Information monopolies and the WTO by Roberto Verzola Information goods, sectors and economies The sector of an economy the involves the production of information goods may be called the information sector. Information goods, being non-material goods, are quite different from agricultural or industrial goods, which are material goods. When the bulk of the cost of a material good is in its information content, it partakes of the character of an information good. An economy whose information sector has become more dominant than its agriculture or industrial sector may be called an information economy. Earlier, such an economy had been variously called a "post-industrial" economy or "service" economy. Some people today use the term "knowledge" economy. The best example of such an economy is the U.S. economy. Information goods are different from material goods as follows: the true cost of producing an information good is concentrated on the research and development (R&D) stage -- in creating that first copy of the final good. Once the first copy is created, it can then be stored and reproduced electronically at very little cost. If digital format is used, then perfect copies of the original can be made very cheaply over unlimited generations of copies. Low reproduction cost The low cost of reproduction of information lies creates the basic contradiction within the information sector. On the one hand, it makes it very easy to share information products freely. On the other hand, it makes the potential profits from selling the product very high. We share information all the time. The lower the cost of reproducing information, the lower the barrier in sharing it. Once information is released, it tends to have a life of its own and gets shared among users until all who want it have gotten it. This reflects the social nature of information. But because the free sharing of information goods makes it difficult to set high prices for them, commercial information producers tend to do everything in their power to prohibit the free exchange of information. If they manage to do so, they can create an artifical scarcity, which enables them to keep prices - and profit margins - high. This is the whole concept behind intellectual property rights (IPR) such as copyrights and patents. IPRs prohibit the public from freely sharing information and give the information producer the exclusive right to use, make copies or sell the product. IPRs are, in effect, information monopolies. Today, they are the principal form of information ownership. The information economies of today are monopolistic information economies. Information monopolies make high profit margins possible. We know that investments tend to go where the profit margins are highest. The high margins in the information sector encourage the shift of investments from the industrial and agricultural sectors to the information sector. The transformation of the U.S. economy from an industrial to an information economy is the simply the result of this natural movement of investments to areas which promise the highest returns. Cyberlords: the rent-seeking class of the information sector The propertied class of the information sector may be roughly classified into two: those control the programs, the data, or the content (the software); and those who control the infrastructure, the servers, the facilities or the equipment for distributing, using, or consuming the information goods (the hardware). Both of them are usually rentiers, earning their income in the form of rents extracted from users. The rents include patent and copyright royalties, license fees, subscription fees, entrance fees, usage charges, technology charges and so on. These rentiers of the information sector are the landlords of cyberspace. They may therefore be called cyberlords. Cyberlords who control the software may be called information cyberlords. These include the owners of software companies, database companies, music, video and film companies, publishers, genetic engineering firms, pharmaceutical and seed firms, and similar companies who earn most of their income from IPR rents. Cyberlords who control the hardware may be called industrial cyberlords. These include the owners of communications lines and equipment, radio and TV stations and networks, Internet service providers, theater distributors and owners, cable TV providers and operators, integrated circuit manufacturers, and other firms. With these facilities converging towards a single global information infrastructure for data, voice communications, media, entertainment, financial transactions, payments, etc., the industrial cyberlords are consolidating, merging and creating huge new monopolies that control large chunks of these facilities. We can also include in the cyberlord class those highly-paid professionals who earn their living under the employ or in the service of cyberlords. The best examples are the top-level managers as well as the lawyers who serve cyberlords and who derive their income mostly from the payments of the cyberlords they work for. Lawyers, in particular, are absolutely necessary for copyrights and patents holders because these IPR instruments are basically legal artifices which can only be implemented through government intervention. Cyberlords provide a social base for globalization. Because the social nature of information keeps asserting itself, information products tend to spread themselves globally as soon as they are released, regardless of the will and intentions of the producers. Cyberlords, therefore, have no choice but to globalize their operations themselves, to follow where their information products go. Thus, they push the globalization process incessantly to ensure that every country, every nook and corner of the globe, is within the reach of their mechanisms for rent extraction. WTO: a legal superstructure for cyberlords To strengthen this global reach, cyberlords need a global legal superstructure for imposing their information monopolies and extracting rents. This global legal superstructure is turning out to be the World Trade Organization (WTO). Under the WTO's persistent pressure, various international agreements have been concluded that protect and advance the interests of cyberlords. The most important agreement, without which cyberlords would not be able to realize their high profit margins, is the TRIPS agreement under GATT, which bound all WTO members to very high standards of IPR protection. Since more than 90% of all IPRs in the world are owned by rich countries, this highly protectionist agreement is clearly in the interest of rich countries like U.S. and Europe. The TRIPS agreement was followed by other WTO agreements essential to the growth and expansion of the information sector, and which have been or are in the process of being concluded. These include: the e-commerce agreement, the information technology agreement, and the agreement on telecommunications. These agreements ensure low-duty or tax-free transactions, an increasingly deregulated playing field, the lifting of restrictions to the entry of foreign firms, and other policies beneficial to cyberlords, particularly those who operate globally. These also include agricultural agreements, in so far as they ensure markets for the genetically-engineered agricultural products (which may be seen as information products of the genetic variety) of information economies. Retaining the colonial trade pattern With the emergence of powerful information economies led by the U.S., there are now three major categories of economies in the world: the information economies, the industrial economies and the agricultural economies. Let us do a quick comparison of their typical products (agricultural crops like sugar; industrial manufactures like refrigerators; software programs or movies on CD). To produce $300 worth of sugar, one needs to plant lots of sugar cane, grow them for months, harvest them and then process some 2,000 pounds of sugar. A $300 refrigerator would need a lot of metal, plastic, glass and other materials, as well as sufficient energy to process and mould them into a working appliance. A $300 software on a CD can be copied within minutes for one dollar or so. Yet, in a WTO-ruled world, these products are supposedly of equal value. Clearly, the greatest returns will be enjoyed by the information economy and the lowest by the agricultural economy, with the industrial economy lying somewhere in between. In the past, industrial economies enjoyed a favorable pattern of trade with agricultural economies. This colonial trade patttern kept erstwhile colonies under the former's economic control, although the latter had gained formal political independence. Similarly, we can expect information economies to enjoy a favorable trade pattern with industrial and agricultural economies. The high profit margins of information products will allow information economies to continue to extract large amounts of resources from developing agricultural and industrial economies. Agricultural economies which are trying very hard to industrialize in the hope of extricating themselves from the colonial trade pattern with their industrial trade partners will not necessarily succeed in doing so. By the time they reach industrial status, the U.S. and Europe will have become full-blown information economies, thereby remaining in a very good position to continue such a colonial trade pattern. Historically, therefore, the emergence of the global information economy can be seen as the third wave of a continuing globalization process. The first wave involved direct conquest through colonialism. The second consists of the post-colonial expansion of industrial economies producing material goods. The third is the emergence of the global information economy. First to third waves: a comparison Let us compare the three waves: - The first wave was after slaves, precious metals and lands for raising export crops; the second wave was after new investment acquisitions, sources of raw materials and labor, and industrial markets. The third wave is after sources of mental labor, sources of information raw materials, and markets for information products. - The third wave requires freer movement of information across national boundaries, further eroding the power of the State. While the State itself operated corporate monopolies during the first wave, and continued to be dominant over corporations during the second wave, it is much less powerful under the third wave. Global corporations are now assuming the dominant role in the State-corporate partnership, in close collaboration with supra-national institutions like the IMF, the World Bank, and the WTO. - As in the first two waves, a mask hides the real intention to extract wealth from the rest of the world, using such phrases as "information at your finger tips", "world without borders", "global village", instant access to the world's libraries", and "free flow of information". - The global information economy imposes its own global rule to facilitate wealth transfer. Supra-national institutions curtail national sovereignty. The role of the nation-state shrinks, many of its functions taken over by private corporations, which strengthen their political voice and clout further. Corporate control of information, communications, and media infrastructures expands through privatization and deregulation. - New forms of wealth extraction emerge or old forms acquire new importance. Monopoly rents become the main form of wealth extraction. Royalties from intellectual property rights (IPRs) and other income from information rents assume major significance. Because of the huge disparity in profit margins, trade between information economies and other economies become even more unequal. - We face new technologies of exploitation. First wave technologies were for the immediate plunder of our natural resources and human communities. Second wave technologies were based on material exploitation and intensive energy utilization. Third wave technologies are invariably information-based, centered on extracting the highest monopoly rents from one's control of information infrastructure or information content. The best example is the Internet. Advanced information and communications technologies make possible the convergence of media, entertainment, data, and communications. Genetic engineering and biotechnologies have likewise become fertile areas for information monopolies, like the patenting of life forms. High initial costs filter out the poor Will new information and communications technologies (ICTs) democratize benefits and make it possible for poor countries to catch up with the developed economies? Not likely. In fact, new ICTs are bound to exacerbate the existing gap between rich and poor countries, and between rich and poor sectors in every country. Consider the nature of an information product, whether software, hardware, or a data connection: the initial costs (the development costs, the equipment cost, the leased line cost, etc.) are high, but the operating or recurring costs are low. Because the initial costs are high, few firms or individuals can afford them. These high initial costs serve as barrier, filtering out those who have little or no capital. But the rich who can afford the high initial costs then enjoy low operating costs (the cost of reproducing software, running equipment, maintaining a leased line, etc.). This makes them much more competitive vis-a-vis those who have been excluded from the new ICTs because of the high initial costs. The more competitive rich will get richer, the less competitive poor will get poorer. Low-friction capitalism and the wealth gap Software and information content can move around the world much more quickly than refrigerators or bags of sugar. The non-material products of the information sector can move more easily, much faster, and with less overhead costs. The same infrastructure for quickly moving information products can also serve for payments. The cost of transactions will go down dramatically. This makes possible what may be called low-friction capitalism. Low friction means less resistance to movement; information goods and money can move faster. The higher velocity of goods and money speeds up the various capitalist processes of acquisition, accumulation, competition, concentration, and the emergence of monopolies. Thus, the evolution from a multiplicity of small producers towards a few giant monopolies occurs much faster. The rich will get richer, and the poor will get poorer faster too. Social change advocates who work in the agricultural and industrial sectors must grasp how the information sector and the emerging global information economy are qualitatively different from the material sectors of the economy. Only an appreciation of these new features can lead to an effective strategy against the increasingly powerful cyberlord class. A strategy against cyberlords Such a strategy may be summed up as follows: oppose privatization and fight for public domain information content, tools, facilities and infrastructure. We should yield no ground in the cyberlords' efforts to increasingly privatize information, culture, knowledge and other non-material goods -- including what are currently public domain material -- through IPRs. This is the key struggle in the information sector. Information cyberlords will rise or fall depending on how this struggle turns out. In the software field, this is best done through the expansion of various forms of compulsory licensing of commercial information products and the protection of the people's freedom to use, share, and modify information tools and content. A strong lobby must be mounted against the patenting of life forms. We should propose non-monopolistic rewards for intellectual activity and the social sharing of non-material goods. We should advocate various forms of community/public control or ownership over backbone information facilities and infrastructures, to minimize private rent-seeking through corporate control over such commonly used information facilities. Such a strategy runs squarely against WTO principles, which are highly protectionist over IPRs and which favor corporate control over information facilities. As the legal infrastructure which cyberlords rely on for maintaining their high profit margins, the WTO will remain major arena of struggle in the information sector. The setback WTO suffered as a result of the Seattle protests has opened some windows of opportunity to question the various pro-cyberlord WTO agreements, particularly TRIPS. Developing countries must try to get these agreements postponed, reviewed, and modified, to weaken pro-cyberlord provisions and strengthen those provisions that increase public access and control over information content and facilities. While the cyberlord class has become increasingly powerful, the source of its power is also the key to its weakness. This is the extremely low cost of reproducing information, which is the basis of the social nature of these goods. It is impossible to stop people from sharing information, regardless of the will of information producers and cyberlords. The more people freely share information, the weaker information monopolies will become. Our future: neo-slaves or free citizens? The colonization of our countries that began in the 16th century hasn't really stopped. It just changed forms, coming in waves of globalization that intrude into our communities, impose their unwanted rule, and squeeze wealth out of our people and environment. Each improvement in technology and transformation of capital creates new ways of extracting wealth from us, enriching further those who control the technology and our economy while impoverishing us, destroying local livelihoods, ravaging our natural resources, and poisoning our environment. The resolution of this conflict cannot occur separately from other ongoing struggles in the agricultural and industrial arenas. Only a combination of demands involving the three major sectors can draw the support of the majority of the people in these sectors and bring about a new political structure that is in closer harmony with the social nature of information. How we confront this extension of colonialism will determine whether our children and grandchildren will live as neo-slaves under a system as cruel and heartless as the colonial system of old, or as free citizens living in communities where knowledge and culture are again freely-shared social assets, where industrial machinery is appropriately designed to serve and not to enslave human labor, and where ecology is the organizing principle in agriculture.