The Magazine

Let Them Eat Patents

Instead of cash, which corrupts, why not give poor countries intellectual property?

Jul 31, 2000, Vol. 5, No. 43 • By JAMES D. MILLER
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HELPING THE POOR is a worthy goal. But in countries with corrupt bureaucracies, it can be difficult to do. Aid destined for the needy often goes to buy limousines for the ruling class. Instead of giving money to third world politicians, why not give their people the right to use intellectual property?

Suppose, for example, that the United States purchased and then gave away to all comers the African rights to an AIDS drug. Companies that produce drugs for the African market could then produce the AIDS drug without having to pay royalties.

This plan need not be limited to pharmaceuticals. Rich countries could buy the right to reproduce software in Africa and could make this software freely available to users there. This would reduce the cost of conducting business in the recipient countries. Unlike money for building infrastructure or for providing tax breaks to businesses, the right to use intellectual property couldn't be secretly salted away in a Swiss bank account. It couldn't be used to finance wars. Unlike tangible aid, it wouldn't go to waste because of a poor distribution system. Most important, private firms could make use of the aid without having to go through their government.

The primary danger of this plan is that third world countries would attempt to limit the use of donated intellectual property to those who paid the government some tax. Such aid should therefore be given only to countries that agreed not to restrict the use of the intellectual property.

But what if a country attempted to violate this agreement and surreptitiously imposed a tax on the use of the donated property? Fortunately, bureaucratic inefficiency would mitigate the harm of any such tax. Collecting a fee on the use of information while pretending that no such fee exists would be beyond the competence of most third world governments.

Many third world countries already steal American intellectual property. Since we are unlikely to go to war over the misappropriation of Windows 2000, it's difficult to deter or stop this kind of piracy. By giving away the right to use intellectual property, we would reduce the advantage to countries that steal it.

Because of the rampant theft of intellectual property, companies are reluctant to develop many products that would benefit primarily those in poor countries. Why should a pharmaceutical company develop a cure for malaria if the natural customers for such a product would only steal it? Instead of giving direct aid earmarked for fighting this disease, rich countries should offer a substantial reward to anyone who develops a cure for malaria. Such a cure would do more good than hundreds of World Bank-financed dams, and infinitely more good than IMF-financed dachas.

Giving away intellectual property would not reduce the wealth of the donor country. Every dollar the United States contributes in foreign aid is one less dollar America has. However, if we were to purchase and donate intellectual property (that would not otherwise be bought by those to whom we gave it), then we would not be reducing America's wealth. Instead we would be helping the world's needy by transferring money from U.S. taxpayers to U.S. patent holders.

Ordinary Americans would even benefit directly from this plan. The aid would subsidize and therefore promote intellectual property. Firms would engage in more research and development knowing that they had a new potential source of income. Furthermore, if this form of aid strengthened the economies of third world countries, it would eventually increase the demand for American exports.

The greatest benefit of capitalism is the creation of ideas and information. This has produced tremendous affluence in the developed world. The same creativity could do much more for the world's neediest.

James D. Miller is an assistant professor of economics at Smith College.