Intellectual Property and Point Protection

Patents were invented in Europe, specifically in Monarchical France, and the concept was taken up enthusiastically around the continent. During the eighteenth century, France was way ahead of the UK in the number of patents registered; but by 1800 a clear difference was emerging: while most patents were never to make much money for their owners, some patents - notably British patents - were massively generative of wealth because they were fundamental to the change that was sweeping the United Kingdom into the predominant position in the process that was soon to be called 'the industrial revolution'. Then, into the nineteenth century, the process that led to the unification of Germany ran in parallel with the industrialisation of key areas in that territory; most notably in the Ruhr and Saxony, and around Hamburg and Bremen; and German industrialisation was accompanied by a flurry of patents that included an increasing proportion that were based on methodical research.

The United States developed as a group of former British and French colonies, with a significant proportion of German-speaking settlers helping to drive industrial growth in that vast continent. For a considerable period there was considerable piracy of European intellectual property in the emergent economy of the United States; and eventually the US legislature recognised the good sense of mutual protection of industrially valuable intellectual property [simply because, if the US stole from others, others could steal from them: and thus they could undermine each other]. But, even then, copyright in literature, drama and art seemed less important - especially in the context of US law which was designed to make the acquisition of information and education as cheap as possible - so such property was to be protected mutually much later; hence arose Charles Dickens' famous endeavours to get his new output into the hands of  American readers before all the revenue was lost to pirates.

There are pseudo-scientific explanations as to why the UK and Germany, in particular among European states, have been prolific in inventing useful things and processes; but those theories do not explain why the USA has been at least equal to the European leaders in invention and innovation. The Great Exhibition in London in 1851 was meant to show the British people and the rest of the world the range and brilliance of British industrial output, and [to a certain extent] it did: but it also shocked the British visitors to see how sophisticated and clever the French, German and American innovations were. Britain was still primarily an agricultural country in 1851, and most of the urban population had only recently moved into town and still had links to the countryside: so to a huge proportion of the million or so Brits who walked round the Exhibition the most amazing device on display was the McCormick Reaper from the USA. The great plains of the USA were beginning to be prepared to grow crops, and the sort of mechanisation that the reaper represented showed how the American farmers would be able to undercut labour-intensive European suppliers of the principal cereal crops without needing to wait for a mass of immigrant labourers. One of the bizarre side-issues to emerge from the conversations that were driven by the perceived shift in the balance of advantage from Europe to America [and, to a much lesser degree, to Australia] was that Russia remained a peasant economy: the development of that vast empire would have been utterly transformed if the same extensive mechanised farming were to be installed there as in the USA. Russian peasants were still enslaved as serfs in 1851, and the Cossacks roamed free over the future wheatlands. The potential short-cut to massive advancement and wealth was not taken up.

Over the decades since 1851, Britain, Germany and the USA have remained the global leaders in invention and innovation: France and the low countries have been in the league too, but the dominant three have remained in the lead. And now the UK is going through the throes of implementing the decision to leave the protectionism of the European Union; and there is frequent mention of the notion that Britain can 'go it alone' with a hotch-potch of free-trade agreements with other countries: notably China and India, and maybe Brazil, alongside the USA. As the strongly emerging economies develop their industrial capability, they know that the mutual protection of patents will become ever more important. Chinese goods can simply be frozen out of the US and the EU if they are produced in breach of patent: so it is in the interests of the Chinese economy that the state becomes more and more forthright in protecting foreign patents.

On quite different grounds, the major economic blocks can close their markets to specific Chinese exports - or slap punitive tariffs on them - if Chinese exporters try to 'dump' that output in export markets at less than the cost-price of making the equivalent in the receiving country. Raising such barriers is what I have called point protectionism. Big economies, or economic communities, can retaliate against each other if they believe that point protectionism is unfairly being applied against them. This is a powerful tool in the armoury of each major economy. An isolated Britain will not have adequate leverage to apply against the emerging mass economies that might infringe British patents or apply unfair point protectionism against the UK. This is the decisive reason why the crazy Tory Brexiteers must be exposed for what they are, now. The European Union stinks, from the Parliament to the Commission to the Court; the UK must get as far away from those institutions as is feasible; while remaining in the necessary protection of the economic community.

What about 1834?

The heading to yesterday's Blog invited comparison of the situation in Britain in 2012 [in respect of benefits under the Welfare State] with what happened in 1834; but made no further comment on the earlier year. Anyone who has followed the Blog for a long time, or interrogated the system via key words, would have recognised that 1834 was the year in which a comprehensive nationwide system of family income support was abolished. There was no tinkering of the sort that Iain Duncan Smith is currently advancing, and there was no gaderene rush to fund fake jobs. Cash benefits were withdrawn. Thereafter people who could not maintain themselves had the option to present themselves to a Workhouse, where they surrendered most of their civil rights in order to be kept at a standard of living that was - by law - "less eligible" that that which could be earned by a recipient of a minimum wage in the open economy.

This draconian change in the law could only be carried once the political system had been changed. In 1832 parliament passed the Great Reform Act, which gave the vote to the taxpayers who funded the Poor Law levies from which benefits were paid: and only to those taxpayers. Recipients of  benefits had no votes. The Reform, supposedly a great step forward in the progress of democracy, enabled the taxpayers to slough off the burden of cash benefits: and they accepted the minimalist obligation to fund the [vastly cheaper] workhouse system. The economic objective of the change in the law was achieved: the rising 'middle class' invested heavily the railways, factories, shops and workshops that pushed forward the industrial revolution; and that provided employment for the vast majority of the expanding working class.

Charles Dickens and many others drew attention to the downside effects of the 1834 reform. The horrors of poverty between 1840 and 1870 were almost too easy and too omnipresent to chronicle; but the reform package of 1832+1834 was considered by the Victorian political class to have been irrefutably successful on its own terms. It took seventy years after 1870 for ideas of fairness and generosity to permit the wartime coalition government of 1940-5 to plan a complete welfare state. It took another six decades [1945 to 2010] for the system to undermine the economy and demoralise society.

Now in 2012 the recipients of benefits are voters: together with pensioners they are close to being a majority of the electorate. But they seem not yet to have recognised their potential power. They acquiesce in the 'reform' of the benefits system, and are mystified observers of the 'reconstruction' of the National Health Service. Unlike their forbears in the eighteen thirties, the political class has no clear and simple Political Economy on which to base their strategy. They have no confidence that their own mantras about 'economic growth' will in fact be vindicated; and they can point to no mechanisms that will deliver growth in practicable terms. The cuts in welfare and health spending are being made simply for book-keeping reasons. There is no underlying ideal, and no promise of 'light at the end of the tunnel'. The hopelessness of the situation is its principal characteristic; is this really the ultimate triumph of 'democracy'?