legal system. Patent suits typically cost millions of dollars. Corporations also expend considerable energy to win favorable legislation. Public relations become a useful adjunct in this effort. These supplemental efforts are also costly. The monopoly rights associated with intellectual property raise prices, transferring immense quantities of income and wealth to the few corporations that hold the mass of intellectual property rights. By holding millions of people in unnecessary poverty, this system thwarts their potential contributions to the pool of universal labor. In addition, the quest for intellectual property rights has had monstrous effects on higher education. Finally, intellectual property rights undermine the very nature of free scientific inquiry. The truly great scientific discoveries result from scientists following their own interests rather than the narrow, quick?profit?oriented priorities of giant corporations. In my book, Steal This Idea: Intellectual Property Rights and the Corporate Confiscation of Creativity, I have tried to document in more detail the enormous costs that intellectual property rights have imposed on society. Instead, the economic progress depends upon people having the opportunity to develop their skills freely and to cooperate with one another. Harsh corporate discipline creates a barrier to progress. Add In short, universal labor defies the sort of commodification envisioned in economic textbooks. At the same time, the commodification is a necessary measure to counteract the falling rate of profit. This strategy of defending the capitalist form seriously undermines the social and economic potential of scientific labor creating a deeper contradiction. References Marx, Karl. 1963?1971. Theories of Surplus Value, 3 Parts (Moscow: Progress Publishers). ___. 1973. Grundrisse (NY: Vintage, 1973). ___. 1977. Capital, Vol. 1 (New York: Vintage). Mumford, Lewis. 1963. Technics and Civilization (NY: Harcourt, Brace and World). Perelman, Michael. 2002. Steal this Idea: Intellectual Property Rights and the Corporate Confiscation of Creativity (NY: Palgrave). -- Michael Perelman Economics Department California State University Chico, CA 95929 Tel. 530-898-5321 E-Mail michael@ecst.csuchico.edu
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