Counterfeit capitalism – death at discount rates

Dandelion Salad

Posted with permission by Green Left Weekly

by Barry Healy
Green Left Weekly
23 May 2008

According to the World Health Organisation, 50% of the drugs sold online are fakes.

Moreover, the WHO reported in November 2006 that 10% of medicines in Russia were phoney, 25% in India, 35% in Lebanon, 40% in Peru, 48% in Nigeria and 70% in Angola.

WHO estimates that of the approximately one million people who die of malaria every year, 200,000 could be saved if authentic drugs were distributed.

Dodgy medicines are just one part of a massive global trade in counterfeit goods that has developed as capitalists in marginalised countries scramble to catch up with their First World counterparts.

In a February 1 announcement that Australia will join negotiations for a new international Anti-Counterfeiting Trade Agreement, trade minister Simon Crean noted a recent OECD report that international trade in counterfeit and pirated goods is worth approximately US$200 billion annually.

Discounted death

Whether it be fake condoms, adulterated alcohol, car or aircraft spare parts or copies of drugs, the rise of “counterfeit” capitalism poses a grave danger to ordinary people. It marks a return to the wild days of capitalist fakery that Marx observed in England in the 1860s.

Nineteen people died in Turkey in March 2005 after drinking impure raki (an alcoholic beverage). In Russia, 53,000 people have died from poisonous liquor. According to the OECD, the proportion of phoney spare parts in world trade rose from 5% in 2000 to 10% in 2005.

The range of counterfeits is expanding, including: toys, textiles, software, books, musical and film piracy, bank notes, food products (mineral water, apple juice, tea, alcohol), toothpaste, various perfumes and cosmetics, electrical goods and their spare parts and cigarettes.

Examples of counterfeit “intellectual property” include fake Chinese-made Yamaha motor scooters, complete with the Yamaha logo and a fake “BP” service station that the World Customs Organisation discovered in the Caucasus selling contraband fuel.

The huge trade calls into question the entire structure of ownership and control maintained by capitalist states. It is also likely that a certain amount of fakery is tolerated in order to keep the cost of living bearable.

Fake medicines carry multiple dangers. They may contain harmful or even fatal ingredients, or not an effective amount of the correct ingredient.

Interpol believes that the trade in counterfeits has grown eight times faster than world trade since the early ’90s. The US reported an 83% increase in seizures in fiscal year 2006 — a record for US customs. The European Commission reported a 330% increase in seizures in the EU between 2005 and ’06. As only between 3-5% of goods entering the EU are subject to control, clearly fakes are flooding in.

Patents and black markets

Giant pharmaceutical companies justify the high prices of their brand name products by citing development costs. The gigantic profit premiums secured through their patent rights are referred to as “technological rent”. That is, price gouging made possible by restricting access to the technology.

However, in the internet age, characterised by globalisation and complex logistical networks it is easy to get around these patent barriers. If drugs are not paid for through a form of social security coverage then patent barriers artificially create a demand and then a black market to serve it.

For example, Acomplia (rimonabant) — an anti-obesity drug produced by Sanofi Aventis — cost 800 million euros and took 10 years of research. It was copied before it was put on the market! Fake Viagra can be sold at prices 70% below that of the real thing.

A kilo of heroin produces a 200% profit in Europe, but a kilo of Viagra’s active ingredient from India creates a profit of more than 2000%, according to a former Scotland Yard detective quoted by the May 26, 2007 Le Monde.

According to the European Commission, there is less than 2000 euros profit in 1 kilogram of cannabis sold in Europe, while 1 kilo of pirated CDs produces 3000 euros profit.

Five cases of fake medicines bought in pharmacies have been identified in Britain between 2005 and 2007. In France, one case occurred in 2004 involving false contact lenses, similar to the original but not sterilised. The proposed EU liberalisation of pharmacies will further weaken protection against these scams.

The criminal gangs involved can easily sell small amounts safely on the internet, which is legal in the US and Canada. The approximately 40 million US citizens not covered by health insurance are ready targets.

Legal and illegal capitalists

But the counterfeiters can only move big-profit, wholesale amounts of product by breaking into legal distribution channels through deception. To confuse detection counterfeit goods usually pass through several countries before arriving at their final destination.

Often fake “spare parts” are transported, partially assembled in one country and then completed in another. Major ports and international airports then handle them as legitimate cargo. Fakes are sometimes mixed with authentic products in the same consignment.

Logically, trade on this scale could not occur without the collaboration of transport companies and other “legitimate” capitalists turning a blind eye, at least. The line between legitimate and illegitimate capital is very blurred.

Asia is the main production source of counterfeits. On May 23, 2007, Le Figaro reported that 86% of 2006 EU seizures of counterfeits originated in China. Counterfeiting employs 3-5 million Chinese workers and accounts for 8% of GDP. Russia, South American, African and some European countries are also producers.

In Buenos Aires, the huge Salada market, covering 20 hectares with 15,000 stands, sells 100 million garments per year — 50% are said to be fake, according to an EU report.

Given the scale of counterfeiting, the legal response from major states has been quite meagre. This raises the question of whether a certain amount of counterfeiting is tolerable to keep a lid on monopoly price power wielded by the big business patent holders.

Mercenary police forces

Unhappy with state responses, the major corporations are banding together to develop their own private intelligence forces to trace and stifle counterfeiters. Major players are the Business Software Alliance (BSA); the Union of Manufacturers; the Motion Picture Association of America; and the International Federation of Phonographic Industries. The BSA pays for investigators and participates in raids along with police against illicit software manufacturers.

They have head-hunted police operatives from various countries to conduct field investigations and provide evidence to authorities. These mercenary police forces work closely with state authorities, providing logistical support such as vehicles and analytical laboratories where countries have limited financial resources. The BSA also recruits expert witness for court cases or parliamentary commissions involved in drafting international treaties.

Fakery has always been a feature of capitalism. In Capital, Karl Marx wrote about the 1860 British law preventing the adulteration of food and drink. It was “an inoperative law, as it naturally shows the tenderest consideration for every Free-trader who determines by the buying or selling of adulterated commodities ‘to turn an honest penny’. The
[parliamentary] Committee itself formulated more or less naively its conviction that Free-trade meant essentially trade with adulterated, or as the English ingeniously put it, ‘sophisticated’ goods.”

The new rise in piracy reflects the earlier era of capitalist accumulation when English sea captains like Drake, Grenville, Raleigh and Morgan brought home Spanish gold for Queen Elizabeth I. They are heroes in establishment history books, however they were never anything more than thieves. But the bulging Spanish galleons they plundered were also owned by thieves.

The situation is similar today where mafia smugglers and brutal sweatshop operators producing modern day “sophisticated” goods are carving from the flesh of workers their own primitive accumulation of capital in competition with bloated multinational corporations.

If patents simply did not exist, then goods could be produced as cheaply as possibly and distributed to those needing them. In such a world, profit would be impossible. However, it would mean that the world’s productive capacity, currently distorted and degraded by patent laws and customs barriers, would be freed to serve the needs of all humanity.

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One thought on “Counterfeit capitalism – death at discount rates

  1. In his book, Bad Samaritan, Professor Chang makes a good case for doing away with many of the restrictions imposed by patent law.

    What is more important than redefining intellectual property law is asking the questions, “Why has modern society become so caught up in material possessions?

    I believe it has a great deal to do with the electronic media which has allows advertising to psychologically manipulate people and their “desires, wants and needs.”

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