Software piracy bad for the economy - Leon Louw - TechCentral

Software piracy bad for the economy – Leon Louw

There is a direct link between high levels of software piracy and poor economic growth. The higher the rate of piracy, the more likely a country’s economy will stagnate.

That’s the view of Leon Louw, executive director of the Free Market Foundation, who was speaking at a software piracy convention hosted by the foundation and the Information Technology Association on Thursday.

Experience shows high rates of software piracy coincide with economic stagnation, especially in the IT industry, Louw says.

“Countries with high rates of software piracy tend to be economically backward and characterised by corruption and poor governance,” he says. “Conversely, prosperity increases as piracy falls and the rule of law is upheld.”

Louw cites research from the International Data Corp (IDC) that shows SA faring relatively well in reducing piracy levels. Piracy rates in the country are estimated at 35% — in other words, for every three software applications installed, one was pirated and two were legitimate. In the US, the figure is 20%; in Armenia, on the other end of the scale, it’s 93%.

In addition, Louw cites Business Software Alliance research that claims that a 10 percentage point reduction in piracy rates over four years should create 1 650 hi-tech jobs in SA. According to research by the alliance, R9bn in new economic activity and R1bn in new tax would flow from such a reduction. And IDC research shows a direct correlation between economic growth and a reduction in piracy. The faster piracy rates come down, the quicker an economy grows.

“Such correlations do not, of course, imply a direct causal link in either direction, but the overwhelming coincidence worldwide between such factors as lower piracy, corruption, poverty and unemployment rates, on one hand, and enhanced performance in virtually all areas for which there are published indices, on the other, is strong evidence for what a government should do if it wants its country to be a winning nation,” Louw says.

Representatives of Microsoft, the Computer Society of SA, The Business Software Alliance and the department of trade and industry were also scheduled to speak at Thursday’s event.  — Staff reporter, TechCentral


  1. so what they saying is if you recude poverty, corruption and unemployment, the economy rallies…. where has this research been hiding!!!! someone call the president!

  2. so what they saying is if you reduce poverty, corruption and unemployment, the economy rallies…. where has this research been hiding!!!! someone call the president!

  3. Reduce the COST of software, make it more affordable, piracy will decline, economy will benefit. Software manufacturers must stop thinking about maximum profit, and start playing fair.

  4. What an idiot schill. Correlation is not causation, so his point is moot. He even acknowledges the lack of any useful connection, but hey, why not use it anyway, because it’s convenient in helping to “prove” an erroneous assumption.

    It’s not rocket science. Piracy is more common in poorer countries because software is so damned expensive. Someone who earns $200 a month is not likely to buy a $2000 software package.

  5. Louw is disingenuous here to the extreme. There’s a big difference between the direction of a causal link.

    “The higher the rate of piracy, the more likely a country’s economy will stagnate.”
    (his claim)

    is very different from:

    “The more a country’s economy stagnate, the more likely piracy will increase.”
    (the real link, i.e. poverty drives people to “theft”)

  6. Is the BSA/Microsoft giving the Free Market Foundation money now? 🙁

    I would hope they would be more intelligent than supporting the BSA’s LIES about piracy.

  7. My “research” indicates that organised piracy is the trademark of a sophisticated economy ( / Sweden).

    I agree with Brian. This is a simple economic problem.

  8. Shame on you for publishing this nonsense. If the price is not market related then piracy takes place, that is why DVDs don’t cost R300 any more and PC games are affordable. Nobody wants to pirate anything, piracy is a symptom of ridiculous pricing. Obviously the poor pirate more because they can’t afford R7000 for Adobe CSX etc, maybe the pricing is reasonable in the states but it is exorbitant in the developing world.

    The moral, make your product affordable and there will be no or very little piracy. Klaar.

  9. Ah so china’s economy is doing so badly. With there high rate of piracy.

    Think they have there stats the wrong way round. More likely as an economy improves and people have more money they are less likely to pirate.

  10. What a load of bollocks! And an insult to the readers’ intelligence! It is the kind of rubbish postulation that we expect from Malema!! Was it not maybe supposed to be published on 1 April?

  11. Andrew Thomas-Woolf on

    In the US at the very least, the laws against software piracy (copyright infringement) make a mockery of the inflated claims of “lost revenue” by the **AA, the most example of which would be the case lost by Lime Wire:
    The RIAA were claiming damages that amounted US$75 trillion.

    Global GDP in 2009?

    $58.14 trillion.

    Go figure.

    (For the record, I am not anti-IP law in principal. I do however think that the current system is broken – for many reasons – and have major issues with inflated claims of the “cost” of piracy.)

  12. Talk about seeing things the way you want to.

    Maybe there’s simply high piracy in places with a poor economy because they can’t afford the ridiculous prices of some things and would never have payed, or being able to pay, for something to begin with.

    Also something that makes prices even more ridiculous is that in different countries they charge according to the exchange rate, at best, which is hardly appropriate since in some countries the “average” person doesn’t have R100 just to go out and watch a movie

    Also with digital distribution making it so easy to go global without the cost of shipping physical products and manufacturing it should be a lot cheaper but instead they still have the attitude of physical sales trying to charge as much as they can as if they still had these expenses.

    The prices of digital distributions could be cut drastically and make the same profit if not more because it will be within reach of so many more people without costs associated with physical releases on media like just getting the product to them. If the price of it was also appropriately adjusted and lowered for people in countries where the average person could afford it, or by the countries per capita income, that would again lead to more sales and with digital sales again no extra cost.

    At the absolute best 10% of piracy would turn into sales if piracy were to suddenly stop, or are people under the stupendously stupid assumption that the rich who could afford all those things are the ones who pirate rather than those who simply cant afford it. Who wouldn’t like to be able to buy all the things they otherwise pirate. Though it doesn’t help that being a paying customer means you have to put up with DRM, regional limitations and a host of other nightmares.

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