iPhone shows the potential for globalised trading to alleviate poverty
Wednesday, July 7, 2010
New research into the components of Apple’s iPhone 4 nicely demonstrates the fragmented nature of modern trading. Californian designers, Korean processors, German microchips and Chinese labourers all combine to create final product sold by retailers around the world. Developing countries should recognise that embracing global trade is the surest route out of poverty and seize upon the opportunity to attract foreign investment.
Apple is not unique in utilising localised cost efficiencies to provide lower prices for consumers. Manufacturers the world over rely upon complex international supply chains which create much needed employment opportunities and prosperity. Globalised trade is increasingly fluid: as production costs increase, as is happening with rising labour costs in China, so businesses will look elsewhere to source their products and labour- just as European businesses looked to the east in the 1960s when the Asian Tiger economies offered cheaper production opportunities.
The significance of this? Governments in developing countries should follow the Asian model of development and look to attract foreign investment by creating favourable business environments at home. Where this has happened Mauritius- Hong Kong, Singapore, South Korea- the results have been incredible, with millions emerging from poverty in just a few decades. It is time for other developing nations to open their economies up to investment and trade.