World IP Day: Intellectual Property is a Big Economic Positive for U.S.

By at 25 April, 2022, 7:07 pm

by Raymond J. Keating –

April 26, 2022, is World IP Day. That is, it’s a day to celebrate the role that intellectual property plays in helping to drive entrepreneurship, investment and innovation forward, and thereby fueling economic and employment growth.

Indeed, intellectual property rights and protections are central to what I’ve called the four I’s – investment, improvement, innovation, and invention. Why invest, improve, innovate or invent, if others can steal those investments, improvements, innovations or inventions? Hence, the importance of patents, copyright and trademarks.

The U.S. has been a leader in protecting intellectual property, and it is vital that the nation continues with such leadership.

Consider, for example, the standout performance of investment in intellectual property in our economy. As illustrated in U.S. real GDP data, investment in intellectual property products has long outperformed overall business (nonresidential) investment and economic growth in general.

For example, when the pandemic hit, while the U.S. economy shrank by 5.1 percent (all growth rates are annualized) in the first quarter of 2020, intellectual property investment actually expanded by 3.8 percent.

And with real GDP declining by 31.2 percent in the second quarter of 2020, IP investment experienced a much smaller falloff, i.e., a decline of 10.6 percent. Obviously, the overall economy experienced a larger snapback in the third quarter of 2020, but subsequently, real IP investment growth has run well ahead of GDP growth. In fact, while real nonresidential investment slowed markedly during the last three quarters of 2021, IP investment growth remained strong.

Looking at annual real growth rates, the last year when IP investment growth trailed overall GDP growth was in 2002.

Source: Federal Reserve Bank of St. Louis, FRED

And from 2000 to 2021, for example, real GDP growth averaged a meager 2.0 percent, and nonresidential (business) investment average growth came in at 3.1 percent.

Over the same period, real IP investment grew by an average real rate of 5.1 percent – more than two-and-a-half times faster than the overall economy.

Intellectual property has been an economic standout in the U.S. Unfortunately, the Biden administration and various Members of Congress are looking to undermine IP through an assortment of misguided policies, such as imposing pharmaceutical price controls, regulating an assortment of IP technology companies and industries, weakening the Bayh-Dole Act, and giving away U.S. IP through international entities.

Rather than working to undermine U.S. companies that rank as global leaders in their respective industries, perhaps an agenda strengthening incentives for entrepreneurship and investment, such as via tax and regulatory relief, and leading on IP protections and rights would make more sense.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.


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