Apple aficionados suffered a blow a couple of weeks ago. All of those beautiful products, it turns out, are the product of an industrial complex that is nothing if not one step removed from slave labor.
But of course there is nothing new here. Walmart has long prospered as a company that found ways to drive down the cost of stuff that Americans want. And China has long been the place where companies to go to drive down cost.
For several decades, dating back to the post World War II years, relatively unfettered access to the American consumer has been the means for pulling Asian workers out of deep poverty. Japan emerged as an industrial colossus under the tutelage of Edward Deming. The Asian tigers came next. Vietnam and Sri Lanka have nibbled around the edges, while China embraced the export-led economic development model under Deng Xiaoping.
While Apple users have been beating their breasts over the revelations of labor conditions and suicides that sullied their glass screens, the truth is that Foxconn is just the most recent incarnation of outsourced manufacturing plants -- textiles and Nike shoes come to mind -- where working conditions are below American standards.
While the Apple-Foxconn story has focused attention on the plight of workers living in dormitories who can be summoned to their work stations in a manner of minutes, the story has also become part of the debate about whether the U.S. should seek to bring back manufacturing jobs or should instead accept the conclusions reached by some economists that not only does America not need manufacturing jobs, but it can no longer expect to have them.
Nobel laureate Joseph Stiglitz argued recently that our difficulties recovering from the 2008 collapse are a function of our migration from a manufacturing to a service economy. While this migration has been ongoing for years, Stiglitz has concluded that the trend is irreversible. His historical metaphor is the Great Depression, which he suggests was prolonged because the nation was in the midst of a permanent transition from an agrarian economy to manufacturing, as a revolution in farm productivity required a large segment of the labor force to leave the farm.
The problem with this deterministic conclusion that America can no longer support a manufacturing sector is that it seems to ignore the facts surrounding the decline that we have experienced. In his recent article, Stiglitz notes that at the beginning of the Great Depression, one-fifth of all Americans worked on farms, while today "2 percent of Americans produce more food than we can consume." This is a stark contrast with trends in the U.S. manufacturing sector. Manufacturing employment, which approximated 18.7 million in 1980 has declined by 37%, or 7 million jobs, in the ensuing years. However, the increase in labor productivity over that timeframe -- 8% in real terms -- explains little of the decline. Unlike the comparison with agriculture, where we continue to produce more than we consume, most of the decline in manufacturing jobs correlated with the steady increase in our imports of manufactured goods and our steadily growing merchandise trade deficit.
The chart below, based on data from the Bureau of Economic Analysis, illustrates the growth in personal spending on manufactured goods in the United States over the past three decades, and the parallel growth in the share of that spending that is on imported goods. These changes happened over a fifty-year period. Going back to the 1960s, we imported about 10% of the stuff we buy. By the end of the 1970s -- a period of significant declines in core industries such as steel and automobiles -- this number grew to over 25%. As illustrated here, the trend continued to the current day, and we now import around 60% of the stuff we buy.
This shift has been embraced across our society. For private industry, outsourcing to Asia has been driven by profit-maximizing behavior and the pressures of surviving in competitive markets. For consumers, innovations in retail from Walmart to Amazon.com have fed the urge to get the greatest value for the lowest price. And for politicians -- Democrats and Republicans alike -- embracing globalization was part of the post-Cold War tradeoff: We open our markets, and the world competes economically and reduces the threat of nuclear conflict.
The notion that American industry, consumers and politicians were co-conspiring in the destruction of the American working class was a discussion relegated to the margins of public discourse, championed among others by union leaders, Dennis Kucinich on the left, Pat Buchanan on the right and Ross Perot, while largely dismissed by the mainstream media.
While Apple has been pilloried from National Public Radio to the New York Times for its effective support of a slave economy, most electronics consumer goods are now imported. The irony of the Apple story is that the Chinese labor content may well not be the cost driver that we presume it to be. As in many other industries, the costs of what is in the box can be a relatively small share of total costs, when product development, marketing, packaging and profits are taken into account.
This, of course, is why China is not particularly happy with their role in the Apple supply chain. When the profits of Apple products are divided up, far more of it flows to Cupertino than to Chengdu. And that is the reality of modern manufacturing. Based on National Science Foundation data on the value chain of the iPad, for example, final assembly in China captures only $8 of the $424 wholesale price. The U.S. captures $150 for product design and marketing, as well as $12 for manufactured components, while other nations, including Japan, Korea and the Taiwan, capture $76 for other manufactured components.
If anything, the NSF data -- and China's chagrine -- reflect a world in which the economic returns to design and innovation far exceed the benefits that accrue to the line workers who manufacture the product. This is one part of the phenomenon of growing inequality, and would seem to mitigate the complaint that is often made that America no longer "makes things." We may not make things, but we think them up and as the NSF data suggests, to the designers go the spoils.
Yet there is no fundamental reason that the decline in manufacturing jobs in America should be deemed inevitable and permanent. For all the talk about the number of engineers in China, the fundamental issue remains price. As a friend who is a consulting engineer who works with Apple in China has commented, "Yeah, they have engineers, but the driver is cost, cost, cost. And the labor quality is awful. We lose a lot of product and have to stay on top of everything, but at $27 per day, you can afford a lot of management."
This argument conflicts with Stiglitz deterministic thesis. Just as manufacturing jobs left the United States, they can come back as economic conditions change. As wage rates rise in other countries, one competitive advantage of outsourcing shrinks. And if nations -- from China to Taiwan -- migrate away from their practice of pegging their currencies to the dollar, foreign currency risk exposure will offset some of the cost advantages of outsourcing. And today, as newly industrialized nations like Brazil have seen their own manufacturing sectors ravaged by mercantilist competitors, there is a growing understanding for the need for order and fair rules to govern the forces of globalization.
The Apple-Foxconn affair spooked consumers of Apple products -- at least for a news cycle or two. Like Claude Rains in Rick's Cabaret, we were shocked to confront the reality of labor conditions in China. But the story was less about China than about us. That Foxconn could put eight thousand workers to work within thirty minutes to accommodate a last minute design change by Steve Jobs was not -- as Jobs suggested in a meeting with President Obama -- an argument for why those jobs could never come back to America, but rather it was illustrative of the astonishing narcissism of the Apple world.
It is true, no American factory could deliver for Apple as Foxconn did. But on the other hand, there really was no need to. That story was less about what Foxconn could deliver than what Foxconn's customer had the audacity to demand.
This story raised the question of whether we care where our products are made. The answer is unclear, however many Americans have long cared about purchasing cars made in this country, and Clint Eastwood's Super Bowl ad has raised awareness of this question. What is clear is that if Americans care about where their products are made, companies will care. Therefore, even as the president promoted tax credits for insourcing -- the new word for bringing those jobs back -- perhaps another step would be to build on the power of choice. Perhaps not all Americans care where their products are made, but many certainly do. But even if one does care, it tends to be difficult to find out.
Perhaps a simple step would be for companies to provide that information to consumers. Even if it was voluntary labeling, knowing who chose to provide information to their customers would tell many of us all we need to know. Then we could find out whether the Apple story really changed anything, and whether consumers might be willing to take more into account that the last dollar saved if it enables us to sustain a diversified economy into the future.
Making sure that jobs in the US are either non-existent or pay peanuts isn't in the national interest. That is, it's not in the national interest if you are one of the hourly workers. If you are one of the 'investor class' (no, you aren't an investor if you have a 401k) it makes perfect sense to use foreign labor to build your products so that investors can maximze profits.
If those products were made in the US, the workers would make more money, the products would cost more, but average people could afford them.
The Ayn Rand'ish idea that self interest is all that is important and altruism is evil has been and is killing our nation.
If we can't bring the jobs back, then return taxes to where they were in 1955. That will provide a safety net for those Americans made destitute by the geniuses on Wall St.
This however hasn't happened with the decline of manufacturing. Service has matched population growth and produced enough jobs to effect a similar labor shift. So we've been left with a nearly irresolvable unemployment problem.
Material lifestyle, when agriculture shifted to manufacturing, improved. Workers traded-up for skilled positions, unionized wages and benefits. From this, the middle class solidified.
Material lifestyle is now being traded-down for either unemployment or a service position. These are low wage, little benefit, unskilled situations. As a result, the middle class is dissolving.
Most importantly, as noted in the article, the mechanization of agriculture increased U.S. agricultural production. As service has moved-in however, we have only experience a decrease in U.S. manufacturing production. This has left us with both export deficits and import expenses.
Yet the profit, from agriculture, manufacturing and service have all increased. Thus, executives have become increasing wealthy as their corporate profit-margins climb and therefore they see no reason to change course. Yet cost of living steadily increases, wages do not keep pace and manufacturing positions consistently disappear over-seas.
Rather than reconcile ourselves to that 'new normal' Wall Street is selling us, what this nation of workers needs to--restore our labor, lifestyles and national productivity--is demand federal measures sufficient to restore that manufacturing lost over-seas to U.S. lands.
The dip in unemployment rate is temporarily and its cooked for election 2012 ,
after election it will be risen considerably in tow digits (and don t forget about the quality of jobs).
http://online.wsj.com/article/BT-CO-20111221-707599.html
http://www.youtube.com/watch?v=rhzMEtD349Y
http://www.informationweek.com/news/199601616?pgno=2&queryText
http://en.wikipedia.org/wiki/IBM_India
http://modernpatriot.blogspot.com/
http://www.theburningplatform.com/?p=28624
http://www.istockanalyst.com/article/viewarticlepaged/articleid/5640311/pageid/2
Now JP Morgan chase will cut more jobs and outsource (transfer most of the jobs to overseas), most of there work force , so ready to get fired.
http://www.businessweek.com/globalbiz/content/mar2009/gb2009039_431274.htm
http://articles.economictimes.indiatimes.com/2011-02-14/news/28540403_1_government-bailouts-outsource-top-banks
Quit buying products from companies that rely on outsourcing, and if you absolutely must buy from such companies (and you don't really need that iPad, do you?) use your dollars to demand better transparency.
Quit buying into the narrative that "the good jobs are gone - permanently", because it's complete and utter bull
Quit supporting the Wall Street mantra of "profit margins", which is where all that added value from design and marketing really goes.
And finally, quit listening to people who complain about regulatory and labor costs, and start listening to people who know it's really all about currency manipulation, anti-worker/anti-consumer policies (both corporate and individual), and investor demands for higher dividends and "cost-cutting" that results in little to no savings when the costs of substandard quality are factored in.
Apple Foxconn Workers: 700,000
Apple Profits per Foxconn Worker: $33,700
Confederate Slavery Profits in 1860: $1 billion ($24 billion in 2011 dollars) (2)
Confederate Slaves: 4 million (1)
Confederate Profits per Slave: $250 ($6000 in 2011 dollars) (2)
References:
1. http://eh.net/encyclopedia/article/wahl.slavery.us
2. http://american-business.org/2708-slave-era.html
http://news.yahoo.com/lemming-exodus-manufacturers-look-u-165814959.html
http://www.flixya.com/blog/3201910/Beautiful-Butterflys
Why? Why is that so in US where its engineers once lead the world in space, electronics, and what not. And people bought American made products because they experienced top notch quality in products that were engineered here.
Well, that was once. From 1981 onwards it was clear that our Manager's had begun skimming on investing in the labor force, in education. We cared mainly for short term growth measured from quarter to quarter. Managers could show growth only by selling off the farm bit by bit. The celebrated engineering skills that took decades to hone were pulverized over repeated layoffs. This is why its not easy to now to bring skills back or to 'buy American' just for the heck of it. Meeting the global competitive forces is far more complex.
Still we can work it out. But many of our established politicians are not getting it still -- that's a problem. Overall, repairing the state of our economy comes down to putting democracy back to work.
how about putting those factories in all the little towns across america who lost their main industry w/ buildings sitting idle. if the chinese can SIT and do hand labor without robots
then why can't amiercan workers sit and do hand labor too? it's a matter of patriotism and country over profit. that's all.
Thats what happens before unions and labor laws...no matter here and what you go back to when you remove the counter balancing effects and create a powerful middleclass..
regards
Congress held hearings as they raised taxes to reduce the Reagan Debt after his tax cuts, tripled the debt.
Reagan jobs were created by doubling the size of government, as investment dropped. Reagan's job growth rate was 50% less than even under Carter! The population had grown by 20 million.
None other than Trump testified saying that a top tax Bracket of at least 50% is needed to stimulate investment/job growth. Even Reagan came to say that! Here is why:
As the top tax bracket gets higher, a person has the choice to pay more taxes to Uncle Sam(or most of that incremental Income), or reduce his taxes by paying employees more(thus creating more demand, stronger economy), expanding his business, investing internally, or starting a new business, which if it fails, he loses money that mostly would have gone to the government. If it succeeds, it gets lower cap gain taxes(why cap gain rates as a business expansion tool go away when top tax rates are lowered).
Owners keeping lots of that extra incremental income, promotes outsourcing to low wages countries, speculating existing assets up, buying $60,000,000 Picasos.,$3million Shellby Cobras, hoarding money, that creates no jobs/capital investment.
Worse low top tax rates, reduce job creation, investment as under Reagan/Bush,creates speculative bubbles..Encourages outsourcing.. you get to keep what you save..
Every economist/CPA knows this!
Regards
In a free market, the US can never compete with low cost labour countries ( a lot of the assembly processes for Apple are manual ) . What is needed are national industrial objectives to remain an economic superpower and a strategy to achieve these, including the provision of tax advantages to relocating manufacturing companies , R & D grants and imposition of certain tarriffs However, American politicians and the media are more focussd on social issues like birth control, abortions, gay marriages, etc. Deming, depressed by the lack of interest in quality by American corporations, once stated that "America is committing economic suicide" . That statement may not be far from the
The quality of our goods now are as good as anyones... and very much better than that coming out of China..
Note howver that all other countries offer their MFGs export rebates of 18-19%. And fo course thye have much chapeaper national helathcare not in the cost of the goods... between the 2 a pricing advnatge of 40%. Thye can sell here at cost and thus a lower price for comparable quality, report no profit and thus pay no corporate taxes and thus the laying field was not comparable,.
Th price for that Japanese car in Japan in 1980s was twice as much as here... those government add on cost, were used to subsidize their car sales here! it was redatory rpicing just as China did in solar this year with its dumping after subsidizing its MFGs there 30 billion, so they could kill the world competition..... in anothe rindustry thy want to control.... there are not and there has never been free markets, just a dumb repub idealogy...
regards
Reality can't be both
Someone help me out there.