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April 26, 2012

James Pooley Keynote Address at IPI's 2012 World IP Day Event

Lessons for Today's Debate on Tech Transfer
by James Pooley | Publications | Event Transcript

On an early September day in 1789, Samuel Slater, 21 years old, boarded a ship in London to begin a voyage to New York.  His family didn't know he was doing this.  He presented himself as a simple laborer, a farm hand.  He was lying.  Hidden from sight were his only official papers, identifying him as a recently-released apprentice to a cotton mill.

Slater had been apprenticed seven years before to Jedediah Strutt, a friend of his father, who operated the Cromford Cotton Mill in Derbyshire.  For textiles, Derbyshire was the Silicon Valley of its time, employing the amazing invention of Richard Arkwright, who had perfected the "water frame" technology of cotton spinning, allowing thread to be spun on dozens of spindles in a single operation.  Young Slater had proven to be particularly adept at maintaining and adjusting the machinery, and showed great promise to his employer.

But Slater had two other important attributes: he was ambitious, and he had an extraordinarily good memory.  In 1789 he heard news that textile manufacturers in America were struggling.  The young country was the leading supplier of cotton to the world, but that was in bales of raw material; the high-profit processing center was in England, where Arkwright had made a fortune.

Most English technology had been protected by businesses in the traditional way, through closely controlled apprenticeships where secrets of production could be reliably shared.  But the government also pitched in with some extremely restrictive laws.  The focus was not only on the machines, but also on the people who operated them.  By 1774, fifteen years before Slater slipped out of the country, England had criminalized the export of textile machinery and the emigration of mechanics.

What was the fuss about?  Manufacturing at home versus buying from abroad was not as it is today a mere abstraction of balance of payments.  Buying finished goods from foreigners caused gold to leave the country, and that meant loss of wealth and power, in the mercantilist view of the time.

Therefore, England, having found itself in the position of technology leader, was intent to keep it that way, reinforcing the classical relationship of the colony as both supplier of raw materials and market for finished goods.

Meanwhile, back in America, Samuel Slater first came to New York, where he pulled out his apprenticeship papers and got a job at a textile plant.  But when he reported for work he found the machinery was hand-operated and used antiquated English technology.  He was very disappointed.

So a few weeks later when he learned that there was a manufacturer in Providence who had been trying, and failing, to replicate the English mechanized cotton-spinning factory, he was intrigued, and wrote a letter offering his services.  He was careful to emphasize his experience with Arkwright's water frame.

Moses Brown, the proprietor, decided to take a chance, and brought in Slater as a partner.  Working exclusively from memory, making much of the necessary tooling himself, and experimenting with adjustments of his own invention, within a year Slater managed to create America's first automated textile mill.

Slater's factory was a huge success.  By 1815, within a 30-mile radius there were 140 mills operating over 130,000 spindles.   This was the launch of the American textile industry, and arguably of the American industrial revolution, upending the client-server relationship between agricultural, extractive America and manufacturing England.

Samuel Slater is remembered well but variously.  In the United States, Andrew Jackson dubbed him the “Father of American Manufactures”.  In his hometown of Belper in Derbyshire, he is less fondly known as “Slater the Traitor”.  It also bears mention that Slater’s wife, Hannah Wilkinson Slater, became the first woman in America to receive a U.S. patent, covering her invention of cotton sewing thread.

There's little doubt that American industry got a strong start from immigrants, and had the English laws been more effective, the transfer of technology from Britain would have been slower.

It's also true that this sort of "unauthorized appropriation" occurred to an extent in both directions.  For example, Benjamin Franklin did not seek a patent on his famous stove; but a fellow in England patented it there, and Franklin was furious.

But let's return to the present and consider the argument that the U.S. got a head start back then by stealing technology, and that therefore it is guilty of hypocrisy today when it advocates for robust IP laws.  I think the argument is not entirely fair, and that those who make it are missing some important context.

First, the laws that were apparently violated by Slater and others were not IP laws as such.  Instead, they restricted emigration of a part of the population.  This sort of approach to protecting technology had been used for centuries.  For example, the Venetian government guarded the secrets of Murano glassmaking by prohibiting workers – on pain of death – from making the short trip to the mainland.  But today, we view such restriction of movement of labor as draconian.

Second, England was not in a good position to complain, since for a long time it had been guilty of the same sort of conduct, and had been even more brazen about it.  England’s primary use of patents, dating from the 14th century, was not to reward invention, but to encourage the appropriation of skills and innovations from the more technologically advanced countries of the continent.  So-called patents of importation, providing exclusive rights to the first person to bring someone else’s invention to England, were enforced there as late as 1778.  In addition, England had long practiced industrial espionage – often through diplomats – against other European countries.  It wasn’t until it became dominant in mining, metals and machines in the 18th century that England saw it was the one with the most to lose and began clamping down.

Third, there was at the time no framework of international agreements on intellectual property; this process began only in 1883 with the Paris Convention.  Today, with many other more detailed treaties, including the PCT of 1970 and the TRIPs agreement of 1995, the international environment encourages more cooperation.  Significant among the provisions of TRIPs is article 66, which states that developed countries “shall provide incentives to enterprises and institutions in their territories for the purpose of promoting and encouraging technology transfer to least-developed country members in order to enable them to create a sound and viable technological base."  More on that in a bit.

Fourth, trading today is vastly more globalized and integrated than it was at the end of the 18th century.  Indeed, for international business, boundaries are often annoying, and companies are focused instead on markets.  So the mercantilist, zero-sum perspective of the 1700s isn’t so common today.  Naturally, much of global business likes to have reliable sources of raw materials, and that leads some countries to focus on extractive industries.  But in the information economy, where profits come from innovation and dramatically increased productivity, we’d like to see growing markets everywhere.

Finally, the pace of technological change has vastly accelerated in the last two hundred years.  We all know this intuitively, but consider one example.  Let’s compare the decades it took in the 1800s merely to get the steam engine to work on a boat, to the pace of change today, when 5-year-old Facebook buys start-up Instagram for $1 billion because it’s on the “new” mobile platform instead of Facebook’s “old” desktop model.

So while the charge of hypocrisy is provocative, it isn’t really useful to inform today’s debate on IP rights, specifically the discussion about technology transfer.  The economic engine that America began to assemble two hundred years ago, whether or not it was tainted with imported technology, has been an astounding achievement in the development of domestic innovation capacity.  The young country laid the groundwork for what became a culture of invention that serves its citizens so well today.

But if all we take away from this is that the U.S. is not a nation of thieves, and that what its people accomplished came mostly from their own wits and perspiration, then we’re missing the most helpful lesson.  It’s precisely because so much has changed in the globalization of markets and the pace of technological development, that few other developing countries today – and remember that the U.S. was an underdeveloped, mostly agrarian economy in 1789 – can expect to catch up on their own.  The race has become too complex and too fast.

It is this basic truth that is behind the agreement enshrined in the 1995 TRIPs accord that established universal standards for intellectual property protection.  The world’s rich nations recognized that there was a cost for early-stage developing countries to embrace strong IP laws, making their imports more costly, but argued that there would be a payoff in future economic development.  This was backed up by a specific promise to help build local capacity and to help enable technology transfer to the developing world as a means of creating local innovation engines that would need IP to thrive.

Much of today’s debate is about whether the industrialized world has done enough to provide assistance and encourage technology transfer.  It is in this context that we sometimes hear the claim of hypocrisy.  But what often gets missed is that the TRIPs deal was, and is, a win/win proposition.  By helping build developing country capacity and technological know-how, the rich world in general, and multinational businesses in particular, are investing in their future markets.

Let’s remember this: while the British may have been upset that the Americans broke their technology-export blockade in the 18th century, today trade between the U.S. and the U.K. amounts to over $200 billion annually.  That’s the magic of mutual growth.

One last thought:  innovation today is not constrained by national borders.  The future of technological advance lies in collaboration around the globe, enabled by the Internet.  There is no eighteenth century analog for that opportunity.


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