August 02, 2017
It’s popular among economists and policy types to wisely note that technology is leading the rich to get richer. Many of them consider this unfortunate, but hey, should we be Luddites and try to stop technology?
This is, of course, silly propaganda, but it passed for sophisticated thinking in policy circles. It is not technology, but our policy around it, like patent and copyright protection, that redistributes income upward. We got yet another lesson along these lines in an NYT article reporting that the Trump administration is beginning a major investigation on China’s trade practices which will focus on its treatment of U.S. patents, copyrights, and other forms of intellectual property (IP). The implication is that we would impose retaliatory measures because China was hurting Bill Gates, Elon Musk, and other major beneficiaries of these government-granted monopolies in the United States.
The decision to focus on IP is striking since there is little dispute at this point that China’s decision to deliberately keep down the value of its currency in the last decade badly hurt U.S. manufacturing. The result was the loss of millions of manufacturing jobs. This ruined the lives of many of these workers and devastated communities in places like Ohio and Pennsylvania. It also put downward pressure on the wages of non-college educated workers throughout the economy.
Furthermore, the trade deficit that resulted from China’s currency practices is the main reason that the United States suffers from secular stagnation (a.k.a. inadequate demand). This is the reason growth was slow following the collapse of the housing bubble and even today, almost ten years after the start of the recession, we are still not back to full employment.
Anyhow, the plight of the bulk of the country’s workers was apparently not a sufficient reason to get upset over China’s trade policy. But not honoring Bill Gates’ copyrights? That’s serious stuff. And the folks who write and talk about economics will tell us it is just technology.