On the occasion of Apple’s rise to become the first $ 1 T company, the NY Times had a good article with graphic displays showing the size of Apple (as well as Google, Microsoft, Amazon, and many others) in the US economy. There are a number of lessons to be drawn from this.
1. The surprisingly dominant role of Apple—together with the other three just mentioned—shows the importance to this country of technology leadership. That’s what supports our standard of living and always has. Railroads, steel, automobiles were all high-tech in their day. We cannot pretend that even behind high tariff walls we can build a successful economy out of staying put.
Our challenge is to seize the opportunities and bring everyone along. One important positive from this story: much of what these companies sell didn’t exist twenty years ago, which says a lot about opportunities for the future.
2. It’s worth recognizing that (despite all the fuss) China’s rise has been a good thing for Apple and for the US economy generally. The iPhone is a prime example of why trade deficit arguments are wrong. One of the most profitable American products ever is a loser in the trade deficit, because profits are declared in Ireland for tax purposes! Are we really going to tell China: “Don’t send us any more of those cheap iPhones that we sell everywhere at 300% markup until you can buy more yourselves”?
For the future, now that China is richer, East and West are actually joined at the hip. Continued growth has to be collective, so the last thing anyone needs is a trade war. Sure they tried to copy us—we should do something about that, but the bigger challenge is that they’re good at it. To be successful we need to play to our strengths:
– A skilled workforce. Implies support for education.
– Equality of opportunity, so that we can use all talents and ideas. Education is a big part of it, but healthcare and other contributors to family stability are important too.
– To be the place where people with entrepreneurial ideas will want to come realize them. Google (with an immigrant founder) and Apple (Steve Jobs’ father was a Syrian immigrant) are convenient and far from exceptional cases.
– Creating a global environment for trade and cooperation where we can be successful. That means international engagement on rules for all.
3. Apple is also emblematic of the high-ticket corporate welfare we are now practicing. It’s hard to argue that Apple, of all companies, needed a huge tax break on $252 B of repatriated profits plus a current-income tax break, all yielding $100 B of stock buybacks. US companies were doing fine before the new tax plan, and stock buybacks have been the primary result of their tax savings. In other words, companies decided the best thing to do with their tax cut money was just to give it back—for the benefit of the rich people who own them.
The other side of that policy is our current inequality of wealth and opportunity. We have refused to help our population move to the increasingly high-tech future—and created a cast of bogey men to blame for it. We won’t spend money on education, infrastructure, or people—despite the difficulties of transition. We’ve fought unions and anything that gives workers clout. But it’s the Chinese, or the Europeans, or the liberals, or the immigrants who are to blame.
We’re moving toward a worst of possible worlds: a capitalist mal-distribution of wealth combined with socialist top-down economic policy. We’re fighting tariff wars so senseless that even the Kochs are complaining, because Trump feels empowered to decide which sectors of the economy ought to be winners.
Apple’s success shows what happens when we build to our strengths. We know how to do that. We did it for a long while. But for now we’d rather shut our eyes to the opportunities, take our marbles, and go home.