Saturday, Jul 03, 2010
Gulf News
Having grown up in the US, I've seen a number of recessions, but I only have firsthand accounts of a depression from my grandparents.
Even they don't have much to say, other than repeating a mantra that espouses being happy with what you have and accepting that sometimes you have to go without. My grandparents were kids when the stock market crashed in 1929, so they didn't see the 1930s from the perspective of struggling adults or a modern economist.
I may not have to rely on my grandparents' tales anymore. A number of economists, including Nobel laureate Paul Krugman, are predicting that the deficit-reducing agenda put forth at last weekend's G20 meeting will only throttle the recovering economy, which in turn will lead us into a global depression. The possibility of facing a depression in my own time is a rather daunting one, but if I have any reoccurring thought about the state of the economy, it's this: how can we have a recession when Apple is claiming to sell an iPad every two seconds?
The really cynical out there will point out that such spending habits are the reason we are currently in a period of economic doldrums. If the estimates that 3 million iPads have been sold since its launch 3 months ago are correct, that means that Apple has received almost $1.5 billion (Dh5.5 billion) in revenue, presuming that everyone is buying the $499 model, which they aren't. People are paying over $800 for the top-of-the-line models when they are available from Apple, and almost three times that when they have to buy them on the grey market. It's probably safe to say consumers have shelled out over $2 billion for iPads.
It doesn't just end there. The new iPhone 4 is setting sales records only a week after its launch, with reports of the unlocked version commanding a Dh6,000 price tag here in the UAE. I don't mean to suggest that Apple is the only one driving sales. Sales of Google's Android phone are also on the rise, as are sales of 3D televisions. There is no doubt about it. Technology sells, even when times are tough.
But is that a good thing or a bad thing? With my grandfather's voice in the back of my head, I think, this is crazy. People should be saving their money, not wasting it on the latest gadget. Wasn't it this kind of reckless spending that got us in trouble in the first place? Hasn't the person who spent Dh6,000 on an iPhone learned anything?
It's that type of thinking that many economists say will lead us into a depression. It wasn't reckless spending that sent the world into a tailspin, it was reckless and often very questionable investing. Provided that person could afford it, spending Dh6,000 on an iPad probably did more good than depositing it in a bank, where it would be doing nothing except putting a small monthly fee into the wallet of some banker. By spending that money, the buyer helped pay someone's rent, their bills and put dinner on their plate. Now multiply that by 3 million units sold. That's what the world needs.
Those who preach austerity are simply marching us down the road to more economic troubles and heartache. It's a tempting argument, but no one has ever saved their way out of a depression. This is not our grandfathers' depression, however, and they didn't have the iPad to help pull them out.
By Scott Shuey
Gulf News 2010. All rights reserved.
