The interplays of US, China and their intellectual monopolies

Please cite the paper as:
Cecilia Rikap and Ariel Slipak, (2020), The interplays of US, China and their intellectual monopolies, World Economics Association (WEA) Conferences, No. 1 2020, Trade Wars after Coronavirus, Economic, political and theoretical implications

Abstract

Beyond the US-China watershed and supposedly polar state ideologies (liberal and pro-free- market in the US and dominated by state planning in China), this article delves into the shared traits of these powerful states. The US -at least since the Second World War- and China since 1978 share a systematic and highly oriented industrial policy directed to spur innovation in chosen sectors. In both cases, policies have been entangled with corporate interests and contribute to explaining the emergence of intellectual monopolies, precisely dominating each state’s privileged industries and technologies. Furthermore, each state’s geopolitical power relies on its respective intellectual monopolies. However, besides the support of each state, intellectual monopolies control global production and innovation networks constituting their own republics, which formally overlap with portions of different states. Intellectual monopolies also minimize their paid taxes while increasing wealth concentration. Contemporary capitalism is always on the brink of a global collapse as core states and intellectual monopolies are simultaneously friends and foes. We end this contribution with a preliminary analysis of these complexities.

8 comment

  • Juan says:

    Hi Cecilia and Ariel,

    Congratulations for the paper. I think it is a very interesting perspective to analyze the current technological warfare. Also, I have found that you have more work that will be very useful to me in studying digital capitalism and the role of both powers.

    Specifically, for me this work is a window to deepen the concept of “intellectual monopolies”, since I do not know it in depth and it can be very useful in my research on the struggle between China and the United States. In any case, given the current situation, I believe that the proposal you offer of the strategic similarities of both countries reflects how alive technonationalism is.

    I also find the relationship between the state and intellectual monopolies very useful in shaping the new rules of the digital game. In the end, infrastructural power is fundamental in the struggle for hegemony and I believe that in the future this state-monopoly relationship will be key in the creation of rules in areas such as 5G or artificial intelligence.

    In relation to what you advance in the conclusions about the withdrawal of the United States from international coordination, do you think we can walk towards a world of fragmented digital ecosystems (for example, two different regions of the internet with their respective monopolies, one dominated by the US-EU and the other by China)?

    Thank you very much.

    Greetings,

    Juan Vazquez Rojo
    Universidad Camilo José Cela and Corporación Universitaria de Asturias

  • Cecilia Rikap says:

    Hi Juan,

    Thanks for your comment and question. Digital decoupling is not impossible and both countries have made moves on that direction, think of the US banning Huawei (and extending that ban to other countries such as the UK) and of China´s great firewall. However, China is still too dependent on US AI chips and other ICT infrastructure and the US is arriving late at 5G, a technology where Huawei is the pioneer. So fully fragmented digital economies is something that I do not see coming any time soon.

    What I see is a long term turf war where technology is a central weapon and the outcome not only depends on the contestants (US, China and their intellectual monopolies) but also on other core countries/regions, in particular the EU.

    Finally, if digital decoupling seems complicated, overall decoupling is simply impossible. Both countries are too dependent on each other on every front (in terms of supply chains, the monetary system, and even ideologically they build their strength by demonising their opponent).

    Best wishes and again thanks for reading and commenting.
    Cecilia

  • Oscar Ugarteche says:

    Thanks for a fascinating paper filled with in-depth analysis of the high tech industry and the existing competition. Wade’s concept of directional thrust, analogous to dirigiste planning, is instrumental in understanding both countries’ competition in the high tech industry.
    Intellectual monopolies have replaced state functions as policymakers, say the authors opening the door to the idea that maybe it is corporate technological competition and not national competition that is at stake. This shift in emphasis then takes the reader into a global political economy framework where the corporate interest matters worldwide.
    The recent trips of Mr. Kennath Krach, Under Secretary for Economic Growth, Energy, and the Environment in the US State Department, around 53 countries gear around the notion of “The Clean Network,” meaning the cancellation of possible Huawei 5G contracts by those countries visited, threatening them with reprisals if they carry on with Huawei. The beneficiaries of such trips are US firms. From a corporate angle, the market is secured by their Government intervention and weight, not by their speed nor cost. Here lies the entire 5G problem. Maybe the Chinese will spy, yet the business of 5G is the point. Huawei launched 5G into the market in August 2018, and the US firms have only in July 2020 launched theirs. The underlying fear of Western economies regarding Huawei as the only company mastering 5G technologies is reinforcing China’s geopolitical and economic leadership, say the authors, making a good point.
    What can be seen is that the automotive and aeronautics industries in the US are downhill, and have been for several decades, with recurring rescues, in the name of national security. The market is the philosophy, and in case of doubt, Government enters, just in case. Those industries are not competitive but could improve with all of the undergoing high tech development. Protecting downhill industries will not reinforce US leadership. Even if China has only three global innovators in the 2020 edition of the Top 100 global innovators, while the US had 39 (Clarivate Analytics, 2020), the US fear is that China is more dynamic and might take over. In some senses, it is already filling in the vacuum left by the Trump administration and the high tech competition. However, it is also advancing towards the consolidation of larger trade areas, like RCEP, and the possible use of its currency for intraregional trade, confirming a new multipolar world ahead.
    Finally, the high level of co-dependence between the US and China’s led tech regimes opens the door to a cooperative game in terms of game theory. The fear of leadership loss is at stake—worse, who calls the game. The winner of the war calls the game. Maybe it is time to stop and cooperate, but all points in the direction of continuous war using more official intervention as we see in the Huawei case. The next stop could well be electric cars and clean electricity technology, and possibly the pharmaceutical industry. The argument made by Pelossi was that Chinese technology does not come from democracy but from an autocracy. With that argument, all Chinese industries ahead will be attacked. Only if the US decides to cooperate with China and Europe can the logic change. Otherwise, the war will continue in new forms as the US loses its place in the world economy slowly but surely.

    • Cecilia Rikap says:

      Thanks for your reflections Oscar.
      Indeed, there is a chance the US and China become “frenemies”. An interesting question related to this possible scenario concerns the rest of the world, in particular what would that mean for other core countries and for underdevelopped countries.
      What is crystal clear to me is that either frenemies or foes, corporate power will dictacte an essential part of this outcome.

      Best,
      Cecilia

  • Eduardo Mtz-Ávila says:

    Hi Cecilia and Ariel

    Thank you very much for sharing your article. It is a very valuable piece of writing. I look forward to reading more of your work. I believe that one of the highlights of your writing is that, in addition to detailing the role that intellectual monopolies have played in the United States and China, you make clear structural discussions. To exemplify, I consider it fundamental to point out that intellectual monopolies, despite being based on intangible goods, do not lose their relationship with global industries. Another outstanding issue is the renewal of the idea of the international division between countries, pointing out that the hegemonic centers in intellectual monopoly capitalism are fed back by a process of appropriation and extractive (intellectual income) of the knowledge issued in the rest of the world (since companies in many cases go beyond the territorial scope).

    In particular, I have two questions I would like to raise. 1) At the end of the third section, they quote from a Deutsche Bank report that points out that we are living through a new edition of the Cold War in its technological version. However, you state that, contrary to the geopolitical context of dispute that characterized the relationship between the United States and the USSR, a high degree of integration prevails between the US and China. Does this correlation of forces really allow us to think of a current process of hegemonic dispute at the technological level? Or does the United States seek to block, through trade warfare, a possible scenario of Chinese confrontation in the medium term?

    2) You point out that China has been favored within the framework of globalization in recent decades. The penetration of its companies at a global level, its technological developments guided by the State, as well as its insertion in international organizations such as the WTO, have been beneficial to the Chinese expansion project. However, what can we interpret with a process of deglobalization? Will it have an adverse impact on China?

    Thank you very much.

    Greetings,

    Eduardo Mtz-Ávila
    PhD student at the Institute of Economic Research, Universidad Nacional Autónoma de México

    • Cecilia Rikap says:

      Dear Eduardo,

      Thanks for sharing with us two very stimulating questions. I do not expect to answer them in a closed manner at this point but rather share my work in progress on this matter.

      The co-dependence between the US and China makes a full decoupling impossible, but this does not mean that countries will -to some extent- try to limit further globalization and privilege techno-nationalisms. The US indeed will keep trying to block China’s catching-up as they did with Japan (being quite successful in the latter case). Another difference with the USSR cold war is corporate power (both in the US and China). The playing field is more complex, which is why all or nothing solutions have a really narrow space. Neither full decoupling, nor unrestrictive globalization. The fight for the world’s data is another dimension to closely look at. Corporate and political powers in the US and China are aware of the strategic relevance (in economic and/cum political terms) associated with appropriating other countries most valuable datasets.

      Overall, both things will selectively happen. In manufacturing, I think we will probably witness more decoupling. In digital more intertwined production processes. And within each, many realities. AI processors are a very interesting case in point to follow in this respect.

      Best
      Cecilia

  • Marc Jacquinet says:

    Dear Cecilia and Ariel,
    This is a very interesting paper, giving a fresh analysis of the rivalry between two countries and a handful of dominating firms. It is also interesting on the matter of concentration and recent dynamics in the digital sector. I will recommend it to students. It gives many opportunities to discuss that matter and it consists of a good literature review and reaches some interesting conclusions.
    I would make some suggestions about the current paper. The first one is to include a brief historical contextualization of the rise of intellectual monopolies related to some international organizations and institutional settings (GATT, WTO, and about IPRs). It is at this point that your story can get a better understanding.
    Second, I agree with the focus on profits and concentration of profits, but I would add a consideration on other elements of financial statements of the big corporations to see if your conclusions hold; namely through debts, cashflow, agreements and financial appraisals from banks or investment funds.
    Finally, I do agree that the rise of China in this sector is substantial and that I would incline to agree with you more than with Schwartz 2019 and Starrs 2013. I see this as a central point of your paper.
    I could give you more comments, if you like.
    Marc Jacquinet
    U. Aberta and U. of Lisbon, Portugal

  • Ariel Martin Slipak says:

    Hola, Marc:
    Muchísimas gracias por el interesante comentario. Es una enorme alegría que lo considere recomendable para estudiantes.
    Francamente considero que la recomendación de la contextualización histórica del surgimiento de los monopolios intelectuales y su vínculo con las organizaciones internacionales resulta pertinente. En un libro que está por publicar Cecilia sobre el tema esto se profundiza.
    En segundo lugar, efectivamente es importante el contrastar las hipótesis con los estados contables de las grandes firmas. A veces el acceso a datos de firmas que sean un “espejo” sectorial entre ambos países es dificultoso, pero un interesante desafío. Creo que aquí habría que tener en cuenta el momento histórico de cada firma como elemento adicional.
    Muchas gracias por las pertinentes sugerencias.
    Esperamos seguir en contacto.
    Un cálido saludo de mi parte y de Cecilia,
    Ariel Slipak

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