How Hollywood, Congress, And DRM Are Beating Up The American Economy

Not too long ago, back in 1985, the Senate was ready to clobber the music industry for exposing America's impressionable youngsters to sex, drugs and rock 'n' roll. For America, that was nothing new. Through most of its history, the U.S. government has been at odds with the entertainment giants, treating them as purveyors of filth.

Not anymore. The relationship between the entertainment industry and the U.S. government today is pretty cozy. Entertainment is using America's clout to force Russia to institute police inspections of its CD presses, apparently oblivious to the irony of post-Soviet Russia forgoing its hard-won freedom of the press to protect Disney and Universal. The U.S. attorney general is proposing to expand the array of legal tools at the RIAA's disposal, giving the organization the ability to attack people who simply attempt infringement.

How did entertainment go from trenchcoat pervert to top trade priority? I blame the "Information Economy."

No one really knows what "Information Economy" means, but by the early '90s, we knew it was coming. America deployed the futurists -- her least-reliable strategic resource -- to puzzle out what an "information economy" was and to figure out how to ensure that America stayed atop the "new economy."

We make the future in much the same way as we make the past. We weave our memories together on demand, filling in any empty spaces with elements of the present, which are lying around in great abundance. In Stumbling on Happiness, Harvard psych prof Daniel Gilbert describes an experiment in which people with lunch in front of them are asked to remember their breakfast: Overwhelmingly, the people with good lunches have more positive memories of breakfast than those who have bad lunches. We don't remember breakfast -- we look at lunch and superimpose it on breakfast.

We make the future in the same way: We extrapolate as much as we can, and whenever we run out of imagination, we just shovel the present into the holes. That's why our pictures of the future always seem to resemble the present, only more so.

So when the futurists told us about the Information Economy, they took all the "information-based" businesses -- which Neal Stephenson, in his 1992 novel Snow Crash, described as (music, movies, and microcode -- and projected a future in which these would grow to dominate the world's economies.

There was only one fly in the ointment: Most of the world's economies consist of poor people who have more time than money, and if there's any lesson to learn from American college kids, it's that people with more time than money would rather copy information for free than pay for it. Of course they would! Why, when America was a-borning, she was a pirate nation, cheerfully copying the inventions of European authors and inventors. Why not? The fledgling revolutionary republic could copy without paying, keep the money on her shores, and enrich herself with the products and ideas of imperial Europe. Of course, once the United States became a global hitter in the creative industries, out came the international copyright agreements: The United States signed agreements to protect British authors in exchange for reciprocal agreements from the Brits to protect American authors.

Developing nations today face the same economic conditions that faced America 200 years ago. It's hard to see why a developing country would opt to export its GDP to a rich country when it could get the same benefit by mere copying. To get developing nations to respect American intellectual property policies, the United States would have to sweeten the pot.

The pot-sweetener is the elimination of international trade barriers. Historically, the United States has used tariffs to limit the import of manufactured goods and to encourage the import of raw materials. Generally speaking, rich countries import poor countries' raw materials, process them into manufactured goods, and export them again. If your country imports sugar and exports sugar cane, chances are you're poor. If your country imports wood and sells paper, chances are you're rich.

In 1995, the United States signed onto the World Trade Organization and its associated copyright and patent agreement, the TRIPS Agreement, and the American economy was transformed.

Any fellow signatory to the WTO/TRIPS can export manufactured goods to the USA without any tariffs. If it costs you $5 to manufacture and ship a plastic bucket from your factory in Shenjin Province to the USA, you can sell it for $6 and turn a $1 profit. And if it costs an American manufacturer $10 to make the same bucket, the American manufacturer is out of luck.

The kicker is this: if you want to export your finished goods to America, you have to sign up to protect American copyrights in your own country. Quid pro quo.

The practical upshot, 12 years later, is that most American manufacturing has gone belly up, Wal-Mart is filled with Happy Meal toys and other cheaply manufactured plastic goods, and the whole world has signed onto U.S. copyright laws.

But signing onto those laws doesn't mean they'll enforce the laws. Sure, where a country is really over a barrel (cough, Russia, cough), they'll take the occasional pro forma step to enforce U.S. copyrights, no matter how ridiculous and totalitarian it makes them appear. But with the monthly Russian per-capita GDP hovering at $200, it's just not plausible that Russians are going to start paying $15 for a CD, nor is it likely that they'll stop listening to music until their economy picks up. The real action is in China, where pressing bootleg media is a national sport. China keeps promising that it will do something about this, but it's not like the United States has any recourse if China drags its heels. Trade courts may find against China, but China holds all the cards. The United States can't afford to abandon Chinese manufacturing, and no one will vote for the politician who hextuples the cost of Wi-Fi cards, brassieres, iPods, staplers, yoga mats, and spatulas by cutting off trade with China. The Chinese can just sit tight.

The futurists were just plain wrong. An "information economy" can't be based on selling information. Information technology makes copying information easier and easier. The more IT you have, the less control you have over the bits you send out into the world. It will never, ever, EVER get any harder to copy information. The information economy is about selling everything except information.

The United States traded its manufacturing sector's health for its entertainment industry, hoping that Police Academy sequels could take the place of the rustbelt. The United States bet wrong.

But like a losing gambler who keeps on doubling down, the United States doesn't know when to quit. It keeps meeting with its entertainment giants, asking how U.S. foreign and domestic policy can preserve its business model. Criminalize 70 million American file-sharers? Check. Turn the world's copyright laws upside down? Check. Cream the IT industry by criminalizing attempted infringement? Check.

It can never work. There will always be an entertainment industry, but not one based on excluding access to published digital works. Once information is in the world, it'll be copied. This is why I give away digital copies of my books and make money on the printed editions: I'm not going to stop people from copying the electronic editions, so I might as well treat them as an enticement to buy the printed objects.

But there is an information economy. You don't even need a computer to participate. My barber, an avowed technophobe who rebuilds antique motorcycles and doesn't own a PC, benefited from the information economy when I found him by googling for barbershops in my neighborhood.

Teachers benefit from the information economy when they share lesson plans with their colleagues around the world by e-mail. Doctors benefit from the information economy when they move their patient files to efficient digital formats. Insurance companies benefit from the information economy through better access to fresh data used in the preparation of actuarial tables. Marinas benefit from the information economy when office-slaves look up the weekend's weather online and decide to skip out on Friday for a weekend's sailing. Families of migrant workers benefit from the information economy when their sons and daughters wire cash home from a Western Union terminal in a convenience store.

This stuff generates wealth for those who use it. It enriches the country and improves our lives. And it can peacefully co-exist with movies, music, and microcode, but not if Hollywood gets to call the shots. Not if IT managers are expected to police their networks and systems for unauthorized copying -- no matter what that does to productivity. Not if our operating systems are rendered inoperable by "copy protection." Not if our schools are conscripted into acting as enforcers for the record industry.

The information economy is all around us. The countries that embrace it will emerge as global economic superpowers. The countries that stubbornly hold to the simplistic idea that the information economy is about selling information will end up at the bottom of the pile.

What country do you want to live in?

Cory Doctorow is co-author of the Boing Boing blog, as well as a journalist, Internet activist, and science fiction writer. Read his previous InformationWeek columns.