What the iPod Tells Us About the World Economy 380
Hugh Pickens writes "Edmund Conway has an interesting article in the Telegraph where he analyzes where the money goes when you buy a complex electronic device marked 'Made in China,' and why a developed economy doesn't need a trade surplus in order to survive. For his example, Conway chooses a 30GB video iPod 'manufactured' in China in 2006. Each iPod, sold in the US for $299, provides China with an export value of about $150, but as it turns out, Chinese producers really only 'earned' around $4 on each unit. 'China, you see, is really just the place where most of the other components that go inside the iPod are shipped and assembled.' Conway says that when you work out the overall US balance of payments, it shows that most of the cash for high tech inventions has flowed back to the United States as a direct result of the intellectual property companies own in their products. 'While the iPod is manufactured offshore and has a global roster of suppliers, the greatest benefits from this innovation go to Apple, an American company, with predominantly American employees and stockholders who reap the benefits,' writes Conway. 'As long as the US market remains dynamic, with innovative firms and risk-taking entrepreneurs, global innovation should continue to create value for American investors and well-paid jobs for knowledge workers. But if those companies get complacent or lose focus, there are plenty of foreign competitors ready to take their places.'"
