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Apologizing for Exploitation

[ 55 ] January 30, 2012 |

Tom Krazit at Paid Content has a piece up apologizing for Apple’s exploitation of Chinese workers in the creation of its products. Krazit argues that Apple really can’t do anything about the problem–the jobs aren’t coming back to the US, it would be too risky for Apple to open its own factory, and China might not allow any real reform anyway.

Most of this is hogwash. The idea that an enormous multinational corporation which just had one of the most profitable quarters in the history of any corporation in the history of the human race is completely incapable of paying its workers a living wage would be laughable if it it didn’t shill for immorality. Take this paragraph for instance:

The truth is that an entire consumer electronics industry depends on these factories for their livelihoods; the dozens of companies and millions of people that have made a handsome living on the spread of mobile technology, gaming consoles, and high-definition televisions into everyone’s lives. And China depends on the demand for its manufacturing services driven by Western consumers who want quality goods at a low price, knowing that few other operations are able to hit those targets as consistently as its homegrown manufacturing base.

OK, but how does this get in the way of paying a decent wage. Apple prices are not low and people are desperate to own its products, but even given the general principle that people want to buy things for cheap, it’s not at all clear that you can’t provide reasonably priced goods and pay people good wages. We did this during the great period of unionization in this country after World War II; admittedly, our level of consumer spending was not so high as it is today, but people also witnessed rapidly increasing consumer power during those years. Even outside of that, given Apple’s gargantuan profits, there’s no way they can’t ensure better working conditions through throwing their considerable corporate weight around. Those contractors do whatever the corporations want them to do. They want so much product at so much cost. And they get it to them. This does not have to be a constant downward. If the corporations want the contractors to pay more, that will happen.

Krazit’s one point worth serious discussion is the role of the Chinese government, who may well be obfuscating any information coming out about their workers’ lives and who could theoretically provide a structural barrier to a corporation wanting to pay its workers more (assuming any of us take seriously the idea that Apple executives really care all that much about how these workers live, which I most certainly do not). If China truly sees its future as providing cheap manufacturing labor, I can see why it might want to discourage one company from paying too much in the fear of driving off other companies. But that’s happening already. As China begins transitioning to a more mature and wealthy society and as workers get sick of dying in factories and having babies born with cancer, companies are moving to Bangladesh, Vietnam, and other nations with working conditions even more wretched. And while I don’t doubt the power of the Chinese government, I do not at all buy the presumption that Apple is somehow helpless to improve their workers’ lives in the face of the Chinese government. This is patently absurd.

Apple could do any number of things if it were serious about allowing its workers to live better lives. It could slightly reduce profits and earmark this money specifically for workers’ wages. It could open its own factory in China, hiring skilled technicians and creating a modern version of a company town (a scenario also ripe for abuse, but it isn’t worse than the present situation). It could then allow western reporters, environmental consultations, human rights groups, and whoever else full access to that factory. Even if you take Krazit’s point seriously that they jobs can’t leave China because that’s where the expertise lies (which begs the question of how computers were made before they were in China and what will happen when computer companies move their factories to nations with ever-more degraded labor), it hardly means that corporations are helpless to do anything at all about their workers. It’s that they don’t really want to do so.

Comments (55)

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  1. Warren Terra says:

    OK, but how does this get in the way of paying a decent wage.

    This. I’d love to see a breakdown – potentially even as a mandatory element of all packaging and product advertising – that shows how much of the product’s cost goes to labor; other obvious candidates might include packaging and transportation.

    It’s like the famous Immokalee tomato pickers’ strike: when I encounter tomatoes really, really cheaply in the Supermarket they’re still over $0.50 a pound, on sale. The pickers were striking to get a rise from what was often a penny-a-pound wage. If the pickers were paid five times as much the consumer or even the industrial buyer would scarcely notice the difference but the lives of the people doing back-breaking labor in the hot sun would be transformed – indeed, when the Immokalee strike was resolved with a penny-a-pound increase nobody but the workers really noticed any difference.

  2. LKS says:

    (a) As I’ve said before, this is primarily about dodging stricter environmental and workplace safety regulations, not about wages. The cheap labor is a secondary benefit, and it’s probably not that cheap in the aggregate – because it’s so cheap and plentiful, Foxconn et alia almost certainly use human beings to do tasks that could readily be automated. A byproduct of this is higher defect rates, which also increase costs resulting from using cheap labor instead of skiller labor or automation.

    (b) Tertiarily it’s about proximity to the east Asian semiconductor industry, but that’s tertiary because these components are small and lightweight and shipping them to the US for assembly is simply not that expensive. It’s not like why the US rustbelt industries wound up in the Pennsylvania-Illinois corridor because of proximity to coal and iron sources.

    (c) Expertise my ass. The vast majority of workers who assemble and test these things are following rote instructions. They are at best semi-skilled nad have no clue otherwise what they are doing. The only experts are the technicians, engineers and plant managers who oversee the production, and there are plenty of those out of work right now in the US.

    • Bijan Parsia says:

      Is it really tertiarily? My understanding from reading around (e.g., Krugman and a bunch of articles) it’s not the semiconductors alone, per se, but the industrial cluster aspects (including, but not solely driven by, the labor practices). Krugman suggested that the effects may persist after labor standard catch up.

      • LKS says:

        I didn’t mean to imply that “tertiary” meant “inconsequential”, although I can see why what I wrote reads that way.

        There are certain undeniable benefits to localizing your key supply sources, including better quality control and more flexible options if a major supplier’s plant burns down etc.

        I just doubt that, on the list of reasons why Apple assembles its products in China, this was given all that much thought, despite what Steve Jobs said. It’s one of those things that makes the list because it can be trotted out as The Real Reason We’re Over There when people start protesting the treatment of workers and the environment.

        If anything, Krugman’s argument supports my contention that it’s not really about labor prices (although I do believe labor practices are a key issue). I also believe that for heavier industries, such as auto or large appliance manufacturing, the advantages of clustering are substantial and may outweigh everything else (ask Boeing how well it worked out to have key components of the 787 built all over hell and creation). I just don’t see it making much of a production-cost impact for this particular type of consumer product, although I’m not saying there are no benefits at all.

        • BigHank53 says:

          Localizing your supply chain makes sense when transport costs are a significant factor. Not really the case with an iPod: the largest items are the battery and the glass screen. The $50,000,000 worth of cell-frequency transceivers that have to be flown in from Europe? I am certain that FedEx shipped those at a cost of a couple thousand dollars, mainly insurance.

          • Bijan Parsia says:

            I still would dispute “tertiary” (in the not-inconsequential sense). (I’m not sure what’s secondary here :) But I find your primarily to be unrealistic in the case of Apple and, actually, in general. I’m sure there are some people who would pay more to do environmental damage, but isn’t it usually the case that the reason to float such thing is to cut costs? Why would they float standards and safety when it raised costs?)

            First, as I understand it, the “industrial cluster” aspect is not merely shortening well established supply chains and it’s not just the low end labor (the NYT’s article stresses the ready supply of engineers as well as physical plant).

            Second, I don’t know why you’d nickel and dime labor and be insensitive to transport costs, all other things being equal. Again, from the NYT article:

            Manufacturing glass for the iPhone revived a Corning factory in Kentucky, and today, much of the glass in iPhones is still made there. After the iPhone became a success, Corning received a flood of orders from other companies hoping to imitate Apple’s designs. Its strengthened glass sales have grown to more than $700 million a year, and it has hired or continued employing about 1,000 Americans to support the emerging market.

            But as that market has expanded, the bulk of Corning’s strengthened glass manufacturing has occurred at plants in Japan and Taiwan.

            “Our customers are in Taiwan, Korea, Japan and China,” said James B. Flaws, Corning’s vice chairman and chief financial officer. “We could make the glass here, and then ship it by boat, but that takes 35 days. Or, we could ship it by air, but that’s 10 times as expensive. So we build our glass factories next door to assembly factories, and those are overseas.”

            Mere physical distance probably isn’t the only factor and may be dominated by establish shipping routes and agreements, stockpiling points, etc.

            (None of this is to excuse Apple a whit. But there are clearly a bunch of things in the mix and those things may well persist through the (I hope soon) increase in wages, safety, and environmental standards.)

    • ajay says:

      it’s about proximity to the east Asian semiconductor industry, but that’s tertiary because these components are small and lightweight and shipping them to the US for assembly is simply not that expensive.

      It’s not expensive in one sense. Shipping is dirt cheap. Sending an ISO container from Shanghai to Long Beach is cheaper than a first-class air ticket over the same journey.

      But time costs money too. If it takes a month to ship the components around, then you’ve got that much capital – the value of a month’s worth of components – tied up not doing anything. It’s exactly the same as if you made the phone entirely in the US and then stuck them in a warehouse for a month before sending them to the shops. Just-in-time management was a great thing in the 1980s precisely because it freed up all the capital that was locked up in the form of stockpiled raw materials and components.

      An iPhone’s components are worth over $200, and they sell around 90 million a month.

  3. Icarus Wright says:

    [Apple] could slightly reduce profits and earmark this money specifically for workers’ wages.

    Ah, but that would defeat the whole point of outsourcing to countries with cheap labor. Where’s your sympathy for the shareholders you fucking commie?

  4. c u n d gulag says:

    How is it that, somehow or other, after WWII, when the rest of the world was recovering from 5+ to 40 years of war, and we were relatively untouched, outside of soldiers killed or wounded, that the US managed to pay decent wages and sell our products, not only to the growing middle class here, but to the other countries?

    The death and incapacity of workers in the war put American labor at a premium here, and yet we were able to grow the greatest economy history had ever seen.

    Now, we can’t seem to do shit here.
    This is bullshit.

    • El Tiburon says:

      CEO and executive pay wasn’t astronomically higher than the workers. Off shoring jobs is not about staying competitive, but maximizing shareholders earnings. We could manufacure iPhones or Nike shoes here, bit Steve Jobs And Phil Knight wouldn’t be billionaires, assuming decent wages and benefits were being paid.

    • ajay says:

      How is it that, somehow or other, after WWII, when the rest of the world was recovering from 5+ to 40 years of war, and we were relatively untouched, outside of soldiers killed or wounded, that the US managed to pay decent wages and sell our products, not only to the growing middle class here, but to the other countries?

      Lack of competition? You make it sound as if having its industrial economy destroyed made Japan, etc, more able to compete with the US.

      • Bijan Parsia says:

        That’s not necessarily bonkers, depending on other factors. I remember reading an economics text that discussed the idea that the Plague was a critical factor in the runaway growth of Europe (by killing off the labor supply, thus requiring productivity increases). Similarly, one hypothesis for China’s prior growth lag was that there were too many people (which made it cheaper to just use them instead of develop labor saving devices and techniques).

        Similarly, the Civil War wreaked the South, but rebuilding means you are starting from a more modern infrastructure.

        I’m not saying it’s the case for Japan per se, but mere lack of competitors is probably insufficient. (For example, if we hadn’t helped rebuild the Eu and Japan, they wouldn’t have been good markets.)

        • ajay says:

          I remember reading an economics text that discussed the idea that the Plague was a critical factor in the runaway growth of Europe (by killing off the labor supply, thus requiring productivity increases). Similarly, one hypothesis for China’s prior growth lag was that there were too many people (which made it cheaper to just use them instead of develop labor saving devices and techniques).

          Yeah, but postwar Japan wasn’t really in the position of having lots of capital and not much labour. Quite the reverse really; all the Mitsubishi factories had been bombed, but most of the population was still alive.

          • Bijan Parsia says:

            Yes, I’m not saying that the situations are identical or even strongly analogous, merely that destructive events which nominally remove one as a competitor for a time can have effects which have a long term competitive edge.

        • ajay says:

          Similarly, the Civil War wreaked the South, but rebuilding means you are starting from a more modern infrastructure.

          I am willing to be corrected, but I don’t think that the postwar South underwent any sort of economic miracle compared to the North. Quite the opposite.

          • Bijan Parsia says:

            Ok, this is more tenuous, but the point I remember was not that there was an immediate economic boom, but that by the time you hit the 60s, one of the things that made the sunbelt attractive was that the cities were younger (having been destroyed in the war).

            Again, it wasn’t meant to be a strong analogy, just a suggestion that destruction (or avoiding destruction) at one point can have counterintuitive effects.

            I do think that our rebuilding efforts, and not our being last intact infrastructure standing, helped. (Consider the aftermath of WWI in comparison.)

          • Holden Pattern says:

            The South also focused its energies on reactionary politics and maintaining its sharecropper hierarchy, not modernizing its infrastructure. Policy choices matter.

  5. justaguy says:

    The Chinese state is explicitly trying to raise incomes in their industrial sector over the long term so that workers can buy more – as a part of their plan to shift from export led production to internal consumption as a engine of economic growth. So, its not that the Chinese state would presumably care – wages are already growing.

    • justaguy says:

      Also, he seems to think Apple opening up a factory in China would somehow be blocked by the US or Chinese states. Which is bizarre, non-Chinese firms open up factories here all the time. The preference for most is the flexibility of outsourcing, but it not uncommon to open one’s own plant for any number of reasons. Sure, there’s regulations involved, but its not unheard of – and someone who wants to write about the politics and economics of outsourcing should really not be confused about such a basic point.

  6. Icarus Wright says:

    A better title would be Apologetics of Exploitation. Krazit isn’t in a position to offer an apology on behalf of Apple, and he even if he were, he isn’t actually apologizing for Apple’s conduct.

  7. bph says:

    One of the postulated solutions (Apple opening its own company town) is not possible.

    The Chinese government wants Chinese technology companies to be Chinese. This is an important piece of industrial policy.

    The work around is Apple partnering with Chinese companies to provide better pay, a better workplace and less toxic sludge.

  8. bph says:

    As much as love Apple getting hammered on this, I do wish other companies would get hammered as well (IBM, HP, Dell, Acer, Samsung, Sony, Sharp, etc.)

    Having all of the companies get told to shape up will remove the “we can’t help the workers ’cause we will just go out of business” excuse.

    • Bruce Baugh says:

      I agree, but – speaking here with my “slavering Apple fan” hat on – it makes sense to pressure Apple precisely because the company is so extraordinarily successful in terms of profit. (I recall reading that Apple got a majority of the profits in the PC industry last year, despite getting nothing like a majority of the sales, and this has been the pattern for some years now.) None of the excuses about marginally successful enterprises apply to Apple.

      On the other hand, if Apple were to put any successful effort into pushing for better standards for Chinese factories, it might in turn bring down some of the costs of doing so and make it a more viable option for others.

      The whole thing really gives me a bad case of the willies. I depend on Apple products to manage life with complicated disabilities that nobody else has the kind of computing help for that I need and can use. But this is vile stuff. Gotta figure out how best to use my lil’ voice alongside others to push against it.

    • Slocum says:

      This is really important. Pushing Apple is fine, but this is a collective action problem. Unless a critical mass of these companies move to better saftey standards and better pay, then nothing will happen. Pushing them all to sign a compact (mutually enforceable and overseen by neutral parties) is a much better solution than trying to get Apple to do something it will never do on its own.

  9. DrDick says:

    Frankly, given their outrageous profits, there is no reason that Apple could not move those jobs back to the US. They will not do that, since maximizing profits at the expense of everyone else is what they (like all corporations) are all about.

    • Slocum says:

      Corporations, in as much as they are rational actors, aim at maximizing their profit. Minimizing the utility of others is not an aim, except as a means to the first.

      Anyway, we’ve gotten so far from the original conception of a corporation as a body enacted legally for the common good (and fair competition in a market is a common good–just not the only one) that we have politicians saying that they are people too. The way to rein in the corporations is a complete overhaul of corporate law, internationally. I’ll be over here not holding my breath.

  10. HP says:

    I’m not a historian, so I’ve no idea how to do the research, but I bet you could find similar sentiments regarding the British high-end clothiers’ reliance on slave-produced American cotton circa 1840 (probably linked to the urgent need to secure Egypt from the French).

  11. Honorable Bob says:

    I’m sure Erik and all his academic buddies are just about now flushing all of their Apple products….

    Oh, wait….Apple is one of the few corporations that make products that people actually WANT to buy..unlike the Government Motors VOLT that the dealers are starting to refuse.

    @LGM…do the right thing. Flush that iPhone.

    • wengler says:

      Do you ever say anything worth listening to?

    • Furious Jorge says:

      Really? Only a few corporations make things people want to buy?

      What the fuck are all those people doing at the mall then?

    • Furious Jorge says:

      And at least the Volt is made in America. Hamtramck, Michigan, not far from where I grew up.

      Why do you hate Americans, Hormonal Bob?

      • Honorable Bob says:

        It’s as if the Post Office made the VOLT.

        No one wants to buy one. And the few that do, can’t afford one….even with all of the tax breaks that Erik believes has no effect on peoples’ decisions.

        Oh C’mon, Guys….if you can boycott Whole Foods, you can surely squeeze in Apple, can’t you?

        Hmmmm…..not so much. Academia uses Apple computers and other products in droves. And when a boycott might actually affect *them*……not so much.

        • Malaclypse says:

          It’s as if the Post Office made the VOLT.

          See, that’s funny, because the Post Office offers reliable service at a reasonable price. Wait, that can’t be it. I know: it is funny because one of the many many things Bob is bitter about is Post Office.

          • Honorable Bob says:

            hehe….I want to say….Hehehehe…(wiping tears of laughter from eyes)…that’s (cough/fart) pretty funny.

            I’m not nearly as good at parody as you are, Mal.

            Hehe…..GOOD JOB!

        • It’s as if the Post Office made the VOLT.

          The Post Office is a profitable, growing enterprise.

          BTW, your little shtick was funnier five years ago when it was the Prius that nobody would want to buy. Ooops

          • Er, is “not” a profitable, growing enterprise.

            Unlike GM.

            • Malaclypse says:

              Actually, if you look at their financials, you can see that cash flow from operating activities is positive. If you poke around at the data, you see that their operating loss is pretty much all due to the bogus accounting requirements about retiree health.

              • witless chum says:

                The main problem with the Post Office is that Bobs elect morons to Congress who want to “run it like a business” while requiring it undertake a business that no private firm would take on.

                • Holden Pattern says:

                  Ayup. And if you think about it, it’s kind of miraculous that you give them a letter and less than 50¢, and the letter turns up all the way across the country three days later.

                  All of the angry old white Bobs in the rural states who can’t get good broadband because we won’t subsidize it the way we do their phone service would scream bloody murder if we turned their mail delivery over to FedEx or UPS and let them charge what it really costs to deliver to the boonies. Asshats.

              • But the point is, the Post Office is not, like GM right now, a highly-successful, growing business, poised to further extend its dominance in a competitive market.

    • DK says:

      If you are under the impression that the only choices one has in life are to buy or not to buy, then your comment comes close to making sense.

      But this is a clear case where Voice, not Exit, is the best strategy for changing the status quo.

      Apple fanatics need to threaten Apple’s identity through loud complaints, and then we’ll see some change. Individual decisions to not buy Apple products (or destroy them) will have no impact at all.

      Break out of simplistic market thinking. There is a whole world out there.

    • Njorl says:

      Would “Government Motors” be GM? The GM which became the world’s largest auto manufacturer again after its bailout? The GM which exports American manufactured products to China?

      Is that the “Government Motors” you’re talking about?

  12. Comrade Carter says:

    “Apple prices are not low…”

    They are low, bit for bit. Their computers (for example) have more things on them, and more things you don’t need left off them, than any of the others and on any basis you can name (like computer by computer comparisons) they are CHEAPER than equal from the other world.

    • Njorl says:

      “Bit for bit” is the worst possible comparison for Apple. In anything measured in bits, Apple loses. Their memory, hard drives, video cards and processors are all much more expensive than their PC equivalents. Hard drive space on a Mac is 2-2.5 times as expensive as on a PC.

      Their software has a devoted following. This allows them to overcharge for hardware.

      • JRoth says:

        We just did this last week.

        Lenovo just slashed prices on their MacBook Air competitor (or maybe it’s a web-only price? their website is unclear), and they’re now producing a very comparable laptop (size, weight, etc) with a slightly inferior chipset for $100 less (it also came out 4 months later; in 4 months or so, Apple will have a distinctly better Air available for $100 more). Nobody makes a tablet with better specs than the iPad 2 for less money (lots of companies make tablets with worse specs that cost more money).

        While I agree that OS X and iOS are, in fact, worth a premium over Windows and Android (esp. on tablets for the latter), it is simply not the case that Apple is charging more for the hardware.

        Which comes back to the original post. It is absolutely clear that Apple could afford to give up some fraction of its profits to pay higher wages. I highly doubt claims about bringing jobs back to the States*, but another $3 in wages per iPhone wouldn’t cripple profit margins nor force a price increase on the consumer. BUT, as has been mentioned above, it seems to be less about wages and more about safety and environmental regs, and we don’t know what the impact of fixing those would be. Maybe they’re de minimus as well, but they may not be.

        Aside from costs, you’re also looking at speed. It has taken Apple literally 3.5 months to catch up to demand for the iPhone 4S, such that there are no longer persistent ordering delays. How much slower would production be if done to US standards? I don’t know (and you don’t either), and I don’t think we should blithely hand wave that, since the company is (very, very) profitable, they can therefore do whatever they want without feeling any pain.

        This isn’t meant to be apologetics – it’s clear that Apple could, and should, do better by its Asian workforce. But I want to be clear that it’s a fallacy to think that Apple could just wave a wand, give up 1% (or 5%) of its profits, and all would be well.

        How much of their profits should be put towards righting this? And then what do we do to ensure that e.g. Samsung doesn’t take advantage of the situation to operate the bad old way and start kicking Apple’s ass? American consumers have a lot less sway with Samsung than they do with Apple.

        * Apple is clearly playing a profit margin game, not a volume game. If they significantly reduce their margins by paying significantly higher labor costs (as they would to come stateside – less so to increase Chinese wages by 50% or something), then they become a medium volume, medium (or low) profit company. That’s a weird request to make of any company, especially one that’s spent 15 years bringing itself back from the brink of bankruptcy.

  13. JRoth says:

    Even if you take Krazit’s point seriously that they jobs can’t leave China because that’s where the expertise lies (which begs the question of how computers were made before they were in China and what will happen when computer companies move their factories to nations with ever-more degraded labor)

    Early computers were made in the US (although I believe Asian components were part of the mix from very early days), but the industry has grown in sophistication at an exponential rate. Making a computer case used to be a dumb operation involving an injected plastic mold; now it’s an ultra-precise milling machine working with a proprietary billet of aluminum. China/SE Asia is where that industry has developed. The process started with cheap labor doing dumb work, but that’s no longer Shenzhen’s competitive advantage.

    It’s exactly how early automobiles were made in small cities all over the US (Butler, PA claims to be home of the Jeep, before it went to Toledo), but as they became more sophisticated, and assembly techniques became more rigorous, the industry centralized (not only in Detroit; there were other, smaller clusters). In 1915, you could start a car manufacturer wherever you happened to live, as long as there was a railroad nearby. By 1950, nobody was building new plants outside of existing automotive clusters. Even today, assembly plants in the South are mostly putting together parts that were built in Detroit, Yokohoma, or Stuttgart.

    There’s nothing mysterious about this process. And if/when somebody comes up with a new, more profitable way to build computers in a non-Shenzhen location, the industry will shift. But until then, building in Shenzhen is better for computer companies than building elsewhere.

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