Global IP Rights & the Free Flow of Information: Prerequisites for Job Growth in Technology

Last week, Rob, Simon and Jake teamed up on a paper addressing the anemic job creation rates we've seen in the U.S. over the past decade, putting forward a few different explanations of the problem, and offering a series of policy ideas to address both short term unemployment problems and long term, systemic issues with job creation.

There's a lot in the paper that should interest we Global Mobile people.  The last real expansion in the American job market came in the 1990s, largely on the heels of growth in the telecommunications and technology sectors. But some of the driving factors behind the stagnant wages and negligible job growth of the past decade are technological as well.  From the paper:

The spread of information and Internet technologies across American factories and offices not only made millions of positions redundant. These developments also created a growing mismatch between the skills of millions of American workers and the new abilities required to be productive in jobs throughout the economy.

So it follows that part of the solution is technology-based, as well. The policy section of the paper calls for free IT training for all American workers, and "innovation centers" -- an idea that was echoed by David Brooks in his column yesterday. 

I want to post-facto add another dimension to the paper-- another possible explanation of lackluster job & wage growth, and another prescription for potential improvement.  It's less significant than the issues they hit upon in the paper, but one that is, I think, worth some thought and discussion: the question of intellectual property rights, and the closely related issue of the free flow of information on the internet. 

As Rob laid out in his (highly recommended) 2008 paper on The Idea-Based Economy and Globalization, intellectual property-- patents, brands, trademarks, databases, relationships, business methods, and other institutional knowledge-- make up 60% of the market cap value for the world's 150 top corporations.  In 1984, the proportion was very different: 75% of a company's value was in its physical assets.  This shift is thanks, in part, to the technological revolution of the past few decades. An improvement of IT has allowed companies to make much better use of information, and put a lot more investment into intangible intellectual property.  And throughout the 1990s, the U.S. saw significant economic growth thanks, largely, to growth in the telecom and technology sectors-- which are even more dependent on their IP than most other sectors. Microsoft, for example, is a company that is not worth very much at all without its IP.  The same goes for Google, or Apple, or even a company like Nike.

If we want to see more investment in innovation and R&D, innovation centers are a great way to go about it.  But no corporation is going to put money toward developing ideas if they can't be confident they will own their intellectual property, and have rights over it-- not just in the U.S., but around the world.  And as long as pirated copies of Microsoft Windows are easier to find in China than legitimate versions of the software, and the global trade in pirated DVDs rivals or outpaces the trade in legal DVDs, the incentive for investment is going to be lower than it could otherwise be.

Meanwhile, many of these same companies have great incentive for the global flow of information to be free and open.  Corporations in the telecom industry and the high-tech industry (particularly in software and web services), have a major stake in ensuring that the internet remains a single, global network, rather than a series of isolated, national intranets. The same is true for the media and entertainment industries. Time Warner, for example, has huge potential markets for their content in countries like China-- where more people speak English than in the United States.

Information and internet technologies drove a lot of job growth in the 1990s, and their successes have helped make a lot of jobs redundant in the past decade.  I think there is the potential, in the coming decade, for the high-tech sectors to again be major drivers of job growth. To maximize this potential, greater worldwide protection of intellectual property rights and the preservation of the global free flow of information are important objectives for our government.

For more on this, check out the remarks of Anita Ramasastry, Senior Policy Advisor at the Commerce Department's International Trade Administration, at an event we hosted last week.