Islam, John Locke and the future of the internet

Business leaders spoke out at the Saudi Arabian General Investment Authority’s annual summit, but had little to say about the latest storm over the internet.

The Global Competitiveness Forum in Riyadh is the Middle East’s premier annual event for world business leaders. The Saudi Arabian General Investment Authority (Sagia) once again assembled a stellar cast and a huge audience.

The keynote issue was entrepreneurship and how you promote it. Self-made business people said entrepreneurs could not be taught. Predictably, business school academics said they could.

The forum covered a range of issues, but there were two omissions. The changes in the region since last year’s forum were barely mentioned. And practically nothing was said about the storm the previous week over legislation proposed in the US to fight online trafficking in copyrighted material that many believe could restrict the flow of information and ideas through the internet.

Entrepreneurship, the collapse in the power of the state in Arab countries and the worldwide web seem to have no close connection. But there is a link and one that will become increasingly obvious: the challenge to big institutions presented by the growing capacity of individuals to function without them.

It is impossible to argue that the ability to start businesses is solely genetic. Even the most instinctively creative entrepreneur learnt at least something from a parent, a friend or another businessperson. The issue is whether an institution of learning, such as a business school, is a better teacher than the community in which a businessperson functions. In short, is institutionalised learning superior to the informal kind? There is no answer because the inputs and outputs – ideas and information – cannot be objectively quantified. What matters is that the transfer of ideas takes place. And what makes learning through informal networks facilitated by the internet so powerful is that it is spontaneous, intuitive and effectively costless.

The Arab uprisings were, we are told, inspired by the spread of ideas through web-based communication devices and the wireless. They lack an organised structure and visible leadership, thereby making them hard for the state to monitor and control.

Which is why the benignly entitled Stop Online Piracy Act (SOPA) is of relevance to more than just computer hackers. Its sponsors say the aim is to stop people stealing music and films and selling them on the web. But the storm SOPA’s caused has opened a Pandora’s box for everyone.

The issue at its heart is the extent to which an intangible – an idea, a story, a song, an image, a recipe and even a smell – can be deemed to be private property. This question was of limited consequence when the means of transferring intangibles were so limited. But the physics of the web has changed all that. Intangibles can now be disseminated to everyone anywhere with access to the internet. The principal instrument supporting the enforcement of intellectual property rights and the control of the flow of political ideas has been smashed.

For economists, there is a simple test of SOPA’s merits. Will economic welfare be diminished or increased by new laws that restore the protection to intellectual property and the flow of ideas provided by pre-digital technologies?

The logic of all economic arguments suggests the answer must be no. Monopolies reduce choice and unfairly increase the profits of producers. The fact that producers are made poorer while consumers are enriched is a secondary consideration. In aggregate, we are better off when there are no monopolies. Makers of intangible goods should act as their tangible counterparts. If you make a car, you sell it and then make another one. Creators of songs, stories, recipes and other forms of intellectual output should sell them once then create more to make more money.

A refinement of the economic argument is that intangibles are non-rivalrous. Having no physical characteristics, they cannot be physically consumed. You can eat a loaf of bread, but you cannot consume a song; you enjoy and share it. It is a non-rivalrous good, one where consumption does not reduce its availability. Economists call them public goods and argue they should not be treated like tangible. Conventional arguments suggest public goods should be collectively financed and free at point of use – like the police and broadcasting – and the services provided by the internet.

Rebuffed by economists, defenders of intellectual property invariably revert to moral and legal arguments. Regardless of the economic logic challenging the idea of intellectual assets, they argue that ideas are the property of the person who developed them. Anyone who uses intellectual property without the permission of the owner is, consequently, a thief and should be subject to the law in the way any criminal is.

Critics of this line of argument say that no one creates in a vacuum. Every scientific breakthrough has depended upon previous ones. If you start restricting the free circulation of ideas by making them private property, individual inventors will benefit, but society as a whole will lose.

A more telling criticism of the case for intellectual property originates in the concepts developed by European enlightenment thinkers, such as John Locke. To be property, a thing has to be a tangible, such as land or buildings. Ideas are intangible and are not things. That means they cannot be property and consequently cannot be owned.

This insight provides the intellectual underpinnings for those not just attacking SOPA, but all forms of intellectual property. They agree that intellectual property is bad economics. More seriously, they say it constitutes an attack on the fundamental rights of the individual. Their case is expressing itself in US politics in the rise in support for congressman Ron Paul, the libertarian candidate for the 2012 Republican nomination.

The assault on the idea that intangibles can be treated as if they were tangibles found an echo in the Global Competitiveness Forum. Prince Turki al- Faisal, former Saudi ambassador to the US and now chairman of the King Faisal Centre for Research & Islamic Studies, told the forum that the global financial crisis was at least partly due to the rise of the idea of intangible assets and property. “Saudi Arabia’s success and resilience in the current global economic downturn was due in large part to the kingdom’s culture of Islamic finance — most notably Islam’s insistence on debt being tied to real equity and real assets,” he said. The statement reflected a remarkable intellectual connection between contemporary Islam and radical American liberals that will become more significant in the years to come.

For the moment, the focus is on the future of the internet. Events in business and politics during 2011 confirmed what we already knew: that the web matters. But there is a larger issue at stake. Will the future be shaped by ideas freely exchanged, or by those in government and business with the power to stop them?