Suppose someone proposed to tax the country $500 billion a year — which comes to $4,000 per household annually, and more than $6 trillion if we do the scoring over a decade. And then they propose taking this tax revenue and handing the money to the pharmaceutical industry. My guess is that the proposal would be a big topic of debate and likely get many people very angry.
That is what government policy is doing now, but we call the taxes “patents,” so no one pays attention to the massive amount of money that the government effectively taxes from us and hands to the pharmaceutical industry.
I know I harp on this all the time, but I was reminded again of the absurdity of this situation in reading a write-up of a New York Times focus group that was organized around the question, “What is government for?” Predictably, the discussion focused on services directly provided by the government, especially FEMA, since the people selected for the focus group lived in parts of North Carolina hit by Hurricane Helene. There were also some complaints about taxes.
Not surprisingly, no one mentioned government-granted patent monopolies and how much they raise the price of prescription drugs and other items. I have to give the right lots of credit here, they transfer more than $1 trillion a year, an amount close to half of after-tax corporate profits, from the rest of us to those in a position to benefit from government-granted patent and copyright monopolies, and no one even talks about it.
Why Don’t People Recognize a Government-Granted Patent Monopoly as Government?
I am not quite sure why it is so hard for people to recognize that government-granted patent and copyright monopolies are in fact government policies and not created by God or nature. We all understand these monopolies serve a purpose: they promote innovation and creative work.
But these monopolies are not the only way to provide incentives. We can and do have other mechanisms, like direct payments from the government, most obviously with the $50 billion a year we spend (or used to spend) through the National Institutes of Health.
We can make these monopolies shorter or longer if we like. We can make them stronger or weaker. We can impose rules like requiring compulsory licensing, which we actually do with copyrights where copyrighted songs can be played on the radio and in other venues for designated fees. Government policy both brings these monopolies into existence and determines how much money can be made from them.
But the key point here is that patents and copyrights are government policies. That seems stupidly obvious if we give it a moment’s thought, but somehow our great policy intellectuals generally find themselves unable to spare that moment.
This incredible failure of our policy elite means we have structured the market in a way that massively redistributes income upward and then treat this as a starting point for debate over redistributive policy. It’s like starting a football game, where you’re arguing over who kicks and who receives and which direction each team will go, but one team already has 14 points on the scoreboard before the game begins.
These government-granted monopolies are not the only way the government structures the market to redistribute income upward, as I pointed out in my book Rigged. The decision to have “free trade” in manufactured goods — but not physicians’ services — means that our doctors get paid twice as much as their counterparts in other wealthy countries, even as our manufacturing workers get paid less.
Our corrupt corporate governance structure means our CEOS get paid three or four times as much as their European counterparts, skewing our whole pay structure. And we have sought to encourage a bloated financial sector, most obviously by bailing the jerks out when their greed and incompetence sink their banks.
But government-granted patent and copyright monopolies are the biggest and most blatant way in which government policy is structured to transfer money from the rest of us to the rich. And all our elite intellectual types insist they are too incompetent to notice. And we wonder why the right is winning.
This first appeared on Dean Baker’s Beat the Press blog.
