Friday, January 29, 2010

Fourth Quarter GDP, the iPad and American Power

There's some debate over the significance of today's revised GDP report, indicating that economic growth reached an annualized rate of 5.7 percent for the 4th quarter. And while it may well be the case that consumer purchasing power is still way down, and unemployment is still super sticky upwards, the large measure of gross product nevertheless reminds me of some of the big boom numbers during the 1990s. We had at that time the longest sustained expansion on record, and that period marked the emergence of a universally acknowledged quality of American preponderance globally. While the end of the Cold War left the U.S. as the single "pole" atop the global hierarchy of states, by the end of the decade the U.S. had pulled out such a phenomenal lead in all the major indices of great power capabilities, expectations were for decades of unrivaled mastery in the international realm.

Just a few years later, especially after a couple of years of the Iraq war, and especially at the end of 2008, with financial crisis and the virtually unprecendented steps taken by the U.S. government to restore confidence, many commenters were quick to trumpet their predictions of impending American decline. I never personally buy the doomsayer scenarios, because they've been recycled from earlier eras of cyclical economic change, and they're totally predicated on the emergence of a utopia of global governance.

In any case, I always remind my students to never count the U.S. out of the race for international preeminence. Frankly, I'm not convinced that the 21st century won't be a repeat of the 20th -- an American one. I'm reminded of this debate not just by the surging GDP numbers (of which there will be more, in a couple of years from now, especially), but by this week's huge buzz over Apple's iPad. (See Midnight Blue for the specs, "
iLove the iPad.") This report is especially interesting in terms of the market-moving implications of Apple's dominant innovation, "The iPad Big Picture" (with emphasis added):

There was a meta-message in today’s Apple event, not about the iPad in particular, but rather about Apple as a whole. Jobs’s brief preamble included a bit of extra emphasis on the fact that the Apple now generates over $50 billion per year in revenue. (Apple also emphasized this $50 billion revenue thing in their PR two days ago announcing their Q1 2010 financial results.) He also said that when you consider MacBooks as “mobile” devices, Apple generates more revenue from mobile hardware than any other company in the world; the three competitors he singled out were Sony, Samsung, and Nokia. The adjective he used was “bigger”.

Lastly, there’s the fact that the iPad is using a new CPU designed and made by Apple itself: the Apple A4. This is a huge deal. I got about 20 blessed minutes of time using the iPad demo units Apple had at the event today, and if I had to sum up the device with one word, that word would be “fast” ....
In the late-1990s, the American economy saw explosive economic growth as the first huge Internet-related technology-era matured and the leading sectors of the economy -- think Silicon Valley on top of a soaring service-sector juiced by globalization -- outstripped U.S. competitors in the first-mover fields then driving the intense pattern of intenrational integration and growth. Watching all the buzz this week over the iPad was one thing, but just last week market reports suggested a wider pattern of long-term dominance for Apple, in phones, music, and related services. It's still early to say, but these kinds of developments at the macro level (economic growth) combined with those at the micro level (industry innovation and market dominance), are generally encouraging for the larger questions of American world leadership in the years ahead.


lady di said...

Growth for Apple...and in what country are these products manufactured?

Rusty Walker said...

The media will jump all over these temporary gains, but we are being misled. Unfortunately, if you examine recent U.S. economics, the "surging GDP numbers" is only due to inventory rebuilding. Increasing inventories add to the GDP. When purchases do not match the production, the number will adjust down just as in the past.

The government acontinued path of spending, and the excessive debt accumulation of this administration, banks, corporations, and/or consumers, masquerades as a boom (remember 2006?); government infusions of cash is not real growth.

This is a debt-fueled boom based on smoke and mirrors that provide dangerously false affirmations of Obama’s policies. As long as the left is taxing and spending, we are going to see more layoffs. Rebuilding inventories, while a good thing, is only workable when the population is working and thus, has income to buy. I wish we could believe this light in the tunnel. Sometimes I wish I didn't read so much history, because our economic history promises the numbers will be adjusted down, and in the fourth quarter, probably down again.

Norm said...

I'am with Rusty. Personal income is going no where. I am afraid that the second quarter will show either
absolutely no growth, or an economic contraction. I'am usually a bull, an
optimist....but I am very unhappy with the current direction. We can't tax our way out of a recession.

Dave said...

I see no real economic recovery anywhere on the horizon.

Our private sector is being slowly strangled to death, and until that changes, the overall economy will continue its slide.

Whether this is being done deliberately, or by accident, really doesn't matter at this point, as it is the private sector that is this nation's economic engine, not the federal government.

I don't think the repubs will be able change things for the better until January of 2013, and that is assuming they are elected in sufficient numbers in November of 2012. That is almost three years from now.

The only way they could turn things around sooner is if they win enough seats in both houses this November to override Obama's vetoes, and I just don't see that happening.

They may win enough seats to slow our regression somewhat, but that isn't going to be enough. Obama's lunacy must be reversed, not just slowed or halted.

I'm not at all sure the republican "leadership" understands this.

I think many people need to also understand that the far-left is now running things in this country, and will be for some time to come.

These people do not like America having a strong, vibrant private sector economy.

They know exactly what things need to be done to turn things around for real, but they aren't going to do any of them.