Some progressives expressed dismay last week to discover that Bernie Sanders, the Vermont senator and candidate for the Democratic presidential nomination, doesn’t favor a policy of open immigration. While such a policy would undoubtedly allow billions of people in the developing world to improve their lives, there are not many people in the United States who relish the idea of the country’s population tripling or quadrupling over the next three or four decades.
It is hard to justify people in the United States living so much better and longer lives than people in places like Bangladesh or Burundi, just like it’s hard to justify the children of the rich and privileged in the United States living so much better and longer lives than their poorer counterparts, but there is not a plausible story where this inequality will be addressed by mass immigration. There are, however, more serious ways to think about addressing global inequality.
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One of the main reasons that workers in the United States get much higher wages than workers in the developing world is that they have more capital to work with. They also are much better educated on average. The same policy can help to address both gaps. Specifically, we can make our “intellectual property” freely available to the rest of the world at the cost of transferring it, which will generally be close to zero.
We can accomplish this by exempting the developing world from intellectual property (IP) claims in the form of patent and copyright protection. This would mean that poor countries in Africa, Asia and Latin America would be able to get drugs for what it costs to manufacture them. There would no longer be any issues with drugs costing tens of thousands of dollars a year. Nearly all of them would sell for just a few dollars per prescription. The same would apply to chemicals used in agriculture, also to newly designed crops that use land or water more efficiently. The operating systems and software on computers and cell phones would also be available at no cost, as would be various programs applications in research and business.
To get an idea of how significant this would be, the Commerce Department estimated the value of the stock of the intellectual property held by the private sector at $2.4 trillion at the end of 2013, roughly 12 percent of the total capital stock. It is also the fastest growing portion of the capital stock. In real terms the value of intellectual property products increased 40 percent more rapidly than the total capital stock over the last two decades.
While not all of what is counted as intellectual property can be easily transferred, since it depends on trained personnel who may not be available in some developing countries, there is also much intellectual property embedded in the value of physical capital. If developing countries could produce equipment without having to pay licensing fees for using various types of processes, it would substantially reduce the cost of building up their own capital stocks.
The education aspect of this story would also benefit from ending IP claims in the developing world. If schools and training facilities in the developing world all could gain access to books, computer software, online lectures and other educational material at zero cost, it would substantially reduce the cost of education. In short, a substantial portion of the benefits of the wealth can be transferred to the developing world simply by changing IP rules.
Of course if current IP laws are not enforced in the developing world, it may be difficult to enforce them in the US also. If drugs costing $100,000 a year in the US can be purchased in Africa or India for a few hundred dollars, it will be difficult to sustain the US price. This would mean a need for different mechanisms to finance research.
Fortunately Senator Sanders has already been thinking along these lines. Back in 2011 he proposed two bills that would replace patent monopolies with more modern mechanisms for financing drug research. His specific proposals may not be the best financing method, but they are at least a serious effort to move away from the anachronistic patent system.
Unfortunately, US trade policy has been moving in the opposite direction. In 1993, the Clinton administration put the TRIPS provisions into the Uruguay Round at the last minute. These provisions essentially required developing countries to adopt US style patent law if they wanted to be part of the WTO. Since this was very late in the negotiating process and countries did not want to be excluded from the world trading system, developing countries had to accept TRIPS before they even had time to analyze its implications.
Subsequent US trade pacts have consistently sought to make patents and other protections longer and stronger. One of the major sticking points in finalizing the Trans-Pacific Partnership is the strong patent protection the United States is demanding for prescription drugs.
This is another area where there may be major differences between the candidates. Regardless of which president gets elected in 2016, we are not going to see any movement towards open borders. However, there is at least one candidate who may support policies that will make it easier for people in developing countries to benefit from the knowledge the world has accumulated over many thousands of years. This can make a huge difference in their lives.