The iPod, American Jobs, and Economic Fallacies

As the amateurs line up to diagnose the economic problems of the present, the probability that common fallacies and delusions of grandeur will seep their way into mainstream thought is forever increased.

One of the latest involves some of the greatest inventions and products of the last 20 years, the iPod and iPad, which have come under fire in ideological press and debates focused on the affect to the domestic American economy, specifically American jobs.

The greatest culprit is Rep. Jesse Jackson Jr. from the state of Illinois. In a speech before the House of Representatives in April of 2011, Rep. Jackson labeled the iPad “responsible for eliminating thousands of American jobs”, and proceeded to criticize the invention as many more Americans were looking to “get away from paper”. He asks what is to become of publishing companies, librarians, bookstores, and other “paper” jobs:

This came less than a month after Jackson openly promoted the iPod, claiming that the constitution should be amended in order to allow every student access to “an iPod and a laptop” among other amenities. He also forwarded, in the same stride, a constitutional amendment to guarantee the “right to to have a decent home, the right to medical care, and the right to a decent education”:

Clearly, economics is not Rep. Jackson’s strong suit, a point also recognized by Business Insider. Apart from peddling the most consistent economic fallacies known to man, he also deviates from the most essential of lessons learned during the Great Depression, put into words most precisely by economist Henry Hazlitt. In the quintessential classic for economic scholars, Economics in One Lesson, Hazlitt tackles the very issue he saw as so elementary to his own eyes, but seemed to escape all others at the time. He spoke of the false Curse of the Machinery:

Among the most viable of all economic delusions is the belief that machines on net balance create unemployment. Destroyed a thousand times, it has risen a thousand times out of its own ashes as hardy and vigorous as ever. Whenever there is a long-continued mass unemployment, machines get the blame anew. This fallacy is still the basis of many labor union practices. The public tolerates these practices because it either believes at bottom that the unions are right, or is too confused to see just why they are wrong.

The belief that machines cause unemployment, when held with any logical consistency, leads to preposterous conclusions. Not only must we be causing unemployment with every technological improvement we make today, but primitive man must have started causing it with the first efforts he made to save himself from needless toil and sweat.

The lesson, Hazlitt iterates, is that machines do not kill jobs, but rather they further delineate the division of labor, creating jobs that require less mechanization and allow man to use his most precise faculties instead. This is a point forgotten by the Keynesian economists of Hazlitt’s time, who decried the rising use of machines as a detriment to the employment of man. Hazlitt slices through the economic fallacy in proving that jobs have not been shed, instead they have delegated the more physical work to machines and allowed other unseen technical jobs to be created.

But do not only take Mr. Hazlitt’s words as truth. Read a research paper written by the International Trade Commission, titled “Innovation and Job Creation in a Global Economy: The Case of  Apple’s iPod“. Quoting from the abscract, they prove conclusively that:

Globalization skeptics argue that the benefits of globalization, such as lower consumer prices, are outweighed by job losses, lower earnings for U.S. workers, and a potential loss of technology to foreign rivals. To shed light on the jobs issue, we analyze the iPod, which is manufactured offshore using mostly foreign-made components. In terms of headcount, we estimate that, in 2006, the iPod supported nearly twice as many jobs offshore as in the United States. Yet the total wages paid in the United States amounted to more than twice as much as those paid overseas. Driving this result is the fact that Apple keeps most of its research and development (R&D) and corporate support functions in the United States, providing thousands of high-paid professional and engineering jobs that can be attributed to the success of the iPod. This case provides evidence that innovation by a U.S. company at the head of a global value chain can benefit both the company and U.S. workers.

Though the economic fallacies will continue to be peddled and pushed by those who aim to control public opinion, it is those who pay attention to the lessons of the past who will recognize the illuminated truth. As the pundits and politicians aim to blame beneficial technological progression as the main cause of our woes in economic stagnation, let their own misguided presumptions prove to their standing of worth.

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