Apple Didn’t Do It!
A colleague recently wrote an article decrying the hypocrisy of Apple for out sourcing its employment to China. He wrote that after having read a piece in the New York Times about how the US has lost out on iPhone labor, he “became more and more angered by Apple’s flagrant disregard towards America’s failing economy and their overwhelming sense of greed.”
Patriotism is the backbone of Steven Roth’s lament on Apple’s business practices. Apparently out sourcing labor into a cheaper developing economy is unpatriotic. Which I agree with, so long as we remain in the realm of what patriotism means.
According to Oxford patriotism refers to a person devoted to and ready to support or defend his or her country. A corporation, on the other hand, is an amoral entity brought into existence through legal documents. It’s neither a he or a she and has no capacity to respond, one way or another, to the economic or political ailments that surround it. Its stated objective is only to respond to a market economy in a way that returns a profit to its shareholders.
A recent study brought to the light by Marc Houser, in Moral Minds, shows that a solid majority of Americans think it is immoral for businesses to raise prices in response to scarcity. And yet, the price response to scarcity is the single most important advantage of capitalism—to say the least, a slight contradiction. And since individuals, people, feel uncomfortable with the psychopathic tendencies brought out to reak havoc through a “free” market economy, that explains why we invented corporations (amoral, immortal entities) to do so on our behalf.
Mr. Roth laments that Apple exports its labor to China “where employees are herded like cattle and work six days a week, twelve hours a day, for seventeen dollars salary per day…” These conditions may seem harsh, or socially unjust, but that’s only because we’re comparing our standards to those of an underdeveloped country. What determines the income of an average person is not what we want to pay. What it comes down to is the average level of labor productivity. Factory workers in China are paid badly, not because Apple is greedy, but because the entire country is poor. Even if we took the wealth being hoarded by the wealthy and redistributed it to these factory workers, they wouldn’t actually see an improvement in their standard of living. Because in an underdeveloped country like China there is not that much wealth to go around. We may think otherwise, but in all actuality it’s concentrated in the hands of a very few. Once you start dividing it up it wouldn’t go very far. According to the International Monetary Fund (2011) China is ranked 90th in the world with a per capita GDP (value of goods and services produced in a given year divided by population) of $5,184—half that of mexico and one ninth that of the United States. The fundamental problem is not so much that the wealth is divided badly, but that there is not enough of it. The only way to give them a permanent, stable increase in wages is to make the entire country more productive. A good example is seen when we compare an average steelworker in China to his counterpart in South Korea: In 1999 the average Chinese produced 45 tons of output, while the same worker in South Korea produced 1,501 tons per year. This helps explain why the Chinese are paid so poorly.
There is a tendency to think that factory owners take advantage of workers by lowballing them, and that the average wage rate is determined by how well they succeed. There is an element of truth to this, but approaching the issue from this angle is unhelpful. Because what matters is how well they succeed: Being able to lowball someone depends entirely on what other employment options are available. If the alternative to working in a manufacturing plant that produces iPhones is dirt farming, then they’ll probably accept a lowball wage. However, if the alternative is another manufacturing plant, then the lowball offer will have to be replaced by an offer more respective of labor productivity. This explains why the wages of Chinese “employees who are herded like cattle” have been rising by about 10 percent per year for at least the last decade. The Chinese economy itself has been growing at this rate.
Roth states that Apple’s “cavalier” altitudes towards the flailing US economy is the “height of hypocrisy and the most un-American and un-patriotic stance” he has seen of any company. This because an Apple executive was quoted as saying, “We don’t have an obligation to solve America’s problem. Our only obligation is making the best product possible.” Perhaps if politicians were as honest, the US economy wouldn’t be flailing. The executive’s comment may seem harsh, but it’s accurate.
A lot of errors in economic policy arise from the tendency to view governments and corporations as though they were people. Only the latter can be expected to exhibit patriotism. A corporation, on the other hand, is nothing more than a fictitious personhood (as previously mentioned). Apple Computers, the corporation, is nothing more than a mechanism for uniting four classes of economic participators: workers, supplies, lenders, and customers. Essentially it’s a hub of arrangements made by the individuals who supply these four different types of input. Maybe Roth is suggesting that the owners of Apple are un-patriotic.
However, determining who owns a publicly traded corporation is difficult to determine, since the rights normally associated with private property are absent. I may own several shares of Apple, but that doesn’t give me the right to access their facilities, check my email, help myself to the break room, and then tell management what I think they should do about the flailing US economy. Being a shareholder (an owner) only makes me a residual claimant and voter for board members. I can’t tell them what to do, in the same way that the bank (the holder of my mortgage) can’t very well send someone over to tell me how best to clean and maintain my home.
Maybe Roth is suggesting that the Apple executives are unpatriotic. After all, they are the ones seemingly making the decision to outsource labor to China. And perhaps we would label them as anti-American if they were in fact the shareholders (owners), but they’re employees—i.e., hired hands like everyone else. And they were hired to lower costs, increase efficiency, innovate, and maximize profits. If management fails in their task there will be no influx of capital, no investment, and hence no company. The current investors will sell their shares as their value ultimately plummets, and the company will have to shut its doors. How many American employees would Apple have then?
Like Roth I too lament the dismal outlook of the US economy. Accusing Apple, however, for an environment that we have collectively created for ourselves is a lot like blaming Henry Ford for my car accident. If we don’t agree with the way corporations behave, well, last I checked we’re still a democracy, we could do away with them. And the next Steve Jobs to come along will just have to structure his dreams another way. Meanwhile I will continue to use Apple products in the pursuit of my non-profit, egalitarian agenda because they are superior to the alternatives.