January 16, 2017
I blogged yesterday on how “Davos Man,” the world’s super-rich, is very supportive of all sorts of protectionist measures in spite of his reputation as a free trader. I pointed out that Davos Man is fond of items like ever stronger and longer patent and copyright protections and measures that protect doctors, dentists, and other highly paid professionals. Davos Man only dislikes protectionism when it might benefit folks like autoworkers or textile workers.
I thought it was worth pointing out that the protectionism supported by the Davos set is real money. The chart below shows the additional amount we pay for prescription drugs each year as a result of patent and related protections, the additional amount we pay for physicians as a result of excluding qualified foreign doctors, and the total annual wage income for the bottom 50 percent of wage earners. (I added 5 percent to the 2015 wage numbers to incorporate wage growth in the last year.)
Source: Baker 2016 and Social Security Administration.
As can be seen, the extra amount we pay for doctors as a result of excluding foreign competition is more than 7 percent of the total wage bill for the bottom half of all wage earners. The extra amount we pay for drugs as a result of patent protection is roughly one third of the total wage bill for the bottom half of wage earners. Of course, we would have to pay for the research through another mechanism, but we also pay higher prices for medical equipment, software, and a wide variety of other products as a result of patent and copyright protections. In other words, there is real money here.
Davos Man isn’t interested in nickel and dime protectionism, he wants to rake in the big bucks. And, the whole time he will run around saying he is a free trader (and get most of the media to believe him).
Note: This is corrected from an earlier version which used a much lower figure for the wage bill for the bottom half of the workforce. Thanks to Nate Fritz for calling this to my attention.
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