[Ip-health] Stiglitz on China: country must avoid "unbalanced IP"

[James ARKINSTALL]

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Today's Zaman=0D
http://www.todayszaman.com/tz-web/detaylar.do?load=3Ddetay&link=3D108251=0D
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China=E2=80=99s New Economic Model=0D
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China's success since it began its transition to a market economy has been=
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based on adaptable strategies and policies: as each set of problems are=0D
solved, new problems arise, for which new policies and strategies must be=
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devised.=0D
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This process includes social innovation. China recognized that it could not=
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simply transfer economic institutions that had worked in other countries;=
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at the least, what succeeded elsewhere had to be adapted to the unique=0D
problems confronting China. Today, China is discussing a "new economic=0D
model." Of course, the old economic model has been a resounding success,=0D
producing almost 10 percent annual growth for 30 years and lifting hundreds=
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of millions of Chinese out of poverty. The changes are apparent not only in=
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the statistics, but even more so in the faces of the people that one sees=
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around the country.=0D
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I recently visited a remote Dong village in the mountains of Quizho, one of=
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China's poorest provinces, miles away from the nearest paved road; yet it=
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had electricity, and with electricity had come not just television, but the=
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internet. While some rising incomes came from remittances from family=0D
members who had migrated to coastal cities, the farmers, too, were better=
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off, with new crops and better seeds: the government was selling, on=0D
credit, high-grade seeds with a guaranteed rate of germination.=0D
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China knows that it must change if it is to have sustainable growth. At=0D
every level, there is a consciousness of environmental limits and the=0D
realization that the resource-intensive consumption patterns now accepted=
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in the United States would be a disaster for China - and for the world. As=
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an increasing share of China's population moves to cities, those cities=0D
will have to be made livable, which will require careful planning,=0D
including public transportation systems and parks.=0D
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Equally interesting, China is attempting to move away from the export-led=
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growth strategy that it and other East Asian countries have pursued. That=
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strategy supported technology transfer, helping to close the knowledge gap=
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and rapidly improving the quality of manufactured goods. Export-led growth=
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meant that China could produce without worrying about developing the=0D
domestic market.=0D
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But a global backlash has already developed. Even countries seemingly=0D
committed to competitive markets don't like being beaten at their own game,=
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and often trump up charges of "unfair competition." More importantly, even=
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if markets are not fully saturated in many areas, it will be hard to=0D
maintain double-digit growth rates for exports.=0D
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So something has to change. China has been engaged in what might be called=
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"vendor finance," providing the money that helps finance the huge US fiscal=
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and trade deficits, allowing Americans to buy more goods than they sell.=0D
But this is a peculiar arrangement: a relatively poor country is helping to=
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finance America's War on Iraq, as well as a massive tax cut for the richest=
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people in the world's richest country, while huge needs at home imply ample=
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room for expansion of both consumption and investment.=0D
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In fact, to meet the challenge of restructuring China's economy away from=
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exports and resource-intensive goods, China must stimulate consumption.=0D
While the rest of the world struggles to raise savings, China, with a=0D
savings rate in excess of 40%, struggles to get its people to consume more.=
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Providing better social services (public health care, education, and=0D
nation-wide retirement programs) would reduce the need for "precautionary"=
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savings. More access to finance for small and medium sized businesses would=
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help, too. And "green taxes" - such as on carbon emissions - would shift=0D
consumption patterns while discouraging energy-intensive exports. As China=
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moves away from export-led growth, it will have to look for new sources of=
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dynamism in its growing entrepreneurial ranks, which requires a commitment=
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to creating an independent innovation system. China has long invested=0D
heavily in higher education and technology; now it is striving to create=0D
world-class institutions.=0D
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But if China wants a dynamic innovation system, it should resist pressure=
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by Western governments to adopt the kind of unbalanced intellectual=0D
property laws that are being demanded.  Instead, it should pursue a=0D
"balanced" intellectual property regime: because knowledge itself is the=0D
most important input in the production of knowledge, a badly designed=0D
intellectual property regime can stifle innovation - as has been the case=
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in America in some areas.=0D
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Western technological innovation has focused too little on reducing the=0D
adverse environmental impact of growth, and too much on saving labor -=0D
something that China has in abundance. So it makes sense for China to focus=
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its scientific prowess on new technologies that use fewer resources. But it=
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is important to have an innovation system (including an intellectual=0D
property regime) that ensures that advances in knowledge are widely used.=
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That may require innovative approaches, quite different from intellectual=
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property regimes based on privatization and monopolization of knowledge,=0D
with the high prices and restricted benefits that follow.=0D
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Too many people think of economics as a zero-sum game, and that China's=0D
success is coming at the expense of the rest of the world. Yes, China's=0D
rapid growth poses challenges to the West. Competition will force some to=
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work harder, to become more efficient, or to accept lower profits.=0D
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But economics is really a positive-sum game. An increasingly prosperous=0D
China has not only expanded imports from other countries, but is also=0D
providing goods that have kept prices lower in the West, despite sharply=0D
higher oil prices in recent years. This downward pressure on prices has=0D
allowed Western central banks to follow expansionary monetary policies,=0D
underpinning higher employment and growth.=0D
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We should all hope that China's new economic model succeeds. If it does,=0D
all of us will have much to gain.=0D
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* Joseph Stiglitz is a Nobel laureate in economics. His latest book is=0D
Making Globalization Work. =C2=A9 Project Syndicate, 2007