Original Comment by: Thomas Wilburn
http://www.milezero.org
Thank you for such a detailed response! I am not an economist, but I'll try to address these as best I can.
1. Fair enough--you are correct. The CIA factbook where I got that figure lists the $6800 as "GDP - Per Capita (PPP)." My apologies for the mistake, and for any confusion that it caused. I am not sure, however, that it invalidates my point. In fact, it may strengthen it.
2. This is exactly right. I actually considered addressing the US history of piracy (see also a fine story on the radio show Marketplace focusing on the issue), but didn't for reasons of space and coherency. Were we correct to do so? It's hard to say--I would have to say that we were wrong to pirate then, and that it doesn't excuse China now. Many people have advocated loosening international intellectual property rights, including TRIPS, for developing countries. In many cases, however, those exceptions are in regards to drugs and other necessities, not to consumer goods like software.
It is worth noting that China has defended its human rights infractions in the same way: because of America's shameful history of slavery, says the PRC, we have no right to criticize. But two wrongs do not make a right. China is no more excused from piracy because of our history than it is excused from mistreating and detaining dissenting voices simply because of American slavery and segregation. To argue otherwise is morally bankrupt.
3. These points are addressed in the article. From page 6: "Of course, publishers aren't staying idle in the face of all this theft. They've discovered that some games can be profitable in China - namely, multiplayer online games that charge by the hour, often through pre-paid cards or state-owned cell phone accounts (World of Warcraft uses the former)." The last section also extensively covers companies that are beginning to expand into China, both in localization and production. I hope I have not given the impression otherwise.
4. This is, in my view, your most substantial criticism. I don't believe anyone--including myself, in this article or elsewhere--is arguing that there is no income at all being realized from sales to China, nor that products should be sold there for full price. I'm also certainly not saying that piracy is preventing the creation of original IP. Again, I apologize if I've given that impression. I'm honestly a little confused that you have gotten these ideas from what I've written.
My personal concerns regarding the market, which should be reflected in the article, are two-fold. First, there is the concern that piracy undermines the equilibrium of the market. We are not merely discussing customers that purchase software at far lower rates. Most Chinese consumers are getting their software completely for free, as the IIPA's numbers (90% piracy rate, remember) clearly show. They are not contributing even a dollar to the company that owns the IP. The free market becomes, pardon the pun, a bit too free.
These are not issues isolated to the lesser-developed countries. American consumers often justify their piracy in much the same way: we weren't going to buy it anyway, you can't show any direct loss. Nevertheless, it's counterintuitive to say that a theft hasn't taken place. IP rights may be a way to incentivize the creation of new works. But (and here is my second concern) in non-economic terms, they are also a way to recognize and respect the original creator, legally and morally. As someone who lives on the fruit of intellectual labor, I would like for people to not steal my work. Because I'm a writer, we have ethical terms like "plagiarism." I see no reason that the same can't be applied to software. Perhaps piracy is not ultimately an economic drag--it is still (in my view) deeply unethical.
My guess is that the US government finds these infractions to be annoying because so much of the United States production has become intellectual goods. We would like to sell those goods to other countries, even at reduced prices (we already do this with television and movies, as I'm sure you know). If the country simply takes those goods, it may profit internally, but clearly we haven't--hence the government's actions.
Now, your contention that piracy is harmless. I am not an economist, but I play one on TV: in my day job, when I'm not doing the freelance journalism gig, I work for the World Bank in a capacity that doesn't decide policy, but does expose me to a great deal of information about development. I talked with a Chinese co-worker about this article early this week, before this article went online. "Software piracy is not important," he said. "They pirate everything there--including food and drugs. People eat those, and then they get sick, or sometimes they die. That's a real problem." Clearly, his point is hard to argue with. Again, this isn't tied directly to the software market, and so I didn't write about it. But it does go counter to the benign example of designer handbags that you've cited.
As I hoped to show in this article, piracy isn't just isolated incidents of copied PS2 disks. It has become a crucial part of the Chinese economic machine and culture. Just as the huge size of the Chinese workforce had unpredicted effects on the world's markets, it also exaggerates the effect of piracy in ways that we might not see elsewhere. The culture of piracy and China's cheap labor has begun to affect other developing countries as well. I believe that it is dangerous to leave such a huge force unregulated--or, more accurately in this case, regulated by governance as fickle as that of the PRC.
I don't want to be a voice of alarmism, or of protectionism. I personally favor free borders and free trade. I wish China the best. My time there gave me the impression of a dynamic, optimistic, and above all pragmatic people. I liked it very much. I simply hope that the best for China does not mean riding roughshod over the rest of the world as it ascends toward superpowerdom.
