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Our Awesome, Creative, Fashionable Knockoff Culture by Jeffrey Tucker

The modern fashion industry is one of the most creative, dynamic, fast-moving, profitable, and downright interesting sectors in the economy. But right now, there are worries in the air. It seems like the old-fashioned fashioned runway show — groovy music, cameras flashing, debuts of new stuff you can buy months later — is no longer working for the industry.

“Everyone drank the Kool-Aid for too long, but it’s just not working anymore,” Diane von Furstenberg of the Council of Fashion Designers of America told theNew York Times. “We are in a moment of complete confusion between what was and what will be. Everyone has to learn new rules.”

The problem, as industry sees it, comes down to two factors.

The first problem: smartphones. As soon as the models hit runways, the images are spread everywhere and instantly. They are Tweeted, Instagramed, Youtubed, Facebooked, and instantly saturate the culture. This makes life easier for “pirates” (in quotes because you can’t actually “steal” a design).

They can go into production very quickly and have knockoffs on the shelves in weeks. The price premium that has made high fashion highly profitable is no longer working as it once did.

IWWIWWIWI

Also contributing is the influence of what is called “IWWIWWIWI”: I Want What I Want When I Want It. Rapid information flows have heightened the intensity of demand. With complete public awareness of new fashions happening within hours of their being made public, people are already ready for something new by the time the clothing is available for purchase. IWWIWWIWI is dramatically shortening the time structure of production.

Even the traditional four seasons of clothing, with a traditional lag between display and availability, is changing. Designers are being pressured to make new designs available the day of the show. Releasing Spring fashions in January and Fall fashions in May isn’t doing it anymore. The seasons that have shaped the industry for many decades are becoming one, ever-evolving season. “Panseasonal,” they call it.

Sharing the Runway

What has this meant for the runway show? They’ve had to change to become massive public events, featuring concerts, album releases, fireworks, courting of editors and writers, and elaborate media shows. The big show this year was in Madison Square Garden with 18,000 attendees and ticket sales running as high at $6,000 on the secondary market, featuring the release of Kanye West’s new album.

Here’s the rub: fashion itself plays a diminished role relative to pop music and the glitzy stardom associated with it. In fact, the fashion industry is seeking to gain attention by hitching its act to the popularity of other sectors. That’s apparently wounded some egos.

As always, however, the fashion industry will change and adapt. This is an industry trained over generations to compete, persuade, and sell. Cronyism doesn’t work in fashion like it does for banking, education, or even software. There are no bailouts, no subsidies to speak of, and no government favors that insiders can count on to protect them against upstarts. And these upstarts can come from anywhere.

Markets without IP

This is the industry’s second gripe: its lack of government protection.

Here’s the crucial and counterintuitive fact: intellectual property legislation, as it applies to literary works and software, has never applied to fashion. If you see something, you can copy it. It’s legal and expected. This is why even big box stores like Walmart and Target carry cheap knockoffs of the very thing you saw on New York runways just a few months ago. And it’s why the distance between what average people can look like and what the rich look like is growing shorter by the day.

The absence of strict rules has created this hyper-competitive environment and made less discernible the class identity distinctions associated with clothing.

There are a few intellectual property rules. You can copyright original prints and patterns and novel designs. That rule, however, hardly ever applies, and even then, it is almost impossible to enforce. It requires litigation and time, and the courts have not consistently sided in favor of the designer, so it is an iffy proposition. True, Christian Louboutin won his lawsuit to protect the red sole of his shoes. But this is rare. And the big money isn’t always on the side of the copyrighters — companies like Forever 21 specialize in knockoffs and hardly ever lose a case.

A Culture of Fakes

There is also the issue of trademark, which applies to brands. Only Calvin Klein can really make a Calvin Klein. Only Nike can be Nike✓. But trademark has done next to nothing to stop the flood of knockoffs, as anyone who has shopped the streets of any large city can tell you. In a typical shopping district in Istanbul or Rome, or just about any other major city in the world, fakes and the real thing are sold practically next door to each other, and all sellers make money doing so. The fakes are sometimes so sophisticated that it takes an industry expert to tell the difference.

Efforts by law enforcement have done nothing to shut down the industry of fakes. And this is despite efforts by ICE, CBP, FDA, FBI, the Patent and Trademark Office, the Postal Service, and other alphabet soup agencies. In the end, most everyone has come to terms with the reality: the industry is being created by a culture of fakes.

You might say that this is a market in fraud, but that’s not quite accurate. Consumers know exactly what they are buying. They are not being fooled. They want to spend far less for something that looks very expensive. The people meant to be fooled are third parties who see them wearing it. And those with the financial means — and high risk aversion to having their friends find out that they are not carrying a real Gucci — pay for it. Everyone makes money, and no one is physically harmed.

Finally, there are patents that apply to actual new innovations, such as the Vibram 5-finger shoe. It was the coolest thing to happen to footwear in ages. So of course everyone wanted to make their own. Even with the patent, and deep pockets to enforce the patent, it didn’t work. Within months after this implausible shoe caught on, other companies made 4-finger and 3-finger models, and everyone had the new running style ramp up. Vibram sued, but they eventually settled, after finding that it was fighting a losing battle.

A Market that Works

Apart from these two protections, fashion is a free market, and this accounts for why the industry is so crazy competitive, innovative, and profitable — even if those profits aren’t as concentrated as they once were.

Of course, the industry’s biggest players don’t approve. For years, they’ve been pushing Congress for legislation that would apply copyright to fashion. So far, Congress hasn’t gone along. But it is hardly surprising that industry would want to ratchet down the competitive mania a few notches. Having legislation on their side would promote a longer period of profitability for unique items. It would permit the largest players to enjoy great safety, and perhaps not have to sweat so much about staying ahead of the curve.

It’s good that Congress has never gone along. The free market in fashion has been beneficial for everyone, in the long run. Contrary to our standard assumptions about intellectual property, its virtual absence in fashion hasn’t reduced innovation at all. In fact, the entire industry provides a paradigmatic look at how a creative industry can function without government regulation and monopolization.

Since the advent of the capitalist revolution in the late middle ages, the market has provided humankind with an endless variety of garments at ever low prices, reducing class barriers and delighting the working multitudes at the same time. This continues to this day, despite ever falling prices for just about everything. In a global market without substantial state regulation, one might not expect a beautiful creative order to emerge. But that is exactly what has happened.

This market is too marvelous, productive, and delightful to be brought down by the advent of smartphones and social media. Fashion will survive and thrive as never before.

Jeffrey A. Tucker

Jeffrey A. Tucker

Jeffrey Tucker is Director of Digital Development at FEE and CLO of the startup Liberty.me. Author of five books, and many thousands of articles, he speaks at FEE summer seminars and other events. His latest book is Bit by Bit: How P2P Is Freeing the World.  Follow on Twitter and Like on Facebook. Email.

Progress Will Hurt Blameless People by Aaron Ross Powell

There’s an unfortunate tendency among some free market advocates to blame the victim: If you can’t find work, it’s because you’re lazy or you somehow screwed up. Hard work’s all that’s necessary to succeed. But of course that’s not true. It’s quite easy to think of counterexamples. We know creative destruction is a necessary part of a well-functioning economy. Market churn means people lose their jobs through no fault of their own, and shifts in technology and consumer preferences mean that skills once lucrative can suddenly become relatively worthless. Markets are overwhelmingly good, yes, and are responsible for the astonishing amelioration of poverty we’ve seen since the Industrial Revolution, but they have their victims.

A changing global economy has meant a changing American economy and a changing American economy has meant that some people who did well in the old pattern are having a harder time in the new. This harder time is felt by, among others, a segment of America’s lower-middle class who used to be able to find decent-paying jobs that demanded physical labor and the kinds of skills you don’t learn in school.

That segment increasingly faces a fact about the modern economy: Unless you’re a knowledge worker, it’s become a whole lot harder to find a well-paying, stable, long-term job because the skills you bring to an employer aren’t as in demand as they used to be.

And that’s awful for the people going through it. We can say that free markets change over time and that those changes lead to more prosperity in the long term, and that’s true. But it doesn’t make life better for the machinist or construction worker without a college degree and without much retirement savings. Empathy seems an appropriate response by those of us not facing such hardship.

That even well-functioning markets hurt some people some of the time makes selling market solutions to policy problems often a difficult task. We know that the solution to unemployment or underemployment is more economic freedom. Get rid of the barriers to entry and the protectionist policies keeping afloat what would otherwise be failing firms. Enable private schools to create a robust and successful educational system so more people have the skills needed to succeed in a modern economy. Open trade with the rest of the world, so we can grow our economy, buy goods at lower prices, and sell into more markets.

But here’s the thing. Every one of those solutions ends up sounding, to the person economically hurting now, like saying, “Leave it alone and things will work themselves out. Don’t know quite how or when, but they will.”

Market solutions are emergent solutions, and emergence takes time and can’t be planned or predicted. In fact, it’s the attempt to plan and predict that leads so many non-market-based policies to fail. Economists understand this and so largely trust markets. But most Americans aren’t economists.

I think this explains, in part, the appeal of people like Donald Trump or Bernie Sanders. We see them as misdiagnosing the problems and offering counter-productive, and sometimes abhorrent, “solutions.” Immigrants are taking your jobs. (They aren’t.) So let’s fix it right now by closing the borders. Trade with China is making us poor. (It isn’t.) So let’s fix it now by establishing quotas and tariffs.

But to people hurting right now, people like Trump or Sanders offer something free markets can’t: certainty, even if illusory. These people right here are the cause of your problems. Punish or stop them and your problems will go away. America will go back to being great, with “great” meaning the way it was when low-information, low-skill Americans could spend their lives comfortably in the middle class. In other words, before America’s economy became modern.

We don’t want that, of course. The economic visions of Trump and Sanders aren’t just backwards, but are dangerously retrograde policies that will hurt everyone without doing much to improve the lives of those who support such policies.

Liberty struggles when confronted with this combination of widespread economic ignorance and the political incentive for politicians to pander and promise solutions that are anything but. And I don’t know how to solve that. Nor do I believe there’s an easy solution. The incentives in politics run against us, and so we somehow need to get better at articulating the story of markets, of the voluntary and the emergent, and do it in a way that’s as compelling and hopeful in its rhetoric as the false hopes sold by those pitching meretricious intervention.

Part of that means consciously avoiding a panglossian picture of markets, and recognizing that sometimes people get hurt by them, and that often that hurt is blameless.

Cross-posted from Libertarianism.org.

Aaron Ross PowellAaron Ross Powell

Aaron Ross Powell is a research fellow and editor of Libertarianism.org.