FacebookTwitterGoogle+RedditEmail

Blaming Inequality on Technology: Sloppy Thinking for the Educated

Photo by Duncan Hull | Public Domain

The most popular explanation for the sharp rise in inequality over the last four decades is technology. The story goes that technology has increased the demand for sophisticated skills while undercutting the demand for routine manual labor.

This view has the advantage over competing explanations, like trade policy and labor market policy, that it can be seen as something that happened independent of policy. If trade policy or labor market policy explain the transfer of income from ordinary worker to shareholders and the most highly skilled, then it implies inequality was policy driven, it is the result of conscious decisions by those in power. By contrast, if technology was the culprit, we can still feel bad about inequality, but it was something that happened, not something we did.

That view may be comforting for the beneficiaries of rising inequality, but it doesn’t make much sense. While the development of technology may to some extent have its own logic, the distribution of the benefits from technology is determined by policy. Most importantly, who gets the benefits of technology depends in a very fundamental way on our policy on patents, copyrights, and other forms of intellectual property.

To make this point clear, consider how much money Bill Gates, the world’s richest person, would have if Windows and other Microsoft software didn’t enjoy patent or copyright protection. This would mean that anyone anywhere in the world could install this software on their computer, and make millions of copies, without sending Bill Gates a penny. As a smart and ambitious person from a wealthy family, Bill Gates would probably still be doing fine in this world, but he would most likely not be among the super-rich. In fact, he would probably still be working for a living.

The argument for intellectual property is well-known. The government grants individuals and corporations monopolies for a period of time, which allow them to charge well above the free market price for the items on which they have a patent or copyright. This monopoly gives them an incentive to innovate and do creative work.

Of course this is not the only way to provide this incentive. For example, the government can and does pay for much research directly. We spend over $30 billion a year on bio-medical research through the National Institutes of Health. Various government departments and agencies finance tens of billions of research each year in a wide variety of areas. In fact, it was Defense Department research that developed the Internet and also Unix, the program that was the basis for Dos, Microsoft’s original operating system.

The government also directly or indirectly supports a large amount of creative and artistic work. The National Endowment for the Arts and Humanities capture headlines as political targets for the right, but in fact much more work is supported through the tax deduction for charitable contributions, which cover 40 cents on the dollar that wealthy people donate to orchestras, theaters, art museums, and other non-profit institutions that support the arts.

It is reasonable to argue whether patents and copyrights are the most efficient mechanisms for supporting innovation and creative work. In my book, Rigged: How the Globalization and the Rules of the Modern Economy Were Structured to Make the Rich Richer, I argued that in the 21st century they are in fact very inefficient mechanisms for this purpose. But separate from the question of whether these are the best mechanisms, there is no real dispute that intellectual property redistributes money from the people who don’t own it to the people who do. Not many people with just high school degrees own patents or copyrights; they are part of the story of upward redistribution.

Since intellectual property can be either longer and stronger or shorter and weaker, the decision about how much intellectual property we have is implicitly a decision about a trade-off between growth and inequality. (This assumes that longer and stronger IP rules lead to more growth, which is a debatable point, especially since productivity growth has slowed to a crawl in the last decade.) If we are concerned about the degree of inequality in society, one way to address it would be to shorten the duration of patents and copyrights or lessen their scope so that they are less valuable.

That would mean less money for the pharmaceutical industry, the medical equipment industry, and the software industry, as well as many other sectors that disproportionately benefit from IP. Shareholders in these industries would see a hit to their income, as would the top executives and highly educated workers they employ. The rest of the country would see a rise to their income as the price of a wide range of products would fall sharply.

And, there is a huge amount of money at stake. We are on a path to spend more than $450 billion this year on prescription drugs alone. If these drugs were sold in a free market without patents or other forms of protection we would almost certainly pay less than $80 billion. (Imagine the next great cancer drug selling for a few hundred dollars rather than a few hundred thousand dollars.) The difference of $370 billion is almost 2 percent of GDP. It is roughly six times as much money as was at stake in the debate over the repeal of the Affordable Care Act. If we add in the other sectors where IP is responsible for a large portion of the price, the sum would almost certainly be two or three times as large.

Since 1980 there have been a wide variety of measures that have strengthened and lengthened IP protections in a variety of areas. The scope of patentability has been extended to new areas such as software, business methods, and life forms. Copyright duration was extended from 55 years to 95 years (retroactively), and it was extended to the Internet in a way that makes third parties responsible for enforcement. And strong IP rules were imposed on developing countries as a condition of access to U.S. markets in trade deals.

It is questionable how much these or other measures boosted economic growth, if at all, but in none of these cases was there any serious discussion of the impact on distribution. In other words, we never heard members of Congress debating whether stronger IP rules could have a sufficiently negative effect on distribution that would more than offset any benefits from increased growth.

As we go forward and hear tales of robots and artificial intelligence displacing large numbers of workers, we should realize that any redistribution from workers to “owners” of these technologies is a policy choice. If all the knowledge associated with new technologies were in the public domain they would be cheap. We would all be able to buy the most advanced robots for little more than the cost of the materials they contained. The robots would clean our houses, cook our dinners, mow our lawns, and do our laundry. New life saving drugs would cost little more than generic aspirin and the most sophisticated medical scanning equipment would be available at the price of an old-fashioned X-Ray.

The people who developed this technology might still be well-paid for their work, but they would not end up as rich as Bill Gates or Mark Zuckerberg. In fact, if we weakened patent and copyright protections enough, the technological geniuses of the future may do as well as their counterparts did fifty years ago; they would be well-paid but certainly not super-rich.

It’s possible that we would pay a large price in terms of reduced innovation and productivity growth from going this route, but that is a point that has to be demonstrated, not just asserted. And, we would have to ask whether the benefits in terms of greater equality would be enough that we would be willing to sacrifice some growth.

In any case before we answer such questions, we first have to start asking them. This means first and foremost recognizing that technology never produces inequality; it is policy on technology that leads to inequality. Once we recognize this basic fact we can have a more serious debate on how best to structure technology policy going forward.

This article originally appeared on Huffington Post.

More articles by:

Dean Baker is the senior economist at the Center for Economic and Policy Research in Washington, DC. 

Weekend Edition
December 14, 2018
Friday - Sunday
Andrew Levine
A Tale of Two Cities
Peter Linebaugh
The Significance of The Common Wind
Bruce E. Levine
The Ketamine Chorus: NYT Trumpets New Anti-Suicide Drug
Jeffrey St. Clair
Roaming Charges: Fathers and Sons, Bushes and Bin Ladens
Kathy Deacon
Coffee, Social Stratification and the Retail Sector in a Small Maritime Village
Nick Pemberton
Praise For America’s Second Leading Intellectual
Robert Hunziker
The Yellow Vest Insurgency – What’s Next?
Patrick Cockburn
The Yemeni Dead: Six Times Higher Than Previously Reported
Nick Alexandrov
George H. W. Bush: Another Eulogy
Brian Cloughley
Principles and Morality Versus Cash and Profit? No Contest
Michael F. Duggan
Climate Change and the Limits of Reason
Victor Grossman
Sighs of Relief in Germany
Ron Jacobs
A Propagandist of Privatization
Robert Fantina
What Does Beto Have Against the Palestinians?
Richard Falk – Daniel Falcone
Sartre, Said, Chomsky and the Meaning of the Public Intellectual
Andrew Glikson
Crimes Against the Earth
Robert Fisk
The Parasitic Relationship Between Power and the American Media
Stephen Cooper
When Will Journalism Grapple With the Ethics of Interviewing Mentally Ill Arrestees?
Jill Richardson
A War on Science, Morals and Law
Ron Jacobs
A Propagandist of Privatization
Evaggelos Vallianatos
It’s Not Easy Being Greek
Nomi Prins 
The Inequality Gap on a Planet Growing More Extreme
John W. Whitehead
Know Your Rights or You Will Lose Them
David Swanson
The Abolition of War Requires New Thoughts, Words, and Actions
J.P. Linstroth
Primates Are Us
Bill Willers
The War Against Cash
Jonah Raskin
Doris Lessing: What’s There to Celebrate?
Ralph Nader
Are the New Congressional Progressives Real? Use These Yardsticks to Find Out
Binoy Kampmark
William Blum: Anti-Imperial Advocate
Medea Benjamin – Alice Slater
Green New Deal Advocates Should Address Militarism
John Feffer
Review: Season 2 of Trump Presidency
Rich Whitney
General Motors’ Factories Should Not Be Closed. They Should Be Turned Over to the Workers
Christopher Brauchli
Deported for Christmas
Kerri Kennedy
This Holiday Season, I’m Standing With Migrants
Mel Gurtov
Weaponizing Humanitarian Aid
Thomas Knapp
Lame Duck Shutdown Theater Time: Pride Goeth Before a Wall?
George Wuerthner
The Thrill Bike Threat to the Elkhorn Mountains
Nyla Ali Khan
A Woman’s Selfhood and Her Ability to Act in the Public Domain: Resilience of Nadia Murad
Kollibri terre Sonnenblume
On the Killing of an Ash Tree
Graham Peebles
Britain’s Homeless Crisis
Louis Proyect
America: a Breeding Ground for Maladjustment
Steve Carlson
A Hell of a Time
Dan Corjescu
America and The Last Ship
Jeffrey St. Clair
Booked Up: the 25 Best Books of 2018
David Yearsley
Bikini by Rita, Voice by Anita
FacebookTwitterGoogle+RedditEmail