(
Ed. note: I'd like to welcome a new guest blogger to
The Reaction, Marc McDonald of the great blog
Beggars Can Be Choosers. I've been a fan for a long time, and it's a genuine pleasure to be able to feature him here. Honestly, his blogging speaks for itself. It's fantastic. If you aren't yet familiar with his work, I highly recommend you get familiar with it ASAP. --
MJWS)
**********
The late Steve Jobs was a genius. He was an incredibly shrewd businessman. And he was a marketing wizard.
Jobs
was the larger-than-life visionary behind Apple, which has been hailed
as one of the all-time great American economic success stories.
But
there's one big problem with this rosy picture. The fact is, Apple
represents a great deal of what's wrong with the U.S. economic system
today.
Since around 1980, the U.S. capitalism has increasingly
become a "winner-take-all" system. This corresponded with a trend in
which the very top elite in society began seeing an enormous increase in
their compensation. These "winners" included everyone from CEOs to
movie stars to hedge fund managers to sports superstars.
And nobody was more representative of this new breed of elite "winners" than Jobs.
The
only problem is that, since 1980, wages started stagnating for the rest
of us. Allowing for inflation, average workers' wages have barely
budged in more than three decades.
The result is that America now
has the income inequality levels of a Third World nation. In fact, the
top 400 richest Americans now own a titanic amount of wealth that
exceeds the combined wealth of the bottom 155 million Americans.
And that's only the beginning of the problems with U.S. capitalism today.
However,
if you talk to the vast majority of economists today, they'll tell you
that the American economy is still the world's crown jewel economy. We
have nothing to learn from the likes of East Asia or Europe nations, the
economic "experts" tell us. In fact, Europe and China ought to be
taking notes from us, they claim.
As an "Exhibit A" of their
claims, economists usually point to the great U.S. corporate success
stories that have emerged in recent years: Google, eBay, Facebook and,
first and foremost: Apple Inc.
While Americans fret over the
ongoing destruction of the nation's once world-beating manufacturing
base, our free-market economists and globalist politicians tell us not
to worry. After all, they claim, high-tech, prosperous companies like
Apple will ensure that the U.S. remains economically dominant.
But out here in the real world, there's a big problem with these grand claims. They simply don't hold up to scrutiny.
America, after all, has lost millions of good-paying manufacturing jobs just in the past 10 years. We've
lost
over 42,000 factories, just since 2001. By contrast, even America's
most prosperous and high-profile companies, like Apple, haven't even
come close to replacing the job losses in the manufacturing sector.
Hence, America's stubbornly high jobless rates (and the even more
troubling absence of new well-paid jobs).
For all the grand claims made upon its behalf, it is important to note that Apple is still a remarkably
small
company. That shouldn't be surprising, considering that Apple doesn't
actually manufacture the products it sells. Apple only employs about
50,000 people worldwide. That's a mere drop in the bucket, compared to
the great U.S. corporate success stories of the past, like General
Motors. In fact, even today, a vastly-shrunken GM still employs over
200,000 workers in the U.S. alone.
A second problem with Apple is
that many of its workers are not particularly well-paid. Sure, the
likes of Jobs and other company top elites have pocketed enormous pay
packages. But the average Apple employees make mediocre wages. In fact,
most of Apple's employees simply consist of the unskilled sales people
in the company's retail stores.
All of this represents serious problems for any economist who holds up the likes of Apple as an "Exhibit A" of how America's economy still supposedly leads the world.
Economists
also hail the likes of Apple's wildly popular iPhone as proof that
America is still in the world's technological forefront. At first
glance, it appears that this claim is valid. After all, the iPhone is a
high-tech marvel. And it is in heavy demand, worldwide.
The problem is: is the iPhone really even an "American" product?
Yes, it is sold by Apple, an American company. Yes, Apple came up with the concept. And yes, Apple does all the marketing.
But who really manufactures the iPhone? If you said "China," you're only partly right.
The fact is the
real
heavy lifting and the technological wizardry that makes the iPhone
possible comes from Japan (and to a lesser extent, Germany). This
shouldn't really be surprising: virtually all of the world's most
advanced manufacturing takes place in either Japan or Germany these
days.
China does have a high-profile role in the building of the
iPhone in that Foxconn, the Taiwanese-owned assembler of the iPhone, has
captured a lot of media publicity over the harsh working conditions of
its workers in mainland China. By contrast, Germany and Japan's vastly
more important role in the iPhone's production is virtually invisible.
But it's important to note that China's only role is the
assembly of the iPhone. (Assembly is by far the least sophisticated part of the modern manufacturing process).
The
real
high-tech manufacturing heavy lifting is done mostly by Japan. That
shouldn't be surprising: Japan has long completely monopolized the
making of the key, crucial components at the heart of all the world's
smart phones.
So is the iPhone really an "American" product?
Consider this: as Robert Reich
pointed out in an article in December:
About
$61 of the $179 price goes to Japanese workers who make key iPhone
components, $30 to German workers who supply other pieces, and $23 to
South Korean workers who provide still others. Around $6 goes to the
Chinese workers who assemble it. Most of the rest goes to workers
elsewhere around the globe who make other bits.
And the share of the U.S. workers (whose role is mostly research and design on the iPhone): a mere $11.
It's
clear that the iPhone is really much more of a Japanese product than it
is an American product. The key, crucial enabling components that make
smart phones like the iPhone possible are made
only in Japan. By
contrast, the iPhone's research and design work could be done in any
number of countries which excel in R&D (everywhere from Israel to
South Korea).
Note that barriers to entry for service economy activities tend to be vastly lower than those for high-tech manufacturing.
These
days, high-tech smart phones are designed by a number of nations, from
Finland to Taiwan to South Korea. South Korea's Samsung, for example,
makes phones (like the Galaxy S2) that rival and even surpass the iPhone
technologically. And it's important to note that
all these nations' phone builders get their high-tech phone components from the same Japanese suppliers as Apple does.
What's
troubling about all this is that it completely upends the "conventional
wisdom" about the global economy that has been sold to the American
people over the past few decades. The conventional wisdom dictates that
America's loss of millions of manufacturing jobs was an "inevitable"
part of economic globalization. And in any case, we're told, U.S.
manufacturers supposedly can't compete these days, unless they move
their jobs overseas, where they can pay lower wages.
But if
America's free-market economists and globalist politicians ever took a
look at the real world for a change, they'd see that the "conventional
wisdom" is wrong.
For a start, nations like Japan and Germany are
simply no longer low-wage countries. Both have wages that are as high,
if not higher, than what U.S. workers earn. Both nations have strong
organized labor and strict pro-labor laws that would be inconceivable to
Americans. Mass layoffs are virtually impossible in both nations. And
the extremely strong yen of recent years has made Japan a particularly
expensive nation to do business in. But despite all these "obstacles,"
both nations continue to go from strength to strength in leading the
world in high-tech manufacturing.
(Incidentally, the story that
Japan has been "struggling" economically that has been widely peddled by
the U.S. media in recent years is
nothing more than a myth.)
In
short, there must be other reasons why the likes of Apple rely on
Japanese and German suppliers for key iPhone components. Low wages and
low manufacturing costs simply can't be the reason.
It's clear
that a big part of the reason is that the U.S. simply can't compete with
nations like Japan or Germany in high-tech manufacturing. The reasons
for this are many: everything from America's abysmal public education
system to our nation's crumbling infrastructure to our complete lack of a
logical industrial policy.
By contrast, nations like Japan and
Germany have honed carefully planned long-term industrial policies aimed
at boosting both nations' industrial competitiveness.
It is
extremely unlikely that the U.S. will ever regain its former high-tech
edge. After all, no economic activity on earth has higher entry barriers
than high-tech manufacturing. This is evidenced by the fact that
all the world's high-tech manufacturing these days still takes place in the First World, rather than low-wage nations like China.
To
give just one example: aerospace. While Boeing has lost market share in
recent years, it hasn't lost it to low-wage Third World nations.
Rather, it has lost market share to the high-wage First World producers
of Airbus.
Incidentally, Boeing shares with Apple the same
distinction of being a U.S. company that increasingly can't manufacture
the products it sells. Note that the 787 Dreamliner, Boeing's latest
generation Boeing jet, is largely made by overseas suppliers. And Japan
is the nation that has the most crucial role in building the Dreamliner:
the manufacture of the Dreamliner's extremely sophisticated, high-tech
carbon fiber composite wings.
The fact that Japan placed massive
early orders for the Dreamliner has little to do with "market forces"
and everything to do with long-term Japanese industrial policy. With
every new generation of Boeing airliner, Japan has negotiated to
manufacture a bigger share of each plane. It's clear the Japanese
eventually intend to dispense with Boeing entirely in the future and go
it alone in developing its own commercial airliner industry.
It's
clear that, far from being a showcase of U.S. high-tech might, Apple in
fact reveals many of America's shortcomings in the modern global
economy.
And for all the praise heaped upon Steve Jobs over the
years, it's clear that his role in making the iPhone a reality was
greatly exaggerated.
Jobs' role was akin to Aladdin rubbing the
magic lamp. The super-sophisticated high-tech manufacturers of Japan and
Germany then brought Jobs' ideas to reality.
Of course, the
limelight-loving Jobs got all the glory -- which is perfectly in sync
with the "winner take all" ethos that characterizes today's U.S.
economy. And no doubt, all that was just fine with the industrial
planners of Japan and Germany, who are happy to take a low-profile role.
The reason for the latter is that, if both nations' roles in the iPhone
were heavily scrutinized by the U.S. media, it would shine an unwelcome
spotlight on policies that have methodically decimated America's
high-tech manufacturing in recent years.
Yes, Apple came up with
the idea for the iPhone. But it's clear that other nations benefited
vastly more from the manufacturing process of the iPhone than American
workers ever did.
And this raises a troubling questions about the
state of U.S. capitalism today. America continues to lose millions of
good-paying manufacturing jobs. And it's clear that the likes of Apple
are simply never going to be able to create jobs to replace those that
have been lost. This is no small point when you consider than Apple now
rivals Exxon Mobil as America's most valuable corporation.
Today's
America continues to bleed the sort of good-paying manufacturing jobs
that made possible the Great American Middle Class. The latter made
America's economy the envy of the world for decades. The jobs that are
replacing the lost jobs tend to be low-skilled and low-paying (think
Walmart and McDonald's).
And even the occasional U.S. economic
success story like Apple these days offers little to cheer ordinary
American workers. After all, as noted above, Apple is not a particularly
large company -- and most of the jobs it creates in the U.S. are
unskilled and not particularly well-paid. The only real U.S.
beneficiaries from companies like Apple are the handful of people at the
very top, as well as the stockholders (which, of course, are not only
in the U.S., but worldwide).
In the 1950s, it was once claimed
that "What's good for General Motors is good for the U.S." And actually
that statement had a kernel of truth to it. General Motors, after all,
in those days, offered hundreds of thousands of workers good-paying jobs
that helped built the backbone of the Great American Middle Class.
But
economic titans like Apple that outsource all their high-tech
manufacturing will never play a similar role in today's economy. And as a
result, the once-Great American Middle Class continues to shrink.
Today's America has a Top One Percent that increasingly owns everything,
while the bottom 99 percent become more impoverished, year by year.
Far
from being the "crown jewel" of today's economy, it's clear that Apple
represents a great deal of what has gone wrong with the U.S. economy
since 1980.
It's inconceivable that a genius like Jobs never
grasped the fact that the massive outsourcing of high-tech manufacturing
jobs (as practiced by Apple) posed a serious, long-term threat to the
U.S. economy. It's a shame that Jobs never used his high-profile
position to call attention to this crisis, or to offer proposals to fix
the problem. Instead, he was simply happy to outsource everything, make
loads of money, and keep his mouth shut on the issue.
Jobs has
been hailed as a genius and visionary who contributed a great deal to
the U.S. economy. But I beg to differ. In reality, he was nothing more
than a narcissistic, greedy, modern-day Robber Baron whose policies
account for a great deal of what is wrong with the U.S. economy today as
America continues its long-term decline.
(Cross-posted at Beggars Can Be Choosers.)Labels: Apple, Steve Jobs, technology, U.S. economy
