Nick D'Aloisio slaved away in his bedroom over an app. Photograph: Sean Smith for the Guardian
Take apps – the Instagrams, Angry Birds and other productivity-boosting/time-devouring programs. In the five years since launching the iPhone, Apple claims to have kickstarted an entirely new industry in making apps – and it has more stats than you can shake a MacBook at: over 775,000 apps available across 155 countries; 40bn downloads and rising; more than $7bn for developers (figures from January). Nearly all of this software is made by third parties, creating 291,250 extra jobs in the US alone.
Whether in Californian press release, panting media profile or prime ministerial exhortation, the message is clear: there's gold in that code. The public discussion of the "app economy" is where the politicians' rote language of enterprise takes on the sheen of high technology, to potent effect. Success stories come round with obliging regularity. Last month was the turn of Nick D'Aloisio, a 17-year-old who slaved away in his bedroom over an app before flogging it to Yahoo for $30m (£19m). In every profile that played up his normality, and played down his investment-banker dad and funding from Stephen Fry, there was an almost audible sigh: if only more slugabed Britons would do this …
To which the honest riposte is: loads of them do, and it doesn't get them very far. It suits both politicians and journalists to portray the hi-tech economy as a succession of heroic geeks – in which Bill begets Steve who begets Larry and Sergei – but in doing so what often gets missed out is the prosaic, vital stuff of how these companies make their money. Apple's "app revolution" sounds groovily freeform but it is both tightly controlled and a veritable licence for the company to print money.
Designers have to submit their software to Apple, which both sets the parameters for acceptable design and exerts censorship over the finished products. If approved, programs are then hosted at the App Store – and Apple rakes off 30% of any cash from sales or ads. Obviously, there is a lot to be said for having a seal of approval and being stocked in what is one of the most popular shops on the planet. It's also true that app makers can take their creations to rival platforms. But Apple is hardly outsourcing app development for charity. As it admitted in its annual report last year: "If third-party software applications and services cease to be developed and maintained … customers may choose not to buy the company's products." This way, it has stacks of games and assorted fun to offer iPhone or iPad owners, without having to shell out on personnel, all the while running one of the biggest rent-extraction rackets of the 21st century.
The appmakers certainly know who's boss. In extensive interviews conducted by Birgitta Bergvall-Kåreborn of Sweden's Luleå University of Technology and Debra Howcroft of Manchester Business School, even successful developers made clear that when Apple told them to jump, the only acceptable response was how high. "If they decide that they do not like us any more, and they do not want to promote us, that makes a big difference in how much money we make," one said. "They are very much custodians of their marketplace so you've got to be well-behaved."
The designers are among the most educated in the UK, if not the world – Howcroft mentions Cambridge PhDs – doing exactly the knowledge-economy work so beloved of Blair and Cameron. Yet their working lives are precarious, cramped (eight men in a tiny office in one example) and often marked by long hours, where you do a full-time job then spend evenings coding in a box bedroom. You can probably do this for a chunk of your 20s, but it doesn't help with buying a house, raising a family or saving for a pension. And the grim likelihood is those conditions won't change. Last year, one consultancy estimated that seven apps took 10% of all revenue; the vast majority sunk without a trace. Averaging all of that out, Bergvall-Kåreborn and Howcroft estimate that developers earn 17.5 cents per download. Given the hours that go into producing just one piece of software, for most programmers that is well below the minimum wage.
Creative industries have always been dominated by tournaments, in which just a handful scoop the pool. But what you see in our new IT economy is an example of the intensification of these competitive forces, what you might call the X Factor economy. For a couple of generations now, young Britons have been force-fed the language of enterprise and no-jobs-for-life: now there are loads of them practising precisely these portfolio careers – and still not getting anywhere. Meanwhile, Apple takes about a 50% gross margin on every one of its smartphones made in China and 30% from every app sold, all the while taking full advantage of tax loopholes – and receives not lectures, but adoration