The $3 Million IPhone: How Technology Has Raised Our Standard Of Living

We’ve heard a lot about income inequality and the end of the middle class in the last couple of years.

There’s no questioning the maths. You can pick from almost any chart you like, but I’ll take one that Business Insider has used many times: wages as a percentage of GDP. Since the last recession, it’s been bumping along the bottom, near or at an all time low:

Wages as per cent of GDPBusiness Insider, St. Louis FedWages and salaries as a per cent of GDP.

But numbers don’t tell the whole story.

The middle class wage hasn’t changed much compared to inflation or the income of the wealthiest. But thanks to technology’s march, that wage can buy things that were previously unimaginable.

This weekend, I saw a tweet flash by with an amazing claim: “If you had bought the computing power found inside an iPhone 5S in 1991, it would have cost you $US3.56 million.”

This statistic was originally put out by Bret Swanson, writing in Tech Policy Daily in February. He used a back-of-the-envelope calculation based on 1991 prices for memory, computing power, and bandwidth.

It’s not precise, but it’s safe to say that a lot of us are carrying, in our pocket, a computer that would have been unspeakably costly in 1991.

Let’s look at some other huge changes driven by technology in the last few decades, just in the United States. Many of these changes have not particularly helped the poor. But they have, at least arguably, improved the quality of life for the middle class.

  • Information was rare and expensive. To learn about something new or uncover important facts, you had to go to libraries, contact analysts to buy proprietary research, and scour phone books to find experts who would be willing to take your phone calls. All news came from a few major TV networks and maybe a decent local newspaper (if you had one), and a lot of that news was provided by one or two news wire services. Now you can search Google or any of a million web sites devoted to your particular niche.
  • Comparison shopping required massive legwork. Want to find out who had the cheapest TV, or car, or refrigerator? You had to call and visit dozens of places. Now, you look at Amazon.
  • Entertainment options were limited. You could see movies in the theatre, or when they came out on TV, or eventually drive to the video store to rent them on VHS. New music came into the local record store every Tuesday, and maybe if you were really lucky you got to hear it on your local college radio station. Now you’ve got Netflix, YouTube, Hulu, Spotify — the choices are staggering.
  • Basic communication was really time-consuming. In 1991, if you wanted to catch up with an old friend from across the country, you called them and left messages on each other’s voice mail until you were both home, then spent some time chatting. To send a message out to the workplace, you printed a memo and distributed it, on paper, to people’s mailboxes. Or walked from cube to cube telling everybody one by one. No email, no Facebook, no SMS.

I focus on information technology because it’s what I know best, but there are plenty of other examples where a straight comparison of 2014 product to earlier-era product just doesn’t make sense.

Like cars. In the 1970s and 1980s, cars were terrible. They broke down all the time, they were slow with terrible acceleration, they guzzled gas, the insides sometimes stunk like exhaust or motor oil (really — drive an old VW bug for a week and see what I mean). Driving even a mediocre used car today is better than all but the most luxurious automotive experience in, say, 1973.

Or a bag of groceries. When I was growing up in Seattle in the 1970s, fresh fruit and vegetables were seriously limited in the winter time. People ate most of their food out of packages. Coffee was weak drip or instant. There were a few kinds of beer, and they all looked and tasted the same. Now, goods move faster, refrigeration is better, and the supply of fresh, highly specialised food is higher than ever before.

None of these facts cancel the basic idea that the very wealthiest in society are accumulating wealth at a much faster rate than everybody else. None of these advances particularly benefit the poor, although things like access to information through low-cost or free internet connections may help break the cycle of poverty.

And certain very important things — higher education, child care, health care, housing — have gotten more expensive, faster, than the rate of inflation.

But still, a straight wage comparison does not tell the whole story. There are a lot of benefits to technological progress that do not show up on these charts. 





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