Capitalism at Work: “Everybody’s Gotta Eat”

http://www.nytimes.com/2012/01/26/business/ieconomy-apples-ipad-and-the-human-costs-for-workers-in-china.html?pagewanted=7&ref=technology

Similar articles to the ones above has been in the news all last week and after reading this one in particular, I couldn’t help but wonder about a few things.

Anyone who was ever listened to any US election has heard the old phrase of: “we need to create more jobs” or to “stop American jobs from going overseas” out of the mouths of every presidential candidate over the last 20 years in some shape or form. Particularly in sectors such as manufacturing, the whole “made inAmerica” moniker that was once a sense of pride is now seen as a product filled with expenses both from the lens of the sellers and consumers. Ask the laborers in places like Pittsburgh and Detroit and they know exactly what I mean.

It was interesting to hear though that Steve Jobs had told President Obama flatly in 2010 that the manufacturing jobs attached to making Apple products would not come back to the US. On the one hand, you cannot blame American companies who find the cost to manufacture overseas and import into the US is cheaper than making goods in the US. The goal after all is to make super profits, often done by keeping expenses as low as possible – with wages being one of the primary culprits that cut into the company bottom line.

On the 9-5 last Friday, I had a lengthy conversation with one of the youth I talk technology regularly with about Apple’s profit margins and why employers and employees will always look at the words salary and pensions from different lenses. I passed along the advice that was given to me when I was 18 and in college: “make yourself very marketable – have your education and skill set high enough that employers will find it hard to underpay you if they want to hire you”.

Let’s look at Apple’s business practices a bit closer for a moment. We have seen exposés on big companies with somewhat questionable working conditions before –GAP and Nike come to mind. But when it comes to a uber-successful company like Apple, people get extra defensive on both sides. The figures Apple released for Q4 2011 (October – December) are staggering: US$46 Billion in sales, US$13 Billion in profits – much of those driven by iPhone 4S and iPad 2 sales. Apple is NOTORIOUS for controlling all levels of their production process, including the stipulation that once a new device goes to production the supplier cannot divulge its existence until Apple makes the official announcement.

Even the idea of jailbreaking an iPhone is something Apple has stated and argued in the courts to be “illegal”; if a legal amendment here in the US that protects consumers’s rights to do so set to expire in a few weeks doesn’t get renewed, Apple will be right.

So how can a company like Apple “get away” with such a closed ecosystem in every sense of the word, especially in light of the facts stated in articles similar to the one above? Why do people buy products from a company that wants to dictate to the consumer how to use their product after we have shelled out our hard-earned cash for it? Simply put, they use the “everybody’s gotta eat” defense.

Yes, the same line of thought that former NBA player Latrell Sprewell used when he turned down $21 million contract while holding out for a bigger payday: “that’s not enough – I got to feed my family”.

Manufacturing in China allows Apple’s suppliers to have access numerically to a larger labor force than here in the US. Such a move allows the suppliers to have a virtually expendable labor pool for which wages can be kept lower. If HR depts here in the US have headaches reviewing tons of resumes, they should take a look at a picture recent job fair held by Foxconn (a major Apple supplier). It was a sea of folks and resumes ready to overwhelm the recruiters. Due to the nature of the contracts written, suppliers must keep their production output high order to keep up with the insane consumer demand. All the while, Apple’s head office rakes in the cash.

Apple makes money from: pushing for lower order costs from suppliers, percentages from content manufacturers, (music, videos, apps sold via iTunes) and carriers who heavily subsidize the iPhone knowing they will recover subsidies from consumers in the form of their monthly cellphone service. The forced ingrown capitalist in me says, “I want a piece of that action as an investor”! However, the human in me cannot help but think of those faces who help to make Apple’s products a success who don’t get a fair taste of the lion’s share of those super profits.

One can only begin to imagine the 60+ hour work weeks by these factory workers, the constant standing and running, working with hazardous chemicals, the little sleep, possible health and mental risks. People have been fired for losing iPhone prototypes, and workers testing prototypes that were lost have committed suicide in China. Many folks in the US seem to be unable to relate to such things as they play Temple Run on their way to the nearest coffee shop hangout. But there is one local company that has its own well-documented issues with worker treatment: Wal-Mart. People still shop at Wal-Mart in the same way that people still buy iPhones and iPads – much of those consumers shop in both places.

Perhaps these folks have good reason not to care as much where and how the products they depend on get to them; after all, it aint easy making that American green to pay for them. Therein lies the ugly beauty of the successful capitalist: you get each person connected to a product or service to focus on HOW to remain individually connected to that product/service, not the collective human cost all the people who want that product or service endure.

Am I hating on Apple? Of course not. I do own an Apple device that I find myself using less and less these days. My gripe isn’t necessarily with Apple – even though they should really do a better job of policing the habits of their suppliers. How can they do such a thing? The same way consumers do with a company that they don’t like or have issues with their business practices: take their business elsewhere.

Yes, my biggest gripe is that as consumers we allow many of the brands we “trust” to feed  our dependence on these products in seemingly blind manner. While some companies have started to conform, we need to push for a systematic level of compliance to true consumer wishes and ultimately, real better business reforms.

Yes, everybody has to eat. From the factory worker in China, to the trucker who transport the goods to the Apple store, to the Sales clerk putting the device in the hands of the public. Yes, even the CEO and investors need to eat too. Still, it is how we do business that really defines what are our “food choices”. Shouldn’t the factory worker have the same opportunity for an improved level of access as the trucker driver, sales clerk and the fat cat CEO? Perhaps – but I can clearly hear a penny section of society cry such a thought being “Communist” in nature.

Guess the power of choice is quite clearly defined by the power of the wallet. That’s why for foreseeable future, conglomerates and multinational corporations will continue to dictate to us “what we are allowed to eat”.

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