Patent Trolls

While reading the "Patents, Profit, and People" chapter of Stiglitz's book, I was reminded of a news report I heard over the summer detailing the rise of patent trolls. Here's a recent podcast done by a Boston University Law Lecturer, James Bessen, that explains the patent troll phenomenon in detail. Essentially, patent trolls are companies that buy up patents (specifically, what Bessen calls "garbage patents", patents that are broad and unclear) and then file lawsuits against companies for infringing upon these patents. Bessen headed a study that discovered that law suits filed by patent trolls could be held accountable for hundreds of billions of lost revenue. Bessen then continues, postulating that the patent trolls aren't just siphoning away money, but they are also slowing innovation, since tech companies need to settle lawsuits for new software or technologies before they can hit the market. This relates back to Stiglitz's point that the current patent system needs reform, since there are cases, such as patent trolls, where patents are actually stifling innovation.

Microfinance

In 2006 Muhammad Yunus of the Grameen Bank won the Nobel Peace prize for pioneering the concept of "microfinance"--giving out small loans to small impoverished households. His award brought international attention to the microfinance industry, which for a while seemed like a magic bullet for international poverty. Problems started in 2010, when reports of endemic suicide, caused by the stress of microfinance, started surfacing in India. In 2011, Bangladesh's government forced Yunus (A NOBEL PEACE PRIZE WINNER) to step down. Now according to the Economist, the government is trying to forcibly restructure and lay claim to the Grameen Bank. 

The rational for the government trying to intervene with the Grameen empire is somewhat nebulous, considering Grameen has partnerships with many companies abroad, which could be spooked by a government take over. That said, Grameen employs over 37,000 people and made over $592 million dollars worth of profit in 2010, making it a glistening jewel for a power hungry state… 

http://www.economist.com/node/21543547

Lobbyists

New tangent, same podcast. Here's another Planet Money podcast, this one dealing with lobbying in the United States. A recent study has discovered that lobbying Congress yields inordinately large sums of money--to the point where it could be considered a lucrative business investment. This podcast goes right to source, interviewing Jack Abramoff. 

I found the podcast extremely relevant to what Stiglitz is saying in Making Globalization Work. On page 79 he writes, "Special interests are largely to blame--not special interests in the developing counties resisting trade liberalization, as proponents of trade liberalization complain, but special interests in the developed world shaping the agenda to benefit themselves, while leaving even the average citizen in their own countries worse off. The negotiators, in representing their immediate "clients"--the corporations that lobby them heavily and constantly, partly directly, partly through lobbying congress and the administration--often lose sight of the big picture, confusing the interests of these companies with America's national interests or, even worse, with what is good for the global trading system."

Interesting what he says about the average American citizen. In fact, Planet Money details how one particular act that was heavily lobbied, the American Jobs Creations Act, has (in retrospect) been condemned by the Senate Permanent Subcommittee on Investigations as an act that "Did not produce any of the promised benefits of new jobs or increased research expenditures to spur economic growth". Corporations were given a 30% tax windfall and it did little to help the average citizen, a fact that sheds doubt on the relationship between corporate and American interests. 

Planet Money: The Original Chinese Capitalists

Ok last post on China for awhile… 

Stiglitz and Wolf both hold up China as an example of a developing nation that has flourished with globalization. Stiglitz writes on how China has averaged near 9% growth for the past 3 decades (11) and has lifted hundreds of millions of people out of poverty (23). While Wolf attributes this success to deregulation and the opening up of special economic zones, and Stiglitz attributes the success to careful management of a potential hazardous boom bust cycle, it is important to remember that following the Cultural Revolution, China was an extremely poor, vulnerable and economically depressed country. This podcast details the spark that arguably started China's meteoric rise. In 1978, farmers in a small town took a revolutionary step and started farming for themselves. This was extremely illegal in Communist China, where all goods were supposed to be collected by the government and redistributed. The end of result of these Chinese farmers' experiment has to be considered one of the most compelling arguments for the benefits of a capitalist system in the past 100 years (at least on a micro level). Check out this Podcast from NPR's Planet Money!

BBC Talks With Chinese Economist

http://www.bbc.co.uk/programmes/p00msxgh

In the same vein as last weeks post, BBC's Zeinab Badawi discusses China's recent economic growth pains with prominent Chinese Economist Cheng Siwei. During the course of the discussion, Badawi tries very hard to get concrete answers concerning the growing number of riots and public dissent that have come to light in Chinese society, and tries to make the case that these are signs that China's system is starting to show cracks. Cheng meanwhile contends that China's economy has only slowed because of the financial crisis in the West, which has slowed down demand for Chinese exports. This is interesting--showing tension between a newly developing country and countries that have been developed for sometime.

Mass Suicides at Chinese Microsoft Plant vs. Free Trade

http://www.cnn.com/2012/01/11/world/asia/china-microsoft-factory/index.html?hpt=hp_t3

Today in class we were asked whether or not we supported free trade. At the time my answer felt obvious, of course I support free trade. This was probably influenced by our first reading, from Martin Wolf, who makes the hypothetical argument that it makes little sense for America to set prohibitive barriers that create 50 separate economies. In same way, it doesn't make sense for the world to be divided into 200 separate economies. This logic seemed compelling at the time, but the more I think about it, the more unsure I become in the free market logic. Take for example the afore mentioned article. The details are a little sparse, but its slightly perturbing to think that in order for us to consume products for a "reasonable" price here in America, our goods need to be created by Chinese workers toiling in a sweat shop. Not just toiling, but treated poorly enough to consider mass suicides in order to improve working conditions. This article makes me reflect on my earlier assuredness in the free market, perhaps I do support some sort of regulation after all?