Following Apple's announcement on Monday that it has begun an independent audit of working conditions at plants in China where the iPhone and iPad are built, the recent outcry over the business practices of the company with the largest market in the world is coming to a head. While critics malign its lack of corporate social responsibility, Apple's actions must be understood as an American policy failure and the latest iteration of the global capitalist framework.
Over the last decade, Apple and its tech sector competitors have taken advantage of scale economies and production fragmentation to achieve an astonishing pace of innovation products like the iPad began rolling off of production lines almost as soon as Apple's brain trust had put the finishing touches on its design. This rapid advance in Apple's capacity to turn its big ideas into goods and profits can largely be attributed to the inception of enormous manufacturing plants in China that have been described as the pinnacle of efficiency.
Indeed, the now infamous "Foxconn City" operation in China, where the iPhone is assembled, has both been lauded for the speed and flexibility with which it operates and lambasted for the conditions under which its 230,000 workers toil. The factory's ability to meet Apple's nearly insatiable demand comes at the expense of Foxconn's Chinese employees, nearly a quarter of whom live in on-site dormitories and many of whom work 12-hour shifts while making less than $17 daily. The suspicious gap between the Foxconn company line and employee testimony on working conditions is one of many reasons that public backlash against Apple has reached a fever pitch.
Critics of free trade cite this phenomenon as proof that third world growth is hurting first world prosperity by redistributing jobs that would be solidly middle class in the United States to individuals in China who are underpaid and overworked. However, larger structural forces, indirectly related to trade, are the root cause of the rise of industrial complexes like Foxconn City.
First, the existence and security of Asian supply chains would not be possible without American naval strength in the Pacific region. Our military power in the region has only increased since the end of World War II, and we are now seeing the current version of the American obsession with tapping the resources of Asian markets. As Clyde Prestowitz noted in The New York Times a few weeks ago, it is fair to question whether executives at Apple and its peers would be as comfortable investing huge sums of money in Asian supply chains if the United States were unable to provide the requisite regional stability.
Next, China and the United States have followed divergent paths to reach the current situation. While the United States was busy fighting communism and leading the world economic order in the postwar era, the Chinese economy was growing and opening up. In the last few years, it has accelerated its sprint toward greater economic openness with the help of subsidies and other interventionist policies that have promoted foreign direct investment. To some extent, the sort of breathtaking adaptability that we've seen in places like Foxconn City is only possible in a command economy where the government is actively backing both industry and the training of workers with the right mix of abilities, such as mid-level engineering skills.
With no comparable effort having been made in the United States, it is regrettable but not altogether surprising that Apple and other companies have shifted production overseas. In an increasingly capitalist world, Apple is behaving like any rational firm by seeking to maximize profits. But off-shoring is a two-way street Apple is correct in saying that there aren't enough mid-level engineers in the United States to meet its demand, but Americans have little incentive to develop such skills if those jobs don't exist here in the first place. The burden, then, really falls on the U.S. government to intervene, not by telling Apple where to produce, but rather by leveraging American productivity and providing firms with incentives to invest in America, namely through a more educated workforce.
If President Obama's Blueprint for Reform is any indication, the government finally seems to have woken up. Chinese working conditions aside, we shouldn't be blaming companies like Apple for reaping the benefits of capitalism but rather providing them with every reason to invest in the future of the United States.
