The knowledge Forum: The economies of knowledge and development

A talk with Nagla Rizk, Ahmed Hussein, and Samer Attalah

“Knowledge has peculiar characteristics,” said Nagla Rizk, professor of economics at the American University in Cairo. She is also the head of the Access to Knowledge for Development Center, to which this blog belongs. Rizk was addressing a group of students, techies, lawyers, and others at Cairo’s new tech space Mushtarak in late March. It was one more convention where she laid the groundwork of important theoretical frameworks to knowledge, which have implications in different possible ways in our every day life.

“It is non rival, non excludable. Its value increases when you consume it. Think of the lighthouse, a typical public good, as the best symbol of what knowledge is and does,” she carried on. “An intellectual asset can be copied many times and has a cost value of zero,” Ahmad Hussein, a computer engineer and a second speaker at the gathering, said. Hussein sits on the boards and with the teams of several initiatives concerned with fighting barriers to knowledge availability, such as Open Egypt. He is also the initiator of the Knowledge Forum lecture series in Cairo.

These characteristics create tension when knowledge is placed in a market context, Rizk explained. What is the significance of a price tag when an additional user doesn’t affect the cost of knowledge production? And if the premise is that expanding free access is optimal, what will the market incentive be? These tensions between access and incentive are the main reasons behind the emergence of monopolies in knowledge production through proprietary intellectual property protection.

These monopolies are largely the reason behind legal, economic and technological barriers to access. Moreover, monopolistic practices challenge the natural way in which knowledge has developed through accumulation, Hussein added, shortly after he cited Isaac Newton’s famous words, “If I can see further, it’s only because I stand on the shoulders of giants” exemplifying how we have always built on preexisting knowledge.

Hussein took us from these theoretical horizons straight to their on-the-ground implications, citing the exponentially growing gap between rich and poor countries as a byproduct of how knowledge is commodified and how financial barriers prevent access to knowledge. “I don’t buy intellectual property rights, but I buy the product of intellectual property rights, which is infinite,” he explained, referring to the potentially endless production of knowledge.

In situating the conversation in Egypt, Hussein pointed to aspects of knowledge (mis)management as a key to economic sufficiency in juxtaposition to the way it is upheld in the developed world. He referred to the selling of oil and gas, which are depletable resources, for them to be manufactured abroad, just before any knowledge component has permeated them. Once processed abroad and turned into end products with a clear knowledge component, we import them again. “This means debt and dependency,” he concluded, further arguing that this is a new form of colonialism. Egypt is a major crude oil and natural gas exporter, where export deals have commonly been scrutinized by economic experts for harming the country’s national interests.

Meanwhile, mineral, chemical and oil based products represent Egypt’s top imports, followed by agricultural products and foodstuffs as Samer Atallah, the AUC-based economist who focuses on issues of trade, environment and development, put it. Atallah added that when Egypt was happy to reach US$14 billion in foreign direct investment, half of them were in the petroleum sector. “Companies come to invest large amounts of money in petrol to take it afterwards and export it. We pay the foreign partner a chunk of our petroleum and then we import it again from them in the form of petroleum products,” he said

Atallah took up the economic thread from where Hussein and Rizk left it to remind us of the three-steps to economic maturity: a. accumulation of resources, b. quality based on using technology to improve production, and c. innovation as a step that follows the exhaustion of all elements leading to quality production and the orientation toward new ways.

The Egyptian economy lies somewhere between a. and b., Atallah explained, while innovation economics is the main driver of growth in developed countries. At its heart, lies the concept of protection, Atallah said, especially with the growing volume of international trade and the placing of national products in a lot of foreign markets. This is why intellectual property regimes were developed.

International trade agreements, where patent protection is a prominent feature, are a major tool used to subdue underdeveloped economies, which often have weaker position in negotiations.

This resonated with examples cited by Hussein of how the management of knowledge in economies is key to sufficiency. For example, Alan Greenspan the Chairman of the Federal Reserve reported that 70 percent of the US’ GDP comes from intangible assets, such as patents, trademarks, business methodologies, and brands.

Moreover, research in the 1990s showed that only 3 percent of revenues coming from drug sales, which price tags emanate from IP, go to developing new ones, and 1 out of these 3 percent go toward the creation of competitive drugs. Here, pricing according to IP as a justification for the need to develop the drug industry becomes a weak argument since only a small percentage of the sales return go to research and development.

In Egypt, intellectual property rights are defended on the basis of encouraging FDI, particularly in the fields of oil, communications, and real estate.

Indeed, in one of its proclaimed economic goals, Egypt wants to place itself as one of the top 20 countries in the number of registered patents, a questionable goal from an access to knowledge perspective, Rizk opined. At the same time, anti-trust laws remain too weak to protect fair competition and resist monopolies.

As ways out of the restrictions forced on developing countries by IP regimes, Hussein brought examples of knowledge theft pursued by countries like Iran, Japan, and China by means of resisting these controls.

But a less militant avenue is to adopt policies catering to access to knowledge such as open source in the world of software production and open access in the field of research and publications. Hussein also reiterated that centering value on the human component and not the copyright is a way to shift the attention away from patent-based economies and is a call to more focus on the service sector.

Risk also spoke of the need to develop alternative business models, which is the crux of her work on the Free and Open Software industry and the music industry. Rizk added that smart use of legal spaces offered within the law and allowed by international agreements can offer legal room for expanding access to knowledge. For example, she referred to compulsory licenses, which liberate knowledge outputs from property rights so long as they are used for educational purposes.

Hussein spoke also about the need for public pressure on the government’s decision-making process, especially with regards to trade relations, exports, and imports. Rizk brought the example of the Tools Act of the 1700s Britain where machines used in the wool and silk industries and skilled labor were prevented from moving because of the knowledge embodied in them. “Today, a similar model is adopted by maximal intellectual property protection locking up embodied knowledge” she said.

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