Thursday, August 30, 2007

Innovation and Wealth Equals Inequality

Luddites Disunited, As Apple Goes Wireless

by StFerdIII



An interesting aspect of the iPhone launch is the reaction by Marxists, Luddites, technology – haters and the generally ignorant. These groups, along with some media analysts, don’t hold much sympathy or interest in Apple’s foray into the mobile phone market. They descry that the iPhone is a large toy; an encumbrance; and excessively costly gadget with little relevance. Or they just sniff that only Americans can get so excited about yet another consumer device. The mobility – bashing Marxists miss of course the essential point.

The critical aspect of the iPhone launch relates to markets, productivity and wealth creation. Not everyone is interested in a smart phone, nor should they be, but many are. The Apple iPhone represents a dynamic economic shift, with products seeking markets, capital searching out returns, and entrepreneurs and firms investigating profit opportunities. The shift lies towards innovation which makes tools, machines and devices easier to use, more productive, and in the long term – an economy more profitable. Wireless systems are pushing the edge of business system innovation. Apple is right to join a growing market. This shift in the mobile market is just another example of the powerful forces (invisible hand) which drives markets.

Innovation is critical to a state’s survival. Technological advances will lead to productivity gains, which drive higher returns. The Americans, with a lower (though still burdensome and exacting) taxation regime, and less state – sanctioned theft are still the world’s greatest developers of new ideas and inventions. This has been true for the past 150 years. Everything from electricity, to the cotton gin, to the telegraph, telephone and advanced technologies (with the world – wide – web as a glorious exception) was begun in America. It is hard to argue that 2007 is a worse world than 1857. American ingenvity only gains in strength it seems.

State ‘plans’ to close various gaps or support ‘chosen’ industries and leaders usually fail. Some exceptions exist of course, but the net cost to society, after accounting for subsidies, grants, higher – prices, or corruption is usually far in excess of any so – called ‘public good’. Bureaucrats divorced from market forces, make politically convenient, but economically dumb choices.

This is true in every part of life, including health – care. If you don’t want a $2000 (first year total cost) iPhone, but you want email, voice and internet access, than you can buy a $1500 (total fist year cost) Black Berry or an $1100 Nokia unit. Styles, attitudes, functionality and market positioning cater to different consumers and price – points. Suppliers will fill market demands or indeed create new markets, or perish. Total wealth will either increase and be re – invested or investors and entrepreneurs (along with some consumers), will lose money or be saddled with a poor product. Apple’s iPhone will either be successful (new users, good technology, adequate profits), or it will fail (no version 2, economic lost, irate customers).

Innovation and entrepreneurship are the key driving forces of state power and profits. The problem with the State is that politicians exist to buy votes and redistribute wealth. Can’t afford an iPhone? It is your human right to at least be able to buy a Black Berry or Nokia. Maybe governments in Canada, which produces the Blackberry, will choose to subsidize its purchase by the ‘mass’ so that equality is achieved. Sounds stupid? The same principle is applied to health – care; agricultural; farming; banking; culture and tele – communications. Why not sur – tax Blackberry (or Rimm) and re – distribute – its ill – gotten profits? Fairness most reign.

The iPhone and Blackberry are successful products because the U.S. Government de – regulated telecoms. Black and white phones are giving way to mobiles devices which provide business applications, the internet and music. Innovation is running rampant. Why? The state is limited in its interference.

The Blackberry – iPhone experience should be applied across all sectors. By restricting government theft and coercion you actually increase economic progress, innovation and overall wealth. Equality is an immoral goal, as it applies to economics and social structures. Let initiative, skill and energy transform markets through price – points, competition and consumer choice. That way we all win.

In the meantime enjoy your iPhone.