Piracy and economic growth

One of the great things about having a Mac is that it is immediately useful out of the box. Each Mac comes with iLife, a suite of software that includes applications for writing documents, do presentations, making movies (even DVDs), recording music, making websites, organizing and even enhancing photos, and many others – all for free. So while a Mac is a little more expensive than Windows-based PCs (although that gap gets narrower and narrower by the minute), you also don’t have to spend any more money on software to make it useful. With PCs you have to buy Office, Photoshop, and a host of other programs to be able to even do anything with it; with Mac you can starts having fun immediately.

Of course people tell me software is never a problem here in the Philippines, where copies of Windows XP can go for as little as P100. Piracy is so rampant here (and in many other countries) that the Mac advantage in terms of software really is just a myth: anyone can buy a laptop with no operating system (OS) for as little as P30,000 (or even lower) and then load it up with pirated software for an additional P1,000 (at the most). I recently talked to a friend who said Windows actually encourages such piracy in developing countries because while it loses money initially, it recovers it eventually when these countries mature economically and realize that having licensed software makes better sense.

This friend, who will have to remain anonymous since he is in the IT industry, emailed me an article from the LA Times that pointed to this “fact” (maybe we should call it an allegation). “The gist of the beneficial piracy argument,” the article said, “is that the retail price Microsoft charges for signature products such as Windows and Office — as much as $669, depending on the version — can rival the average annual household income in some developing countries. So the vast majority of those users opt for pirated versions…
The proliferation of pirated copies nevertheless establishes Microsoft products — particularly Windows and Office — as the software standard. As economies mature and flourish and people and companies begin buying legitimate versions, they usually buy Microsoft because most others already use it. It's called the network effect.”

Boosting the suspicion is a quote from Bill Gates himself: "Although about 3 million computers get sold every year in China, people don't pay for the software. Someday they will, though," Gates told an audience at the University of Washington. "And as long as they're going to steal it, we want them to steal ours. They'll get sort of addicted, and then we'll somehow figure out how to collect sometime in the next decade." The LA Times says that's exactly what has happened around the globe, according to the Business Software Alliance, a Microsoft-backed anti-piracy group. “Even Vietnam, which at more than 90 percent has the highest piracy rate in the world, has improved from 100 percent in 1994. The No. 1 software firm in Vietnam: Microsoft.”

So there you have it: even Bill Gates apparently thinks software piracy benefits him and Microsoft ultimately, and it even helps economies grow. Gates was in Romania recently to launch Windows’ new OS Vista, and Romanian President Traian Basescu talked to him about what a wonderful boon for the Romanian economy pirated Microsoft software has been, noting that it helped create a Romanian IT industry. Apparently, the tech industry in the country is still growing rapidly, and it’s a no-brainer to conclude that the same thing is happening in our country. Imagine a Philippines without pirated software: the country and even Microsoft would be the poorer for it. Don’t get me wrong: I’m not advocating piracy, especially not now that I’m using a Mac, but I do get the point. Not all who use pirated software are bad people, and in a very real sense they are also helping the economy grow.

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