Against Monopoly

defending the right to innovate

Monopoly corrupts. Absolute monopoly corrupts absolutely.

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The power of Bill Gates

An earlier post asked if IP is affecting significantly income inequality. I do not have hard data to answer either way, and I guess it will take a long while before we get any. Still, my intuition says "yes", and probably significantly. But it takes a lot of "ifs" and "assumes" to argue it, so better leave it for a future date.

What IP certainly does is to increase the personal political power of IP monopolists beyond anything we had ever seen before, even in the "good old days" of the robber barons.

Today we learn that Bill Gates has the power of freeing or keeping people in jail for years in countries as far away as Russia. The press worldwide is reporting that Mikhail Gorbachev has pleaded with him (BG) to spare some obscure school teacher in the Ural region 5 (five) years of Siberian labor camp. When will a court of miracles open up in Seattle for the worldwide roi thaumaturge of the globalization era?


Do you really believe that IP increases income inequality? Can you spell out a few of these "ifs" and "assumes," because, frankly, I think they probably don't map onto reality very well. What dimension of income inequality are you thinking of? Surely not inequality across time or nations, right, because that would sure be a hard claim to support. I guess you're thinking of the (relatively insignificant) difference between Bill Gates and Bill Gates' gardener. Here arguing by anecdote is unpersuasive. There is one Bill Gates. Even the likes of Andy Grove and Larry Ellison don't make headlines like this one (which, of course, is a red herring of the finest order). Moreover, I certainly don't think one would want to claim too much for IP--for all the Gateses, Ellisons and Groveses there are at least as many Waltons, Buffetts and Saudi princes.

For what it's worth, here's Schumpeter:

...the capitalist engine is first and last an engine of mass production which unavoidably means also production for the masses...

Verification is easy. There are no doubt some things available to the modern workman that Louis XIV himself would have been delighted to have modern dentistry for instance. On the whole, however, a budget on that level had little that really mattered to gain from capitalist achievement. Even speed of traveling may be assumed to have been a minor consideration for so very dignified a gentleman. Electric lighting is no great boon to anyone who has enough money to buy a sufficient number of candles and to pay servants to attend them. It is the cheap cloth, the cheap cotton and rayon fabric, boots, motorcars and so on that are the typical achievements of capitalist production, and not as rule improvements that would mean much to the rich man. Queen Elizabeth owned silk stockings. The capitalist achievement does not typically consist in providing more silk stockings for queens but in bringing them within reach of factory girls in return for steadily decreasing amounts of effort.

From Capitalism, Socialism, and Democracy (p. 67)

My intuition--and Schumpeter's--is precisely the opposite of yours.

IP certainly raises the income of IP holders such as Bill Gates, Bono, Britney Spears, Paul McCartney, Yoko Ono, and many other artists and creators. Not to mention that of Carl Icahn, a large Time Warner shareholder and certified non-poor person. It does not raise the income of buyers of Microsoft's products, nor that of Britney et al.s' fans. IP certainly raises Bill Gates income relative to that of his gardner, even in the unlikely event that the latter has a "Garden with Bill Gates' Gardner" TV show.

Re: Schumpeter's insight, yes capitalists have made silk stockings affordable for factory girls. And CD's of Britney's music, which have enriched her thanks to IP, although presumably not nearly as much as have her live appearances.

The point about IP that's important is not merely what it does to the distribution of income, but the fact that IP holders use what Franz Oppenheimer (_The State_) called the "political means" to obtain income, in contrast to the "economic means." Bill Gates uses both means; his garnder probably uses only the latter. How could IP not skew the distribution of income in favor or Gates vis-a-vis his gardner? Schumpeter himself wrote about the "tax state," but didn't hone in on the IP angle.

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