Innovation: The Key Economic Growth

Once again, the American public seems to have a better grasp on macroeconomics than does our legislature. American citizens by and large believe that piracy and counterfeiting kill jobs and damage the economy.

The recent release of The Property Rights Alliance annual “International Property Rights Index” marked a subtle upswing in the United States’ approach to intellectual property policy. More important than the indexes insignificant improvement, though, is the sobering reminder of the relationship between intellectual property policy and innovation. While Asian nations focus on production and efficiency, their reliance on foreign innovation stifles their ability to be fully self-sufficient, and does great damage to their GDP. The United States certainly has itself planted firmly in the top 10 when it comes to respect for intellectual property, but we must push ourselves to the top to regain our status as the world’s greatest innovator.

The Property Rights Alliance breaks their research into three main areas of property rights: (1) Legal and Political Environment, (2) Physical Property Rights, and (3) Intellectual Property Rights. When taken on the whole, the United States manages a meager 17th place finish. For our purposes, we’ll focus on that third area. Within that area, the study uses measures of three subcategories as their means to rank nations. They measure Patent Protection, Copyright Piracy, and the Protection of Intellectual Property Rights. In this scale, the United States managed to cling to a 4-way tie for second place (with Finland owning a commanding lead).

Our ranking aside, the study buries the lede a bit. Buried in the analysis is perhaps the most telling table: “Relationship between intellectual property rights and GDP per Capita.” The data illustrates a positive relationship of 0.71 (p<0.001). In short, as respect grows for intellectual property in a nation, GDP per capita is very likely to grow as well.

Of course this report just reaffirms something that the American public has long known. According to an American Consumer Institute study published last month, 89-percent of the US public sees that counterfeiting and piracy negatively impact jobs and severely damage the U.S. economy on the whole. And indeed it does. The US Chamber of Commerce even puts a number to it, suggesting that domestic IP piracy is responsibly for that annual loss of 750,000 American jobs. And internationally China is the biggest offender. If China would simply raise their standards to US levels, companies here in the States would see an additional nearly $50 billion in revenue. Most importantly, that would equate to thereabouts 930,000 additional American jobs.

The Obama Administration and Chinese leadership vowed in the past two years to depoliticize their economic talks and get a handle on intellectual property. To date, though, little has been accomplished and IP infringement complaints are now at record highs.

There is no question that the American public understands the value of intellectual property protections better than does our government. While government is too short-sighted to see that long-term consequences of ailing IP protection, the American public is worried. According to that same American Consumer Institute poll, 86-percent of Americans believe strongly that the protection of intellectual property encourages American ingenuity and innovation. Without which we would lose our foothold on major innovative markets like healthcare and technology, thereby slipping further down the economic ladder internationally. But even without a firm grasp on long-term consequences, nearly 1 million additional American jobs right now–today–is a number that cannot be ignored by the Obama administration any longer.

The logical extension of The Property Rights Alliance findings is a simple one: demand that our legislators work harder to protect American intellectual property both here and abroad.

Zack Christenson writes on digital tech issues for the American Consumer Institute Center for Citizen Research.