By K. Quinn Kyler, Guest Author

PROVO, UT | 9 April 2008 | Many would have you believe that the economy is stimulated by plans created by the government, such as the Economic Stimulus Act of 2008, which was signed on February 13 by President Bush. This is a two-year 168-billion-dollar stimulus package. Is this what stimulates the economy? Absolutely not! Selling T-bills, or in other words going into national debt, or printing more money to provide the American people with “handouts” do not to stimulate the economy. The redistribution of wealth does not stimulate the economy. However, these are the only ways available to the government to fund a $168 billion stimulus package. If we can’t rely on the government to successfully stimulate the economy, on whom can we rely? On what can we rely? We can rely on corporations, entrepreneurs, and producers. We can rely on productivity and innovation.

Discussion

Last summer Apple released the well-known and revered iPhone. A company who is new to the telecommunications market was able to capture more than a quarter of the entire U.S. market for smartphones by last year’s fourth quarter as reported by Edwards and Einhom of Business Week. Apple has made an exclusive agreement with AT&T to provide the iPhone with service.

What does this mean for Apple’s competitors? What does this mean for AT&T’s competitors? They have to compete. Wireless providers, such as Verizon Wireless and Sprint Nextel, are teaming up with cell phone manufacturers, like Nokia and Samsung Electronics, to innovate and create new products to compete with the iPhone.

This may prove difficult for competitors. Apple has a strong product which integrates flawlessly with their computers, and they are in no way “standing still.” They announced at the beginning of March that they will be opening software development to third-party developers. The iPhone will be made more corporate friendly by making corporate server integration possible, and by making email retrieval instantaneous.

Apple’s innovation does not hamper the demand for new products. It has quite the opposite effect. It creates demand for new innovative ideas.

How does all of this stimulate the economy? To create the iPhone, Apple contracts out the building of its parts. The manufacturers order the raw materials required. Apple hires a printing company to print its manuals and packaging. The printing company orders the paper. The paper company orders the wood and other materials necessary to produce their product. Apple has a manufacturing facility to put all of the pieces together. They hire a distributing company to send out their product. They train a technical support teams. Some teams will field phone calls. Other teams will be dedicated to the repair of defective phones. Apple hires TV studios, actors, and media broadcasting companies to market and advertise. The list could go on.

All of a sudden Apple’s competitors need to hire teams of innovators to create new handhelds. They hire strategists. They produce a new competitive product. Their product must be manufactured, packaged, distributed, marketed, and sold. Is this not how an economy is stimulated?

As companies compete, a better product will continue to be produced. Those products that are no good will not make it in a competitive market. The product will be validated by the profit it produces. Competition will drive the price of smartphones down. Therefore companies will always have an incentive to innovate and produce better products. This cycle of innovation, production, competition, then back to innovation, is Adam Smith 101. Innovation, production, and competition are what simulate the economy. Everyone wins when a free economy is allowed to function. Consumers get the best products at the lowest prices. Business owners are rewarded for the product of their mind.

Even though the government, political leaders, and presidential candidates act as if the economy can be driven by policy, it cannot. Today the government punishes successful companies with higher taxes and more regulations. Failing companies are “saved” with emergency efforts by the government. What message does this send to the marketplace? What message does this send to the American people? Should the Government be in the business of economic stimulation? Regardless of what others may want you to believe, productivity, if allowed, is the only thing that can and will ever save this country from its current economic situation. Productivity is the standard.

Action Items

1. Do you have an idea for a new product? Research what it would take to patent that idea. Ideas can be sold.
2. Write a letter to your Governor’s office, State elected officials, Congressional Representative, or State Senator’s office about companies being punished to produce and rewarded to fail. Find out if they have desires to change this trend.
3. Read Francisco d’Aconia’s speech on money by Ayn Rand to better understand what money is and how it interacts in a society. It can be found in Part II, Chapter 2, “Teh Aristocracy of Pull” near the final quarter of the chapter. (The entire book is highly recommended.)

MRFC Principles: (6, 7, 9, 10, 11)

Resource(s):

Edwards, Cliff and Bruce Einhom. “So Maybe Apple Was onto Something”
Business Week. April 3, 2008

K. Quinn Kyler is a student at Brigham Young University. He is studying Entrepreneurship and Spanish Translation as a double major. He loves advocating for freedom and liberty, and teaches the proper role of government whenever the opportunity presents itself. He currently lives in Utah County, but still calls Denver home.