Intellectual Property as key factor in modernity

[This is another political-economy posting, but it does not follow the previous postings as a series. After all, this is a blog; just thinking out loud here]

This morning I had an epiphany about the changing structure of global production, trade, and prestige-politics in the 21st century. The argument: a shift in governing made intellectual property possible about 250 years ago. This new form of property-rights remains the key ingredient of modern political-economies into the 21st century. Industrial production and military technologies are merely effects, not causes in this transformation. And intellectual property is now revealed most explicitly as the underlying framework of 21st-century trade and competition, often described in shorthand as ‘globalization.’ Thus, to make sense out of ‘globalization’ in the 21st century, we need to make a careful enquiry into ‘the nature and causes’ of intellectual property formation.

In my Global Cities course, I spend a fair bit of time explaining the Industrial Revolution. It is an old-school topic that I approach in a revisionist way. Yes, Watt’s refinements to the steam engine made it useable and transformed England: powered mills, then powered boats, then railroad. For an urbanist, this helps explain the monocentric 19th-century city, and sets the context for the classic Engels reading on living conditions in Manchester in 1844.
Then I talk about the psychological experience: the shock-of-the-new that is a distinctive condition of consciousness among moderns. In modern literature this is often mistaken as a singular shock; for many decades, WWII was treated as the disturbing break from the past. But these breaks, these identitarian disruptions, have been a recurrent process; people in 1850 felt that the world of 1800 was difficult to imagine; people in 1900 had a hard time imagining 1850, and so forth. My students have a hard time imagining daily life without mobile-phones and the internet. How did people get anything done before 1994?
It is crucially important that we understand modernity as an experience (thank you Marshall Berman, and Ananya Roy for showing me is writings). But there is also a political-economy dimension to modernity that bears consideration. Here I return to the Industrial Revolution, and explain it as an effect of a modern transformation, not as a cause. What triggered this effect? The emergence of intellectual property (IP) as an enforceable right-of-property. Stated a different way: by about 1760, English commoners could make (and enforce) claims of value for ideas and innovations.

This inverted the guild-system, where technologies remained trade-secrets. Thus there was a lot of opposition to Diderot’s documentation of manufacturing techniques in his Encyclopedie (1750), the first encyclopedia. Diderot’s Encyclopedie was full of explanations of Arts and Crafts like glassblowing and coach design. I keep wondering if Watt’s pressure-regulator valve was invented based on borrowing the negative-feedback principle from other types of mechanisms revealed through the Encyclopedie. Don’t know; future research. But I do know that one aspect of the guild system gets incorporated into this new regime. If you can commodify ideas, you can also commodify reputation in the same way. So “trade-marks” (and later “brands”) were incorporated into this new regime of property-rights enforcement.

So what was the effect? I use two bits of data.
First: Watt used patent-royalties to fund research, development, and refinement of his steam-engine from 1760 to 1789. Watt did not invent the steam-engine (I think Newcomen did in 1715), nor were Watt’s refinements the last and best thing done to steam-engines. No; but Watt made steam engines /practically useable/: lighter, better fuel-to-power ratio, and less prone to lethal explosions. Watt had a benefactor (Richard Arkwright), who was also a waiting customer for these refined engines. Arkwright was a Yorkshire landlord and manufacturer, who had sheep and the spinning-jenny; but lack of machine-power was his bottleneck. Arkwright did not have a labor shortage, because landlords like him had just evicted hundreds of thousands of peasants off of their land, and razed their old villages to make room for profitable sheep. That also meant that hundreds of thousands of landless English (and Irish) commoners made for a massive “reserve” labor-pool in the English Midlands.

But Watt was not merely a private, exclusive employee of Arkwright. He could patent his improvement and sell “Patented Watt steam-engines” to anyone. Arkwright and other Midlanders used the steam-engines immediately to power textile-mills; hence the ‘satanic mills’ of Blake, and the Industrial Revolution as we know and love it. See Danny Boyle’s portrayal of it at the opening ceremony of the 2012 Olympics in London!

What made it possible for Watt to fund his costly research and design of improvements, beyond Arkwright the angel-investor? Patent royalties. This also meant that others could freely adapt these new steam-engines to mills, boats, and locomotives. The patent-system is an opensystem by definition (the original meaning of patent is still used in the expression ‘patently obvious’). You can only claim your right to royalties (license-fees) in a court of law if you publicly proclaim and explain your invention. Thus, others can learn about the innovations immediately; but the property-holder can enjoy a temporary monopoly position on revenue until the patent expires. Governments like having other inventors examine a new patented technology, because that may provoke yet another idea, a new patent, new economic growth, and thus new tax revenue. It is worth noting here that only strong, regulatory governments with pervasive regimes-of-enforcement can create the conditions in which intellectual property exists at all. A smart software designer in Uzbekistan cannot make any proprietary claims for royalties from her idea within Uzbekistan, because the local regime cannot enforce intellectual property rights. The rise of IP-enforcement in China and southeast Asia may be the most important long-run shift in the global economy right now.

I still don’t understand the fine details of how this new property-regime coalesced around 1760 in England. One component is a change in laws; Timothy Yip pointed me to the Statute of Anne, 1710, that specified enforcement of copyright by the courts. I will look into this in future research. The take-away point, at the moment, is that the emergence of enforceable property-claims to ideas,innovations, and reputation made new technology much more valuable.

Here is my second data-bit: the U.S. formed officially by the ratification of the Constitution in 1789. Much of the Constitution was about rights. Americans tend to focus on the personal-liberty rights such as the 1st, 2nd, 4th, 5th, and 8th Amendments. What we often gloss over are the economic rights such as the Full Faith and Credit clause in Article 4, and the commoner’s right to civil litigation in Amendment 7. But here is one way to highlight the importance of economic rights to the new Republic: its first three creations in 1790 were the U.S. Census, the Post Office, and the Trademarks and Patents Office (USTPO). The Post Office facilitated rapid flows of information across this new, huge, free-trade zone. And the USTPO established the regime of intellectual property. Virtually 100% of the value of Google, Microsoft, and Disney is intellectual property. So, what was that whining I heard about ‘government getting in the way of business’? Business relies on government directly for much of its value across the United States. Even for industries that involved a lot of equipment in the 19th century, the IP property-rights make these enterprises worthwhile: Colt, Morse, Bessemer, Winchester, Edison, Bell, Tesla.

Now let us travel in our minds to 1949, a year that shaped so much of the geopolitics of the next five decades. Westerners were suddenly doubting a hundred-year association of the idea of ‘modernity’ with the idea of ‘progress.’ The massive double-shock of the worldwide Great Depression and WWII revealed and invalidated many assumptions of the modernist worldview, including the optimistic ideal of an ‘upward march of progress.’ Writers start using terms like ‘civilized’ with a wince, rather than as a chest-thump of white people over brown people. When Gandhi retorts that Western Civilization ‘would be a good idea,’ the quip is remembered because it stings. Modernity has just produced extreme material hardship (the Depression) followed by massive brutality including the attempted extermination of whole peoples and the actual incineration of whole cities (Nanjing, Dresden, Hiroshima and Nagasaki).

But white people remained more powerful (and the Japanese, early guests into a certain degree of whiteness because of their modernizing imperialism, 1870-1945). So: how to interpret this brave new post-war world?

Harry Truman used the word “develop” in his inaugural speech in 1949. In the cold-war competition that was shaping up between the Communist Eastern Bloc and the Capitalist Western Bloc, Americans sought to win over newly-independent former colonies in Africa and Asia by promoting development. But “development” was a vague term. What really stuck in the 1950s and 1960s was the term “industrialization.” Writers at the time treated the Industrial Revolution itself as modernity, and thus the words modernization and industrialization were used interchangeably in the immediate postwar years. The hierarchy of national status was signified by being either “industrialized” (superior, modern, complete) or “industrializing” (inferior, backward, incomplete). As manufacturing moved out of the U.S. and Europe, and eventually into what had been called “industrializing” countries, that terminology became obsolete and we went back to using “developed” and “developing”, which turned out to be useful because of their vagueness. What does “developed” mean? Whatever the more powerful country decides it will mean, defined by indicators the powerful countries specify in UN and World Bank reports. As James Ferguson points out in Global Shadows, one of the main political functions of the discourse on development is to reinforce national status-hierarchies.

What gets missed in this schoolyard-bully rhetorical discourse is that white, formerly-imperial countries remain relatively wealthy, even though most manufacturing now occurs in low-status, poorer countries. So is Malaysia more ‘developed’ than the U.S. if a higher proportion of their population is working in factories? Commodity-chain analysts like Gary Gereffi and Robert Reich explain that most of the value-adding in commodity-chains does not occur in the act of actually manufacturing the product. Most of the value is in the brand, in the commodified form of reputation. So a pair of Nikes might cost $10 in parts and labor to produce in Viet Nam, but it sells in U.S. malls for $100. Most of that value-difference is captured by Nike through its claims to the Nike Trade-Mark as property.

Ah: so now we get back to the shift in property-rights that produced the Industrial Revolution in the first place. ‘Globalization’ in the form of transnational production and trade involves the extension of intellectual property regimes to a global scale. In fact the degree of lack of globalization of a country roughly parallels its inability/unwillingness to enforce a regime of intellectual property. So the regime is spans the world like an archipelago, not like a comprehensive blanket. You probably need to pay Microsoft and Adobe for licensed software in South Africa; you probably cannot buy a legal copy of Windows or Photoshop in the Democratic Republic of Congo. The “net” metaphor still works, but it is worth noting that nets have holes in them; gaps where whole populations drop through to extreme poverty. But even as a geographically partial system, this transnational regime of IP-enforcement makes the New International Division of Labor possible.

Furthermore, this valuation of reputation is explicitly cultural in how it maintains a hierarchy of international prestige. Raw technical inventions might be ‘culturally neutral’ (though I welcome challenges to this claim), but ‘reputation’ in the form of legally-enforceable trade-mark is explicitly cultural (ooh! Pokemon! Manga! Who gets the profit from these?). And brand-property seems to be far more valued than technology-property in global trade. So in the cultural politics of global trade, the fact that Apple iPhones are judged (by the judge himself!) as “cooler” than Samsung Galaxy phones, that is an act of privileging California product-reputation over South-Korean product-reputation. In terms of technologies, both Samsung and Apple have infringed each other’s patents repeatedly. Mutual patent-infringement is normally a healthy process that promotes rapid technical innovations. In contrast, the ugly spat between Samsung and Apple is a conflict over reputation. Both corporations understand this to be the most significant basis-of-value in world trade.

Technological innovation continues to matter very much in the grim and shadowy realm of military supremacy. Industrial-era imperialism from the Dakotas to the Transvaal to the Ganges plain relied on mass-production of rapid-fire guns (from the Colt revolver through the repeating rifle to the machine gun). Firearms were the key instrument of ‘civilized’ domination over ‘savages.’ Now it is software security and stability in the control of robotic weapons and sensors. Aircraft-carriers are visually impressive, but big ships can be destroyed by little missiles or torpedoes that are the cybernetic ‘arms’ of increasingly cybernetic militaries. So long as the controlling-signal cannot be disrupted nor commandeered, the warrior can extend their “digital ki” over tens of thousands of kilometers to strike at the enemy, or perceive subtle shifts in that enemy’s intentions.

That military supremacy also matters in the creation and enforcement of terms of trade. A truly intimidating country has negotiating leverage even in multilateral negotiations, such as at the WTO. But military asymmetry really shows up in bilateral negotiations. Uncle Sam says: “Hey Haiti! How about lowering import-export duties? Yeah, we know you need the money, but it’s all about the principle of free trade. You feel free, don’t you? Our Marines occupied your country a decade ago (and six decades ago) to make sure you would be free. How’bout those trade-terms?”

To recap: the competition for reputation among corporations, as a fundamental basis-of-value and as a key aspect of global trade, is widely understood; it is playing out in ad campaigns for smart-phones as I write. Development-studies theorists reveal how this ostensibly private competition is linked to the idea of ‘development’ and national prestige. What I want to emphasize is how the commodification of three intangibles–ideas, innovations, and reputation–laid the foundation for most of the political economy and material culture that we experience today. Industrialization is an effect that can be exported or appropriated like technology itself; but intellectual property remains the key basis of value-production and domination. This is not a new emergence of intellectual property in the 21st century; it has been the crucial  ingredient since at least 1760.

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