This column will run in the October issue of Tell Magazine
Four years ago this month, Douglas Holtz-Eakin, the top economic advisor for then-presidential candidate Sen. John McCain, held up his BlackBerry and told reporters that they had McCain to thank for the device and innovations like it.
“He did this,” Holtz-Eakin said. “Telecommunications of the United States is a premier innovation in the past 15 years, comes right through the Commerce Committee. So you’re looking at the miracle John McCain helped create.”
Whether it was because of its similarity to the Al Gore/”invented the Internet” brouhaha, or because McCain himself was famously computer-illiterate, or because the BlackBerry is produced in Canada, the statement drew embarrassed chuckles. But now we have another debate about a popular smartphone, the economy, and even its possible effect on presidential politics.
With the unveiling in mid-September of the iPhone 5, there was some chatter in both the tech and political press that a blockbuster release of the phone could lead to strong economic activity, or even a recovery.
A research note from JP Morgan’s Michael Feroli in early September predicted that the release of the iPhone 5 could add 1/4 to 1/2 percentage point to fourth quarter annualized GDP growth, leading to fourth-quarter GDP growth of $3.2 billion, or annualized growth of $12.8 billion. Paul Krugman wrote a column in the New York Times touting Feroli’s note, while also noting that the reasoning behind it confirms Krugman’s favored Keynesian economic views.
The note has been debated continuously on political, economic and technology blogs, with the question even being raised of whether the iPhone 5 can reelect President Obama.
I’m not an economist, but the idea that the iPhone 5, all by itself, can rescue the economy doesn’t sound plausible to me. Is the new phone good news for the economy? Yes, and for Apple, even better. But will it rescue the economy altogether? I very much doubt it. That’s because there have been iPhones for the entire recession, each has sold more than the last, and none have led any sort of economic recovery.
This raises something that I’ve noticed through the past half-decade or so: The iPhone has been around since 2007, and the iPad since 2010. Both have been phenomenally successful and revolutionary products, with Apple selling 85 million iPhones and 34 million iPads, counting domestic sales only. Both just about all of those sales have come in bad economic times.
Going by the official definition, the Great Recession began in December 2007 and ended in June 2009, while the three years since have been marked by the fits and starts of a recovery. Unemployment has been above 8 percent for virtually all of that time. And despite all that, Apple has sold millions and millions of its devices.
How is that possible? Well, part of it is that higher-income people still have disposable income, as do the more tech-savvy among us. Still, it’s strange to see that in tough economic times, and even as the consumer electronics retail sector has continued to struggle, there’s almost always a line out the door at the Apple Store, and not only on the release date of a new iPhone or iPad.
As of this writing there are no sales figures for the iPhone 5 yet (though Apple did announce more than 2 million pre-orders in the first 24 hours), nor do we know if the device led an economic recovery or boosted President Obama—who has been known to hoist both an iPhone and BlackBerry—to a second term. But just imagine how many iDevices would’ve been sold had the economy been booming for the past five years.