The Revolt Of The Poor - The Demise Of Intellectua Essay

This essay has a total of 2315 words and 11 pages.

The Revolt Of The Poor - The Demise Of Intellectual Property

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Three years ago I published a book of short stories in Israel. The publishing house
belongs to Israel's leading (and exceedingly wealthy) newspaper. I signed a contract which
stated that I am entitled to receive 8% of the income from the sales of the book after
commissions payable to distributors, shops, etc. A few months later, I won the coveted
Prize of the Ministry of Education (for short prose). The prize money (a few thousand DMs)
was snatched by the publishing house on the legal grounds that all the money generated by
the book belongs to them because they own the copyright.

In the mythology generated by capitalism to pacify the masses, the myth of intellectual
property stands out. It goes like this : if the rights to intellectual property were not
defined and enforced, commercial entrepreneurs would not have taken on the risks
associated with publishing books, recording records and preparing multimedia products. As
a result, creative people will have suffered because they will have found no way to make
their works accessible to the public. Ultimately, it is the public which pays the price of
piracy, goes the refrain.

But this is factually untrue. In the USA there is a very limited group of authors who
actually live by their pen. Only select musicians eke out a living from their noisy
vocation (most of them rock stars who own their labels - George Michael had to fight Sony
to do just that) and very few actors come close to deriving subsistence level income from
their profession. All these can no longer be thought of as mostly creative people. Forced
to defend thie intellectual property rights and the interests of Big Money, Madonna,
Michael Jackson, Schwarzenegger and Grisham are businessmen at least as much as they are

Economically and rationally, we should expect that the costlier a work of art is to
produce and the narrower its market - the more its intellectual property rights will be
emphasized. Consider a publishing house. A book which costs 50,000 DM to produce with a
potential audience of 1000 purchasers (certain academic texts are like this) - would have
to be priced at a a minimum of 100 DM to recoup only the direct costs. If illegally copied
(thereby shrinking the potential market - some people will prefer to buy the cheaper
illegal copies) - its price would have to go up prohibitively, thus driving out potential
buyers. The story is different if a book costs 10,000 DM to produce and is priced at 20 DM
a copy with a potential readership of 1,000,000 readers. Piracy (illegal copying) will in
this case have been more readily tolerated as a marginal phenomenon.

This is the theory. But the facts are tellingly different. The less the cost of production
(brought down by digital technologies) - the fiercer the battle against piracy. The bigger
the market - the more pressure is applied to clamp down on the samizdat entrepreneurs.
Governments, from China to Macedonia, are introducing intellectual property laws (under
pressure from rich world countries) and enforcing them belatedly. But where one factory is
closed on shore (as has been the case in mainland China) - two sprout off shore (as is the
case in Hong Kong and in Bulgaria).

But this defies logic : the market today is huge, the costs of production and lower (with
the exception of the music and film industries), the marketing channels more numerous
(half of the income of movie studios emanates from video cassette sales), the speedy
recouping of the investment virtually guaranteed. Moreover, piracy thrives in very poor
markets in which the population would anyhow not have paid the legal price. The illegal
product is inferior to the legal copy (it comes with no literature, warranties or
support). So why should the big manufacturers, publishing houses, record companies,
software companies and fashion houses worry ?

The answer lurks in history. Intellectual property is a relatively new notion. In the near
past, no one considered knowledge or the fruits of creativity (art, design) as
"patentable", or as someone "property". The artist was but a mere channel through which
divine grace flowed. Texts, discoveries, inventions, works of art and music, designs - all
belonged to the community and could be replicated freely. True, the chosen ones, the
conduits, were honoured but were rarely financially rewarded. They were commissioned to
produce their works of art and were salaried, in most cases. Only with the advent of the
Industrial Revolution were the embryonic precursors of intellectual property introduced
but they were still limited to industrial designs and processes, mainly as embedded in
machinery. The patent was born. The more massified the market, the more sophisticated the
sales and marketing techniques, the bigger the financial stakes - the larger loomed the
issue of intellectual property. It spread from machinery to designs, processes, books,
newspapers, any printed matter, works of art and music, films (which, at their beginning
were not considered art), software, software embedded in hardware and even unto genetic

Intellectual property rights - despite their noble title - are less about the intellect
and more about property. This is Big Money : the markets in intellectual property outweigh
the total industrial production in the world. The aim is to secure a monopoly on a
specific work. This is an especially grave matter in academic publishing where small-
circulation magazines do not allow their content to be quoted or published even for
non-commercial purposes. The monopolists of knowledge and intellectual products cannot
allow competition anywhere in the world - because theirs is a world market. A pirate in
Skopje is in direct competition will Bill Gates. When selling a pirated Microsoft product
- he is depriving Microsoft not only of its income, but of a client (=future income), of
its monopolistic status (cheap copies can be smuggled into other markets) and of its
competition-deterring image (a major monopoly preserving asset). This is a threat which
Microsoft cannot tolerate. Hence its efforts to eradicate piracy - successful China and an
utter failure in legally-relaxed Russia.

But what Microsoft fails to understand is that the problem lies with its pricing policy -
not with the pirates. When faced with a global marketplace, a company can adopt one of two
policies: either to adjust the price of its products to a world average of purchasing
power - or to use discretionary pricing. A Macedonian with an average monthly income of of
160 USD clearly cannot afford to buy the Encyclopaedia Encarta Deluxe. In America, 100 USD
is the income generated in average day's work. In Macedonian terms, therefore, the Encarta
is 20 times more expensive. Either the price should be lowered in the Macedonian market -
or an average world price should be fixed which will reflect an average global purchasing

Something must be done about it not only from the economic point of view. Intellectual
products are very price sensitive and highly elastic. Lower prices will be more than
compensated for by a much higher sales volume. There is no other way to explain the pirate
industries : evidently, at the right price a lot of people are willing to buy these
products. High prices are an implicit trade-off favouring small, elite, select, rich world
Continues for 6 more pages >>

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