Worstall on Wednesday I've mentioned around here before that the shipping container has been one of the most revolutionary technologies of our times. Similarly, I've said that the mobile phone has had a vast effect on human wealth.
The TL;DR version of mobes is that 10 per cent of the population with a mobile increases GDP by 0.5 per cent each and every year in a country without a landline network.
I would happily argue that those two technologies together have done more for living standards generally than anything else at all over the past 50 years. Yes, even the death of communism and absolutely anything done by politicians. I wouldn't insist that I'd be right in such an argument but it's one that I'd happily make.
I've also pointed out that there's a version of trickle down economics that really does work. The making of toys for rich men does lead to gadgetry for the rest of us to enjoy a decade or two later.
Which brings me to this little story in the Indian press:
Datawind is set to enter India's competitive smartphone market this week with two Android devices under Rs 3,000, targeting first time smartphone users and existing featurephone users in the price-sensitive segment. The Canadian company, which has tied up with a leading Indian carrier, will provide free internet for one year to consumers who buy these smartphones if they surf from the UbiSurfer web browser. However, consumers will have to buy data packs for accessing audio and video streaming which are not included in the free internet.
God only knows how much ad slinging is going to happen in that browser to support the economics of it all but it's not going to be a small amount.
The actual price is being reported elsewhere as being some 2,000 rupees. At current rates that's just over $30. By Saint Steve and the Holy Toast*, isn't this capitalist free-markety sort of thing bleedin' glorious? Less than a decade after the Jesusmobe would cost you $1,500 for the bling and a year's data plan, it is now $30 for a Landfill Android plus data: a price that the average citizn of the subcontinent can consider without breaking into a sweat.
The importance of this is not just the obvious one about improving the life and fortunes of said citizen and his confreres. It's what it's going to do to our own standards of living that's interesting.
It is true that we don't, in fact, know the impact of smartphones, nor of mobile broadband, on the economy. There's lots of reports around claiming that things are going to be lovely but we don't actually know this. We do have research that shows us that a landline network increases the growth rate, that simple mobile phones do the same and also that access to broadband up to 2Mbits does too. These are all things that have been studied and measured over the years. All those reports telling us about the future and the effects of mobile broadband are just extrapolating from those earlier technologies (and perhaps not doing it all that well, either; at least one study has shown that 2Mbits improves growth rates but that higher speeds have no effect. But that was from before higher speeds were common).
However, let's accept that extrapolation as being at least reasonably true. This seems like a sound assumption at least: better methods of communication always have grown the economy as getting information passed around is pretty much a definition of how to increase economic efficiency. But if that Indian chap is now getting his cat pictures cheaply, what has this to do with our standard of living?
At this point it's worth considering what economic growth really is. We're suggesting that the Indian economy is going to become more efficient. This is also the same as saying that labour productivity in India is going to increase. And as a result that citizen, along with about a billion others, is going to become wealthier, in that they will be able to consume more.
Yet the flip side of this is that they're also going to produce more. This is again the same statement: consumption must match production (no, consumption of one specific thing does not need to equal production of that thing, but at the economy level they must). So, more will therefore be produced: that's more stuff that you and I can share in the consumption of.
Yes, we'll need to put the little intervening step of trade in here, so that we consume some of what they produce and they consume a little of what we do. But by definition, if they are getting richer then they are producing more and we really do get to share in that greater production through that trade. Thus the effects are not limited just to the local economies where the growth is occurring but radiate out to the whole of the globe. It's rather like the waves from a pebble tossed into a lake; those ripples get smaller as they travel but they are there.
I know, I know, I'm a little too keen on this wondrous exploitation of the masses that is capitalism. Yet it does get some things right and of all the economic systems we've ever tried this odd blend of capitalism and freeish markets is the only one that has ever raised the living standards of the average wallah appreciably and for any length of time. ®
*Obscure joke stolen from commentard hplasm.