Theme: Reform

http://usembassykyiv.wordpress.com/2013/02/15/why-should-ukrainians-care-about-intellectual-property-rights/IP? I”M NOT SURE THE LOGIC FOLLOWS. INSTEAD I HAVE A BETTER ANSWER FOR UKRAINE.

If intellectual property rights helped countries prosper, then China would demonstrate the worst performance. But it’s just the opposite.

Ukraine’s problems are (a) a lack of property rights in courts (b) a lack of insured identity provided by the government, (c) a lack of credit because of (a) and (b). There is a lot of sound and fury here that the government is corrupt, but the truth is, all government’s are corrupt – the USA”s included, if not spectacularly so. Systemic corruption (involuntary transfer, free riding, rent seeking, privatization of public goods, and socializing private losses) is no different from interpersonal corruption (bribery, graft) and oligarchical rent seeking and privatization – and we can argue pretty effectively that interpersonal corruption( bribery, graft) is far less harmful than systemic corruption.

The problem in Ukraine is that the judiciary would need to be replaced, or a parallel judiciary for consumer contracts created using lawmakers from western (common law) countries. If this judiciary were married with an insurance company that people paid to prove their identity so that they could have access to credit, because credit would then be insured, then this would RAPIDLY, within three to six years, revitalize the Ukrainian state.

WHY? Because the problem for any country is generating consumption, and consumption of complex goods requires credit. Consumption must come BEFORE production. This is a common problem, in economic understanding pervasive in all nations except perhaps for China.

In the United States, the state acts as insurer of last resort, and will adequately find and punish people for credit crimes. (Other than identity theft which for some reason the USA is legally incompetent to solve.) In the Ukraine, the courts are too corrupt to insure consumer credit, and no government organization capable of providing insurance is sufficiently free of corruption to act as an insurer. It is quite possible that european countries could provide these services, but they have no means of extracting violators or their assets from ukraine. Therefore the only possible solution is either reform of the court against the existing Ukrainian Constitution, or creation of a parallel court, and insurance provider, so that credit from the willing west can be used to fund consumption in Ukraine. And consequently, local production can arise to meet that consumption.

My admittedly short analysis of the progress of Ukrainian law is that lawmakers are taking adequate measures, but that the endemic corruption in the post-soviet bureaucracy, and certain cultural norms, make it impossible to ensure that citizens have property rights, that their contract rights are upheld, and that credit can be created as a tolerable risk for anyone.

Once this system was in place, and member judges had the incentives that come with such status, it could be used to defend against the arbitrary seizure of property, and the graft and bribery that is pervasive in the country.

But back to the original topic – it is very hard to make a functionally moral argument in favor of any Intellectual Property Right other than trademarks. Patents and Copyrights are hunting licenses to extract higher prices from a population than could be achieve by the process of meritocratic competition alone. Trademarks are weights and measures that prevent fraud. If you want to make a country wealthy, intellectual property rights are just another burdensome tax on a challenged economy. And that is both the logical outcome of any analysis, and the empirical evidence that will result from any analysis.