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The Pirate Party Knows Where the Money Is

One of the oddities of recent election results in Germany and elsewhere in northern Europe is the rise of the Pirate Party. This party received 7.8 percent of the vote in North Rhine-Westphalia yesterday, making it the 4th state government in Germany in which it has enough support to get into the state parliament.  It also won enough votes to get seats in the European Parliament. The Pirate Party is widely expected to cross the 5 percent threshold in the German national elections next year, allowing it to get into the national parliament.

Like many new and rapidly growing parties, the Pirate Party has only a partially formed agenda and undoubtedly means many different things to different supporters. However a general theme is clearly a support for freedom of the Internet. This means a rebellion against governmental efforts to track users and to limit the flow of material over the web.

Near the top of the list of the Pirate Party’s demons is copyright protection, and rightly so. Copyright protection is an antiquated relic of the late Middle Ages that has no place in the digital era. It is debatable whether such government-granted monopolies were ever the best way to finance the production of creative and artistic work, but now that the Internet will allow this material to be instantly transferred at zero cost anywhere in the world, copyrights are clearly a counter-productive restraint on technology.

As every graduate of an introductory economics class knows, the market works best when items sell at their marginal cost. That means we maximize efficiency when recorded music, movies, video games and software are available to users at zero cost. The fees that the government allows copyright holders to impose create economic distortions in the same way that tariffs on imported cars or clothes lead to economic distortions.

The major difference is that the distortions from copyright protection are much larger. While tariffs on cars or clothes would rarely exceed 20-30 percent, the additional cost imposed by copyright protection is the price of the product. Movies that would be free in a world without copyright protection can cost $20-$30. The same is true of video games, and the price of copyrighted software can run into the thousands of dollars.

In total, hundreds of billions of dollars a year flow from the rest of us to those with government-granted copyright monopolies, like Disney, Time-Warner, and Microsoft. This government-directed flow of money dwarfs the size of the items that gets Washington politicians hot, like the Bush tax cuts to the wealthy.

Of course we need to pay creative workers, but we should find more efficient mechanisms, where a higher percentage of the cost borne by the public ends up in the workers’ pockets. Some alternatives already exist. There is much creative work in the United States and around the world that is supported directly by governments or private non-profits. For this work, writers, musicians, and other creative workers are paid for their work at the time they do it. There is no need for copyright protection.

However, we would clearly need much more funding if the flow of money from copyright protection were to be lost. One possibility is an artistic freedom voucher. This is a refundable tax credit of around $100 that each person could use to support the creative worker(s) of their choice. It would be similar to the charitable tax deduction, except it would be a credit. The condition of getting the money is that a worker would not be allowed to get copyright protection for a period of time (e.g. five years).

A program like this should generate a vast amount of material that would be freely available to the whole world. The powers of the government would no longer be used to bottle up the Internet, and we would see the end of legislative disasters, like the Stop Online Piracy Act, which sought to make everyone into a copyright cop.

We would also need new mechanisms to support the development of software. Here also there is a vast amount of software developed each year that does not depend on copyright protection. Much of it is custom software for specific companies. Other software is explicitly developed to be freely available to the public.

Developing the best mechanisms for supporting creative work will take much thought and debate. But it is long past time that this process got started and that we move beyond a hopelessly antiquated copyright system.

The Pirate Party has made an enormously important contribution to this process. While it is unlikely that it will ever become a dominant party in Germany or elsewhere in Europe, it may help to reshape the political agenda in the same way that the German Green Party did more than three decades ago.

Dean Baker is the co-director of the Center for Economic and Policy Research (CEPR). He is the author of Plunder and Blunder: The Rise and Fall of the Bubble Economy and False Profits: Recoverying From the Bubble Economy.

This article originally appeared on Al Jazeera.

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Dean Baker is a macroeconomist and co-director of the Center for Economic and Policy Research in Washington, DC. He previously worked as a senior economist at the Economic Policy Institute and an assistant professor at Bucknell University.

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