The All American iPhone: Bad, Or Good?

The new American President Donald J. Trump is pushing for bringing back jobs to the U.S. as everyone knows. In his inauguration speech he said:

 We must protect our borders from the ravages of other countries making our products, stealing our companies, and destroying our jobs. Protection will lead to great prosperity and strength.

I will fight for you with every breath in my body – and I will never, ever let you down.

America will start winning again, winning like never before.

We will bring back our jobs. We will bring back our borders. We will bring back our wealth. And we will bring back our dreams.

We will build new roads, and highways, and bridges, and airports, and tunnels, and railways all across our wonderful nation.

We will get our people off of welfare and back to work – rebuilding our country with American hands and American labor.

We will follow two simple rules: buy American and hire American.

Now this has led to the repetition of the story that offshoring jobs is beneficial to the U.S. The Apple iPhone is used frequently to tell the story. According to this story, as argued by many such as the MIT Technology Review, the all-American iPhone will be pricier and hence bad for the U.S. One of the arguments is that the iPhone is so complicated that it’s even impossible to make everything in the U.S! While that is certainly true, it doesn’t mean that remaking the iPhone in America, i.e., most of it is not possible or bad.

In fact such denialism has quite contributed to the rise of Trump. People interested in politics and to the left of Trump on the economic left in the “political compass” should have a look into such things.

Let’s say that Apple manufactures most parts of iPhones in the U.S. Since its costs will rise, as it has to pay more labour for example, it will be priced higher if Apple wants to keep the same margin. Now since wages are a source of domestic demand for the U.S. economy, this will lead to higher output and income for U.S. economic units. It will also lead to an improvement in the U.S. balance of payments and international investment position as the U.S. is paying foreigners lesser in the new supply chain than is the case now. Higher U.S. employment would also mean higher wage-bargaining and higher wages. Higher prices won’t hurt iPhone buyers since real incomes would rise.

Needless to say, there’s also an international aspect. That iPhones will be more expensive might mean lower volume of iPhone exports. But price is not the only thing consumers look at. So the fall in exports won’t hurt if that’s the case. Moreover, a rise in U.S. output would be beneficial to the world and iPhone exports needn’t fall. Something has to fall you’ll say. Yes, Apple’s market share will fall, although not the absolute value of its profits.

Donald Trump has to be resisted for his authoritarianism and xenophobic policies. But economic myth-making is not the right way.

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