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Capitalism Made Your iPhone

I've seen a lot of strange noise rising up on Facebook lately. It appears that some people think capitalism makes things, and that other people seem to think that capitalism is just getting in the way. Obviously neither case is true. This is an econ blog after all!

An example of the former problem is the quote inside the screencap below with the sentence 'capitalism made your iPhone' and a rebuttal to the effect that different economic systems sumply determine who gets paid for creating stuff. The rebuttal is true as far as it goes, so I won't address it here.

If we take the sentence 'capitalism made your iPhone' completely at face value then it's a false statement. Workers apply labour and capital to make and distribute iPhones. But nobody disputes that. At least no economist or businessperson disputes that, as economists and businesspeople are workers themselves.

Bear in mind what capitalism is and is not. It's just a mode of production. The difference between capitalist production and non-capitalist production is that capitalist production is necessarily entrepreneurial and reliant upon outside finance to initiate the production - of whatever - in question.

The cycles of capitalist production will over time drive prices down, eventually making it an affordable prospect for a business to make and sell consumer smartphones and tablets, and for competition between the different tribes of capitalists (Samsung and Apple don't get on very well) to continually improve the lifespans, feature sets and reliability of the devices.

Contrast this with the dearth of new consumer-focused products in those parts of the world which have not seen any sustained use of capitalist production yet and the conditions in which people live in those societies.

Of course there's also the matter of the contrast between the availability of goods and services sans capitalism versus the availability of goods and services with capitalism. This is made very clear by quick perusal of a GDP hockey-stick graph.

Daniel J. Mitchell is a bit of a dick but on the broad brush strokes of economic theory and history he is a sound source to go to. Hopisen has some lovely analysis - I respectfully disagree on the details, but we're justifying capitalism itself here, so the enemy of my enemy is my friend. Any finally there's an economist graph I half-inched from Patterico.

This tells us non-capitalist modes of production (sharing, theft, gift, and bureaucracy) can't produce affluence.

So no, capitalism doesn't literally make iPhones. It makes iPhones possible.

Love ya, learn econ.

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