Thursday, February 9, 2012

Technology and our discontents

The NYT article/series on the iEconomy and Apple in particular more than anything else illustrates the tension in our society. It could be the wake up call for the industry in the same way that shoe and clothing manufacturers like Nike, Gap and others as well as its consumers were made aware of the human price of consuming these goods.

The tension is that we want great stuff and we want them cheap. From the NYT article (emphasis mine):

Some former Apple executives say there is an unresolved tension within the company: executives want to improve conditions within factories, but that dedication falters when it conflicts with crucial supplier relationships or the fast delivery of new products. Tuesday, Apple reported one of the most lucrative quarters of any corporation in history, with $13.06 billion in profits on $46.3 billion in sales. Its sales would have been even higher, executives said, if overseas factories had been able to produce more.

Executives at other corporations report similar internal pressures. This system may not be pretty, they argue, but a radical overhaul would slow innovation. Customers want amazing new electronics delivered every year.        

Is this really the case? I may be willing to invest/spend a little more on a gadget if I knew it won’t be defunct the moment I walked out the door. But the moment a cheaper alternative appears … And economists would marvel at this statement because they would say that this is how market forces are supposed to work. If firms could make a cheaper product, they would - and then they would also try to persuade us to buy it - by advertising. Wal-Mart, Target and various discount outlets all try differentiate themselves and their products with low-prices as pointed out in this NPR story.

Moreover as the NPR story shows, despite the publicity on Gap and Nike it isn’t clear that large gains have been made on the aggregate in terms of making working conditions better. There are many manufacturers and many brands and labels that we pick up off the shelf that are probably made under harsher working conditions -than those in Gap or Apple factories.

The comments from Chinese readers of the article were more nuanced than I expected. They did not rail against Apple or the West or capitalism but acknowledged that it was a difficult problem. One hoped for an acceleration of industrialization so that China moved up the value added supply chain so that the next country to supply low-cost workers would be those in Africa.

It seems ironic that in order to make cheap and even spectacular electronics we are relying on work conditions that can be described (by me) as Dickensian. Is it possible then that improvements in technology and the advance of the world production possibility frontier is made possible by more by intensive use of labor than the application of new technologies? If the tablet is not an advancement of the PPF then is it merely a toy and if it is a toy then it should be produced in toy factory like conditions?

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