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Capitalist Contradictions


As World Trade Organization meetings in Cancun draw nearer and the voices of capitalist globalization grow louder, now may be a good time to analyze their ideology with an eye to what modern capitalism is really all about.

Advocates of ?globalization? usually claim that economic advancement is the expected byproduct of international competition. This is why they want upcoming WTO negotiations to include ?competition policy?, which could force governments? to open up all public contracts to multi national corporations. Similarly, they call for a reduction in government spending, arguing that corporations provide services more ?efficiently? and, even if that were not the case, government involvement in the economy is burdensome.

Even opponents of ?globalization? (myself included) commonly summarize the ideology underpinning it: neoliberalism – as free trade and investment, privatizations, deregulation and a reduction in social spending. Basically, ?globalization? is survival of the fittest in the global marketplace.

While this understanding has some truth to it, a recent patent granted to the bio engineering company, Monsanto in Europe highlight its limitations. According to Seth Shulman in the September issue of Technology Review Magazine, Monsanto won sole legal control over all forms of genetically modified Soya within the European Union!
This is only the latest example of the increase in corporate monopolies through strengthened patent laws and a broadening definition of patents. Corporations don’t lobby for ?free? markets; instead they lobby for patent controls to drive up their profits, which ads to the ubiquitous process of ?privatizing the commons?.

For instance, between 1975 and 1994 Microsoft averaged 4 patents a year while between 1995 and 2000 the annual average increased to 240 (1). IBM in 2001 was awarded a record 3,411 U.S. patents, the most awarded to any patent holder and nearly 20% more than in 2000. The company now holds over 37,000 patents worldwide. (2)

The pattern is clear; over the past 20 years the number of patents issued annually in the U.S. has nearly tripled. (3) In 1902 the US patent bureau had given out 1 million patents, by 2002 5 million, which is expected to increase to 7 million by the end of 2004! (4)

Corporations who clamor for the ?free market? when it comes to regulating their activities and when they want to ship their goods across borders are often also claiming seemingly unnecessary patents JUST in case they are useful (profitable) later on. This is one way oligopolistic corporations maintain control over ?their? industry. Patents that are not profitable for one company will frequently be licensed to another. Canadian Business reports that, ?revenues from [patent] licensing soared in the US from US$15 billion in 1990 to more than US$ 110 billion in 1999.? (5)

The creation in 1982 of the U.S. Court of Appeals for the Federal Circuit has been much more favorable to patentees (as its advocates had foreseen). According to patent critic William W. Fisher III: ?”Until the 1980s, both the Patent Office and the courts resisted the patenting of software programs, primarily on the ground that they constituted ?mathematical algorithms? and thus were unpatentable ?phenomena of nature.? In 1981, the United States Supreme Court signaled a slight weakening in this resolve, upholding the patent on a software program (embedded in a computer) that served to monitor continuously the temperature inside a synthetic rubber mold. Since that time, the Federal Circuit has adopted an increasingly receptive posture; today, virtually any software program (if novel, non-obvious, etc.) is patentable, so long as the applicant describes it as being programmed into a general-purpose computer. The predictable result has been an enormous surge in software patent applications”.? (6)

Just like the idea that capitalist globalization is about free market economics, the image of the lone creator in her garret is almost wholly obsolete. Today, most creation is collaborative and controlled by large corporations. Corporations have a ?monopoly of monopolies? (As an aside, patents were originally meant as a mechanism to protect the lone creator from overpowering corporations. How things have changed…). Equally important, the extent to which every creator depends upon and incorporates into her work the creations of her predecessors is becoming ever more obvious. According to Fisher, ?like other ?monopolies? patents and copyrights were [are] dangerous devices that should be deployed only when absolutely necessary to advance some clear public interest.? (7)

One reason for the rise in drug costs and the resulting immense profitability of pharmaceutical companies is the strengthening of patent protections by the U.S. government in 1984. Similarly, the pharmaceutical industry?s sacred patents are a major reason why thousands if not millions go without some life-saving generic drugs.
In fact, a central goal of the WTO, through the Trade-Related Aspects of Intellectual Property Rights (TRIPs) agreement, is to harmonize upwards the world?s patent protection to those of the U.S. The reason the U.S. and other Group of 7 (G7) nations are proponents of the TRIPs is because they are beneficial to G7 based corporations. Steve Lohr in the N.Y. Times business section writes, ?if a global agreement on intellectual property right goes fully into effect, the developed nations, led by the United States, would gain the most, according to World Bank estimates. But developing nations would pay more. The U.S., Germany, Japan and France combined, stand to gain $34.9 US billion annually mostly at the expense of China, Mexico, India Brazil and others.? (8) The reason for this is that the capitalist centers are where the vast majority of advanced technological development takes place. Therefore, the majority of newly patented materials are controlled by the G7 nations. Some claim that the U.S. would abandon the WTO if it weren?t for the TRIPs agreement. In other words the favored part of the WTO is that which limits competition.

The same can be said of other ?trade? agreements. The Central American Free Trade Agreement (CAFTA) currently under negotiation between the Central American countries and the U.S. also has increased patent protection as a focus. The Bush administration is demanding these countries increase their patent protection to 25 years, which is even higher than American standards (It is unlikely that any Central American country has a domestic industry that would benefit from stronger patents). This is much the same as what happened with the signing of the North American Free Trade Agreement (NAFTA) whereby Mexico was required to increase its patent protection.

Increasingly big business in the core of the capitalist world is dependent upon patents. And it wants to impose its desired rules on the entire world. This is especially detrimental to industrializing countries since it perpetuates their dependency on the core nations where the technology is patented. Historically countries have developed by stealing technology, as was the case throughout Western Europe during the industrial revolution. Now, with patent protections codified in WTO and other ?trade? agreements?, wealthy nations? technological supremacy is law, impeding many countries economic advancement.
Patents are not the only realm where companies are pushing for increased monopoly protection. The U.S. Supreme Court?s decision at the start of this year to uphold copyright extension is another reminder of how corporate monopolies are increasing. In 1998 major players in the entertainment industry like Disney, which was about to lose its Mickey Mouse copyright, lobbied Congress to increase copyright. It was extended by two decades to 95 years for corporate copyright and individual copyright was increased to 70 years after the creator?s death. This decision was only one of many in the trend towards strengthening copyright. Over the past 40 years Congress has increased copyright 11 times. (9)

As capitalist globalization has enhanced corporate monopolies, it has increased competition between governments and between workers. This week the head of the Indian state of Gujarat said his state would create an export-processing zone to attract foreign investment, similar to Mexico?s Maquilladoras?or the zones throughout East Asia, where companies could get tax holidays and normal labour laws would not apply. Likewise, at the same time that IBM increases it?s monopolies through patents, in this week?s Business Week there is a report about the company shutting down its Hungarian factories to move them to China where workers are paid 75% less than in Eastern Europe. (10)
Further, while IBM benefits from patents and ?free? trade/investment, it is also the beneficiary of another social phenomenon neoliberalism is supposed to oppose; social spending. The Montreal Gazette reports that, ?companies like IBM are in line to receive millions of dollars of provincial tax credits for moving? to the Montreal area. (11)

Neoliberalism has brought with it a general attack against government spending on social entitlements such as social assistance, education accessibility or health coverage. Yet neoliberally inclined government?s opposition to spending on corporate welfare is much mellower.
A lucid example can be provided right here in Quebec where the Provincial government in 1996 adopted a ?zero deficit? policy. The government claimed debt had gotten out of hand and it was time for us all to tighten our belts. Government spending had to be curbed. At the same time, however, ?aid to businesses of various forms reached $3.3 billion last year from $1.2 billion in 1995-96.? (12) I guess while we were all tightening our belts the Provincial government found a way for business to add on some extra notches.

Nationally, the Liberal government in the midst of the country?s longest period of federal budget cutbacks created Technology Partnerships Canada (TPC) to dole out cash to ?innovative? companies. Since it?s inception in 1996 to December 2001 a mere $24.48 million of loans, or 2.58% of a portfolio of 947.7 million, were repaid. Tayper.com explains that ?according to TPC briefing notes, the program plans to loan out $6.4 billion by 2020, but will only recoup just over $2 billion (a best estimate) during this same period.? (13)

Unfortunately, Canadian practices are not an anomaly, as a recent letter in the Montreal Gazette exhibits. In the letter, Peter Smith the President of Aerospace Industries association of Canada laments the lack of corporate welfare for his industry. According to Smith, Canadian government spending on aerospace R&D is only 25 per cent of their costs while ?in the U.S., the government?s share of investment in aerospace research and development is 65 per cent, in Europe it is 50 per cent.? (14) For Smith, ?these are the realities of working in a global environment? and the Canadian government had better realize it.
?Social spending? is also being shifted to benefit big business in numerous other ways aside from direct corporate welfare.

One way is through the ascendance of Research and Development in North American universities at the expense of student accessibility. According to Issues in Science and Technology, ?[U.S.] Federal support for basic research in universities has increased from $5 billion to $13 billion during the past 15 years.? (15) At the same time, according to the Reno Gazette, ?the average federal Pell Grant award given to financially strapped students going to a public four-year college or university covered 98 percent of tuition in 1986, but only 57 percent in 1999, the report said. State grant aid awards for both low-income and non-need-based students paid 75 percent of tuition in 1986 but only 64 percent in 1999.? (16)

In Canada, ?in the decade ending in the 2000/2001 school year, the operating grants collected by universities for every full-time student dropped from $8,607 to $6,991 in constant year-2000 dollars. Over the same stretch of time, federal research grants rose by $455 million a year, to $1.51-billion.? (17)

A similar logic has taken hold in France. In mid July, Le Monde reported that the ?Cercle des Economistes? (council of economists) called for a massive increase in government spending on R&D to catch up to the level spent in the U.S. (18). According to these economists, increasing spending on R&D pays for itself by spurring future economic growth. What is especially revealing about the economists? announcement is that the French government is in the midst of a series of cutbacks to avoid breaking the European Union?s (neoliberal) Growth and Stability pact (EU governments? aren?t allowed to run more than a 3% annual budgetary deficit). Knowing that France is on the brink of breaking the Growth and Stability pact, the economists? believe R&D spending should be made exempt. At first glance, this may appear harmless enough but why exactly is it worthwhile to break the pact to spend on R&D but not education, health or social assistance? Isn’t spending on French people also an investment in the country’s future prosperity?

R&D’s primacy, at the expense of investment in common people, is for the benefit of corporations. Likewise, the heightened competition brought about by ?free? trade agreements is meant primarily for the international working class and governments. Certainly not for corporations since the same ?free trade? agreements increase corporations? patent capabilities effectively diminishing competition.

People, however, are increasingly fed up with neoliberal globalization’s blatant double standards. 300,000 or so gathered in Larzac, France, 2 weeks ago for a hugely successful gathering of the global justice movement. On Tuesday in Honduras more than 10,000 people were involved in, at times, violent demonstrations against IMF austerity measures. The depths of popular discontent with capitalist globalization will also be on display when WTO officials gather in Cancun.


yves engler is currently working on a book about student activism at Concordia University in Montreal. He can be reached at [email protected]

1. Canadian Business September 2 2003
2. http://www.pc.ibm.com/us/why
3. http://www.patentmatics.com/pub72.htm
4. Canadian Business Sept 2 2003
5. Canadian Business Sept 2 2003
6. http://eon.law.harvard.edu/property99/history.html
7. http://eon.law.harvard.edu/property99/history.html
8. NY Times October 14, 2002
9. N.Y. Times Jan 16, 2003.
10. Business Week September 1 2003
11. Montreal Gazette April 19 2003
12. Montreal Gazette April 19 2003
13. Taxpayer.com
14. Montreal Gazette August 18 2003
15. Issues in Science and Technology Summer 2003
16. Online Reno Gazette Journal 5/1/2002
17. Globe and Mail October 23, 2002
18. Le Monde July 8 2003

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