The Property Rights Alliance (PRA) has outdone itself with the 2010 International Property Rights Index (IPRI) Report, which once again highlights the close coordination of strong rule of law and physical and intellectual property rights in a nation’s economic success. The latest data shows those countries in the top quintile on those yardsticks have an average per-capita GDP of $35,676, almost double the second quintile ($20,087), and well above the third ($9,375), fourth ($4,699) and fifth ($4,437) quintiles.

This year’s report, guided by PRA Hernando de Soto Victoria Strokova, examines 125 economies — 10 countries were added this year — and analyzes each on the three factors listed above. It also provides useful comparisons by geographic region. As Ms. Strokova explained at a press conference today, only the most robust and confirmable data is used, gathered in partnership with several dozen think tanks and other non-profits around the world.

I was honored to speak at the event announcing the 2009 report, so I’m a bit biased in regards to this annual undertaking, but it’s hard not to be impressed. We often cite data showing strong correlations between protection of intellectual property rights in the U.S. and growth in GDP, but this study adds the same conclusions in 124 other nations.

It is somewhat intuitive — although nice to see backed up with data — that a combination of a strong legal regime with respect for physical and intellectual property is a winning economic combination. It’s also not surprising to see that nations that are strong in one or two of those tend to be strong in all three. The same is found with geographic regions.

I was struck, however, with data comparing the level of strength in those three areas across geographic regions; specifically, how in some regions the numbers of all three were comparable, but in others how those regions were poorer with IP rights than physical property rights.

Figure 7 on P. 40 — under the heading “Regional Distribution of IPRI” — has the following breakdown for physical property rights (PPR) vs. intellectual property rights (IPR) (calculations are converted to a 0 to 10 scale, 10 being strongest):

All Countries

PPR 6.0 IPR 5.1

Africa

PPR 5.1 IPR 4.2

Asia and Oceania

PPR 6.4 IPR 5.3

CEE and Central Asia

PPR 5.7 IPR 4.3

Latin America and Caribbean

PPR 5.5 IPR 4.4

Middle East and North Africa

PPR 6.5 IPR 5.1

North America

PPR 7.8 IPR 8.2

Western Europe

PPR 7.5 IPR 7.7

In North America and Western Europe, there’s little statistical difference between physical and intellectual property rights (0.4 and 0.2). However, in all other regions respect for IP is significantly lower, as much as 1.4 (both CEE and Central Asia, and Middle East and North Africa). This is a bit distressing, for it suggests that even as nations, particularly ones in the developing world, begin to increase their respect for physical property rights, their respect for IP does not grow at the same rate.

I asked one of the panelists, Jonathan Zuck of the Association for Competitive Technology, about this dilemma. He suspects that countries generally see themselves as either consumers or producers. If you feel you are producing intellectual property of monetary value, in particular as an export, you will commit to enforcement of IP rights. If you regard yourself as a consuming nation, by contrast, your sole focus will be on cost control. Then you enter the odd paradox wherein the more value consumers place on the IP good, the less payment those clamoring for the good are willing to pay.

Many countries, Mr. Zuck said, are still trying to sort out if they are consumers or producers. He noted Brazil as an example, which he said is “waffling.” I like this example, having participated in an IP conference in Sao Paolo in 2005, where I met a lot of enterprising software designers who felt their own market wouldn’t be willing to pay for their output, although they found ready and legal markets in Portugal and other parts of Europe.

The IPRI rankings show Brazil 52nd out of 125 countries on IP (a 5.2 score), in the middle quintile, supporting Mr. Zuck’s theory.

When I worked at a think tank, we had for years produced a scorecard of each U.S. state, grading them on how well the state government had embraced the Internet (posting updated info on web sites, enabling online driver’s license renewals, etc.). We found that each year, states lower in the rankings would be embarrassed, and we could see real efforts on their part to try and rise in the rankings. Eventually we stopped doing the annual study, because the states that had been behind had caught up, and there was little measurable difference among states. In other words, every state was at least at an acceptable level, according to the benchmarks we had set and had kept constant.

As the GDP numbers above show, there remains wide disparity among different countries regarding property rights. Perhaps, however, this annual report will spark the same level of competition we saw among U.S. states in our digital government index. Maybe, a few years from now, PRA won’t have to publish this annual report because all nations will have embraced all aspects of property rights.

We can hope.

This entry was posted on Tuesday, February 23rd, 2010 at 3:05 pm by Patrick Ross and is filed under copyright law, culture, economy, international, market forces, piracy, property rights. You can follow any responses to this entry through the RSS 2.0 feed. Responses are currently closed, but you can trackback from your own site.