Apple

Workers Riot At Apple Factory In China

Steven Capozzola — Thu, 07 Jun 2012 14:23:26 -0400

We've reported frequently on the abusive labor practices and suicides at Apple's Foxconn factory in China. Essentially, Apple outsources the production of its iPad and iPhone to a massive labor facility in Chengdu, China.

On the plus side for Apple, labor costs at the Foxconn factory are low, with worker schedules and logistics rigorously enforced. Apple not only gets production accomplished on a strict, no-questions-asked timeline, but it also benefits from China's undervalued currency and rampant industrial subsidies.

However, one has to wonder if Apple ever sees the overall costs of using a demoralized Chinese workforce while conducting quality control from 7,000 miles away as really worth the effort.

For starters, Apple could produce the iPad in the U.S. We explained this recently, pointing out that labor costs are not a major component of Apple's production. Plus, U.S. manufacturers are far more productive and efficient than their Chinese counterparts.

Bottom line: Apple COULD build their products in the U.S.

So what to make of the latest news coming out of Chengdu, that dozens of workers at the Foxconn plant were arrested in the wake of riots against security staff?

Apparently, a clash with security staff at a male dormitory for Foxconn workers escalated to the point where as many as 1,000 workers eventually rioted. While the initial dispute may have dealt with an incident of theft, what becomes clear is that the workers are unhappy, and the chronic poor treatment they've endured has heated tempers to the boiling point. In the ensuing riot, workers reportedly threw trash bins, chairs, pots, bottles, and even fireworks from the upper floors of their dormitory, destroying public facilities.

Hundreds of police officers eventually suppressed the rioting, and dozens were arrested.

In the wake of such a messy situation, Apple can do the requisite damage control. But the true costs of outsourcing once again become apparent.

Facts are stubborn things, and the poor overall working conditions at Foxconn are hard to hide. Apple could have a much cleaner conscience if it chose to reshore operations and starting making their products in the U.S.

Can Apple Start Making Their Product in the U.S. Again? The Answer Is YES.

Steven Capozzola — Thu, 31 May 2012 10:17:29 -0400

Last fall, we pondered whether Apple could start building iPads and iPhones in the U.S. Our conclusion was, YES, Apple could indeed start assembling products in the U.S.

Some key points:

1. Labor costs are not the key factor. As Michele Nash-Hoff (President of ElectroFab) and Curtis Ellis (of the American Jobs Alliance) have explained, labor is a small part (probably less than 10 percent) of Apple’s cost of manufacturing, far less than capital equipment and components. With wages rising in China, and U.S. manufacturing workers actually being far more productive, the labor cost differential become very small.

2. Apple is the rare product that competes on quality, not price. While it may or may not cost more in total to assemble iPads in the U.S., Apple is not competing against dozens of similar products. And so, retail price is not the key criteria because consumers are already buying iPads due to their unique quality and attributes, not "low sticker price."

3. Thanks to high productivity and top quality, U.S. manufacturing offers its own cost-savings and benefits. U.S. manufacturers are recognized as being the most productive, efficient, and safe in the world. A state-of-the-art U.S. manufacturing facility would offer its own cost savings by virtue of its incredibly productive and streamlined assembly processes.

Okay, so why are we analyzing the Apple production process today? Because Apple CEO Tim Cook was quoted this week at an All Things Digital Conference as saying he'd like to see his company make more components, and possibly assemble them, in the U.S.

Specifically, Cook said:

"There are things that can be done in the U.S., not just for the U.S. market but that can be exported for the world...On the assembly piece, could that be done in the U.S.? I hope so, again, one day."

There are stumbling blocks to a possible reshoring of Apple products, though. Andrew Nusca at Between the Lines says that American companies can always "go overseas for greater flexibility, lower price and sheer speed." He also cites the potential shortage of skilled high-tech workers in the U.S. who can tackle the logistical and competitive needs of such competitive, state-of-the-art production.

But these are battles worth fighting. For starters, a high-tech facility COULD produce in the manner required by Apple for rapid market response. And as for worker skills needed in such a high-tech industry, the Alliance for American Maufacturing (AAM) has repeatedly urged that the U.S. needs to prioritize such training in order to compete successfully in the 21st Century.

All of this is a battle worth fighting, and a very necessary one if the U.S. is to maintain a solid middle class economy. Apple can do it, and so can the U.S. The question is who will take the big step first?

Apple/Foxconn Promises -- We'll See

Dave Johnson — Fri, 30 Mar 2012 13:17:41 -0400

The "independent" audit of working conditions at Apple's Chinese manufacturing supply chain is out, and it is not good. Workers are being exploited in ways that violate human rights standards and laws, and letting them get away with this is costing us our own jobs. Apple's suppliers promise to improve conditions, make workplaces safer, stop forcing such long hours and lift wages. Foxconn even says they'll start obeying Chinese law -- but not until next year! If this really does happen can China keep its competitive advantage?

"Free Trade"

By opening up so-called "free trade" we made democracy a competitive disadvantage. We just let in goods made in places where people have no say, and as a result there is no environmental protection, little worker protection, terrible working conditions, very low wages and terrible exploitation of people. So of course that undercuts goods made where people have a say, and therefore demand better. We made We, the People having a say (democracy) into a competitive disadvantage! Because we make this mistake we lost millions of jobs, tens of thousands of factories, and entire industries. We devastated out not just towns and cities, but entire regions. (See Free Trade Or Democracy, Can't Have Both.)

Free People Won't Tolerate That

A recent groundbreaking New York Times story by Charles Duhigg and Keith Bradsher, How the U.S. Lost Out on iPhone Work, exposed how workers are treated by Apple's suppliers. Summary: Steve Jobs told President Obama, "Those jobs aren't coming back," because factories in China have people living in crowded dorm rooms where they can be rousted in the middle of the night and made to work 12-14 hour shifts, 7 days a week, standing the whole time, for very little pay, using toxic chemicals, and all kinds of other violations of human rights. Corporations can't get "performance" and "efficiency" and "productivity" -- profits -- like that out of free people who have a say, so they move their operations over there and lay off workers and close factories over here. (Important note: it's not just Apple, Apple is the biggest so the company name is really shorthand for the real culprits: namely, all of them.)

The FLA Report

This NY Times story had quite an impact. Apple was worried that people's knowledge of their exploitation of workers in China might affect profits. So Apple responded by hiring the Fair Labor Association (FLA), a "labor monitoring group" that has no actual organized labor organization participation, to conduct an audit of working conditions at Apple's Chinese suppliers. The report found numerous violations of labor standards and even Chinese law. For example, the report found "numerous instances where Foxconn defied industry codes of conduct by having employees work more than 60 hours a week, and sometimes more than 11 days in a row." In addition, the report "also found that 43 percent of workers had experienced or witnessed accidents, and almost two-thirds said their compensation “does not meet their basic needs.”

TPM: Apple Supplier Foxconn Violated Workers Rights, Audit Finds,

The 60-plus hour work week found at the factories is above both China’s official legal maximum, 49 hours, and the maximum standard allowable by the Fair Labor Association (FLA), the organization that Apple paid to conduct what it said would be an independent audit.

... The FLA inspection also revealed that “more than 43 percent of the workers report that they have experienced or witnessed an accident,” and “a considerable number of workers felt generally insecure regarding their health and safety,” especially pertaining to aluminum dust, which caused an explosion at a factory in the city of Chengdu in 2011 that killed four workers and injured 77, as the New York Times reported.

Apple's Own Published Standards Violated Chinese Law!

Chinese law limits weekly work time to 49 hours but "industry code" and Apple's standards limits weekly hours to 60. That Apple's (and other companies) own published standards violate even Chinese law demonstrates they were aware they were ignoring the law and using what they could get out of the workers. It demonstrates that these companies are knowingly engaged in illegal exploitation of workers, for profit. It also demonstrates that the Chinese government has been ignoring its own laws.

HuffPo: Foxconn Apple Factories Violated Chinese Labor Laws, According To Fair Labor Association

The Washington-based Fair Labor Association says Hon Hai Precision Industry Co., the Taiwanese company that runs the factories, is committing to reducing weekly work time to the legal Chinese maximum of 49 hours.

That limit is routinely ignored in factories throughout China. Auret van Heerden, the CEO of the FLA, said Hon Hai is the first company to commit to following the legal standard.

Apple's and FLA's own guidelines call for work weeks of 60 hours or less.

Promises

In a PR attempt to soften the impact of the FLA report, Apple's suppliers made promises to improve.

NY Times, Electronic Giant Vowing Reforms in China Plants,

Responding to a critical investigation of its factories, the manufacturing giant Foxconn has pledged to sharply curtail working hours and significantly increase wages inside Chinese plants making electronic products for Apple and others. The move could improve working conditions across China.

And, get this, they promise to start obeying the law -- by July of next year,

Foxconn’s promises include a commitment that by July of next year, no worker will labor for more than 49 hours per week — the limit set by Chinese law.

WaPo: Pledge by Apple’s iPhone manufacturer in China could set off new round of wage hikes,

Foxconn, owned by Taiwan’s Hon Hai Precision Industry Co., promised to limit hours while keeping total pay the same, effectively paying more per hour. Foxconn is one of China’s biggest employers, with 1.2 million workers who also assemble products for Microsoft Corp. and Hewlett-Packard Co.

From the HuffPo story,

"The report will include new promises by Apple that stand to be just as empty as the ones made over the past 5 years," said SumOfUS.org, a coalition of trade unions and consumer groups, ahead of the release of the report.

And from the TPM story,

“For months now, SumOfUs.org members have been calling on Apple to clean up the working conditions in its supply chain in time to produce the next iPhone be the first ethical iPhone,” the spokesperson told TPM, “That hasn’t changed at all. Our campaign is going to continue until real workers see real improvements — and so far Apple has been all talk and no action.”

We'll See

This is one of those "believe it when we see it" situations. Phrases like "lip service" come to mind. We'll see. Apple's supplier promises to start obeying the lay -- by July of next year! Wow.

But here is a question: where is our government on this? American companies are breaking laws overseas, exploiting workers and violating human rights standards. They are hoarding the resulting cash offshore to avoid paying their taxes, when we have a national deficit. These actions by these companies are wiping out our jobs and communities. Where is our government on this?

Click here to see the Fair Labor Association report.

Tomorrow: Apple Store Protests Against Worker Abuse

Dave Johnson — Thu, 15 Mar 2012 13:27:33 -0400

People are organizing to protest in front of Apple stores timed to coincide with the iPad 3 launch tomorrow, to remind people that Apple is using exploited Chinese workers to build their products. I have been writing about the situation of exploited Apple workers in China and how this affects our own jobs and wages here, here, here, and here. Also see Richard Eskow's post Hell Is Cheaper: China, Apple, And The Economics Of Horror.

This Facebook page informs people of a protest at Apple San Francisco, One Stockton Street, San Francisco.

I received an email about a protest in Washington, DC at Apple Georgetown, 1229 Wisconsin Ave. NW, Washington, DC 20007. The email was titled, "Protest at Apple Store Demanding iPad 3 Be Made Ethically."

This is a Change.org petition, with almost 300,000 signatures: Apple: Protect Workers Making iPhones in Chinese Factories

Free Trade Or Democracy, Can't Have Both

Dave Johnson — Thu, 01 Mar 2012 15:31:05 -0500

Recent stories about the conditions of Apple's contractors in China have opened many people's eyes about where our jobs, factories, industries and economy have been going, and why. The stories exposed that workers live 6-to-12-to-a-room in dormitories, get rousted at midnight to work surprise 12-hour shifts, get paid very little, use toxic chemicals, suffer extreme pollution of the environment, etc. Is this "trade?" Or is it something else?

Is This "Trade?"

"Trade" means to exchange, to buy and sell, you buy from me and I buy from you. I have something you want and you have something I want, and we exchange. We both end up better off than where we started.

Is it "trade" to close a factory here and move it to a country where people don't have a say? It is "trade" to just move all of the machines from a factory here to a factory there, send the same parts and raw materials over there, and then bring bring back whatever it was the factory used to make and sell it in the same places here? Is that really "trade?" Or would another word be more appropriate?

When People Have A Say

When people have a say we insist on good wages, benefits, safe working conditions, and a clean environment. We even go so far as to say we want good public schools, parks and opportunities for our smaller businesses. When We, the People have a say we get so uppity and ask for the most outrageous things!

Efficiency vs. Humanity

Yes, countries where people do not have a say are more "efficient" and "business friendly." Countries where people do not have a say can make things at a much lower cost than workers where people have rights. But when we let exploitation of human beings be a competitive advantage it undermines our own democracy. It means that democracy is a competitive disadvantage in world markets.

We Can't "Compete" With This, We Have To Fight It

Let's get right to the core of this. Suppose the South actually did rise again, and they reimposed all-out slavery. Would it be "trade" to close factories here and move them south, so the companies would have lower costs?

When we allow companies to just import stuff that is made by exploited workers in countries where people do not have a say, we are granting not-having-a-say an advantage over having a say. We make democracy a competitive disadvantage.

This Is About Preserving Democracy, Not About "Trade"

How often do you come across arguments that "globalization" and "free trade" mean that America's workers have to accept that the days of good-paying jobs and US-based manufacturing are over? We hear that countries like China are more "competitive." We hear that "trade" means that because it's cheaper to make things over there we all benefit from lower-cost goods that we import.

How often do you hear that we need to cut wages and benefits, work longer hours, get rid of overtime and sick pay? They say we should shed unions, get rid of environmental and safety regulations, gut government services, and especially, especially, especially we should cut taxes.

What they are saying is that we need to shed our democracy, to be more competitive.

P.S. Tell Congress and the White House to Stop China's Illegal and Unfair Trade Practices

Hell is Cheaper: China, Apple, and the Economics of Horror

Richard Eskow — Wed, 15 Feb 2012 21:48:18 -0500

I hate what I've learned about Apple's outsourcing to China. I hate hearing Professor William Black explain why he believes that Steve Jobs, who I admired very much in some ways, must have ignored repeated reports that employees were being cheated and endangered. I hate knowing that Apple's business practices are destroying the kind of good middle-class job his adoptive father had.

I hate knowing that many of this week's news stories about China ignore the fact that American companies who outsource to China have employee fraud and death built into their business plans.

In the words of the old Bob Seger song: Wish I didn't know now what I didn't know then. But I do.

Where the Blame Belongs

China and trade are back in the news, thanks to the trade visit of Chinese Vice President (and future President, by most reports) Xi Jinping. Last week on The Breakdown radio show I interviewed William K. Black, Jr., the former regulator who is now a Professor of Law and Economics at the University of Missouri in Kansas City.

Prof. Black, who describes himself as a "white collar criminologist," makes a compelling argument that the cruelty and cynicism of both Chinese authorities and American companies like Apple are far worse than most people can imagine. He identifies Apple's greatest misdeed - one that may be shared by most of its competitors - as "anti-employee control fraud" which it tolerated despite repeated reports.

Before the interview, Bill Black and I shared stories of the working conditions we'd both seen in other countries. Sometimes it isn't pretty at all. So let's not kid ourselves any longer: Companies like Apple don't outsource to China because the workforce is better-educated or more highly motivated. They don't even outsource just because the labor is cheaper there. They outsource because employers who defraud their workers can make products more cheaply, and those who ignore their safety can produce them more quickly.

"I won't sell a product that gets scratched," Steve Jobs said in a famous anecdote. "I want a glass screen, and I want it perfect in six weeks."As Prof. Black noted in our interview (audio here), "Imagine what would have happened if Steve Jobs cared as much about the health of his workers as he did about the quality of an iPhone screen."

As someone who has admired both Jobs and Apple - and who just bought a new MacBook Pro - the issue strikes close to home. Because the worst moral depravity doesn't belong to the Chinese authorities, although they're shockingly heartless toward their own workers - and, as Prof. Black notes in this audio clip, don't even hesitate to tolerate fraud that kills infants. Even companies like Apple who, as Prof. Black says, knowingly create the environment that makes fraud and employee danger unavoidable, aren't the guiltiest among us.

The greatest moral failing isn't theirs: It's ours. We buy products from manufacturers like Apple. We ignore the reports that we hear. We read newspapers and watch television without ever demanding that their reporters ask companies like Apple at every press conference: What are you doing to protect workers overseas?

Shame on them, all of them: the Chinese government, the reporters, executives at Apple. But most of all, shame on us.

The Economics of Horror

The situation in China is Dickensian in the scope of its horror. But the laws of economics makes that situation a predictable, even an inevitable horror. Dave Johnson provides an excellent overview of the horror and its impact here at home, including living twelve to a room in dormitories and being roused at midnight to work unplanned shifts. Dave does, however, omit this detail, from the New York Times: "Some say they stand so long that their legs swell until they can hardly walk." (Update: Dave reminds me he did note it in an earlier post. I should've known; it's a hard image to forget.)

Here's how the economics of outsourcing - the economics of horror - works: Companies like Apple that ignore reports of fraud and danger against employees make it impossible for honest, conscientious suppliers to survive.

Prof. Black offers a compelling argument that Apple - and Steve Jobs - had to know what their practices were doing to Chinese workers. They received audits every year which told them that workers were being defrauded out of their pay. Yet they did nothing. As Prof. Black notes, it's easy to keep two sets of books to fool auditors. Why didn't Apple's suppliers bother doing that? Because they knew Apple didn't care.

As Prof. Black rightly says, corrupt suppliers inevitably drive good suppliers out. But ethics drives out good ethics. Companies that don't pay their workers can always underbid those that do. Companies that maim and kill their workers can always deliver the goods more cheaply and quickly. That's why we have worker protection laws - and why some countries don't.

Apple knew that. So do its competitors, who also rely on many of the same strategies.

Why would otherwise decent people behave like that? To get faster turnaround on their orders. And to save money - even though Apple's profits rose from $26 billion in 2010 to $46.3 billion in 2011. Just one billion of that profit - less than one-forty-sixth - could raise the average salary of workers at its Foxconn supplier from $890 to $1,890 per year.

They could raise those yearly Foxconn salaries from $890 to $1,278 apiece using just one person's salary, that of CEO Tim Cook. Cook, who earned $378 million in total compensation last year, said yesterday that "Apple takes working conditions very seriously" but that "the supply chain is complex." If the journalists at the Times could figure it out, you'd think someone who's paid more than a third of a billion dollars per year could do it too.

Mr. Cook also said they were going to get new, better audits performed. That would be more reassuring if they hadn't repeatedly ignored the ones they'd already received. There's only one reason companies tolerate working conditions that amount to hell on earth: It's cheaper and easier.

Engineers Who Kill Have a Competitive Advantage

Steve Jobs complained about the availability of good engineers in the US, and said they were plentiful in China. Guess that depends on what you mean by "good." As Prof. Black notes in these comments, there aren't many US engineers who would order workers to use a nerve toxin to clean iPod screens just because it's quicker. Chinese engineers did, and more than 100 employees were sickened.

International organizations reported that improper dust management in Apple suppliers' plants could lead to flash fires. That was easy to discover, as Prof. Black notes in our interview. In fact, Apple was warned about it several months before a fire killed several employees who were building iPads and disfigured others. One of the dead was Lai Xiaodong, who lingered for two days before dying of his burns.

Maybe he was making my iPad when he died. Maybe he was making yours. His family might not be comforted to learn that Apple's profits "soared," exceeding all analysts' expectations in the year after his death. Lai Xiaodong was twenty-two years old.

Chinese engineers aren't less moral or human by birth than those elsewhere in the world. But Horror Economics applies among individuals as well as companies: If tolerating flash fires and nerve toxins is the only way to get ahead - or to keep your job - some people will be willing to do it.

Which puts the moral responsibility right back on us.

The Dirtiest Secret

There was a famous exchange in which President Obama asked Steve Jobs what it would take to bring Apple's manufacturing jobs back home and Jobs replied, "Those jobs aren't coming back." The New York Times repeats Apple's often-repeated public justification for that position, describing the company as praising the "flexibility, diligence and industrial skills of foreign workers."

It does take "flexibility" to assign workers to scrub Apple screens with a nerve toxin, or to ignore reports that they're in danger of death or mutilation. American workers are skilled and diligent, and there's no reason for Apple's executives to believe otherwise. It's possible that Steve Jobs and other outsourcing executives really think that "those jobs aren't coming back" because they expect it will always be impossible to underbid the Chinese - because they don't believe Chinese workers will ever be protected by law.

That's the inexorable logic of the unrestrained and unregulated market. If things don't change, there will be no stopping the outflow of employment from the safe and the stable to the cheated, the endangered, and the abused. Bad ethics drives out good ethics.

Perhaps that's what Jobs knew and Obama didn't: that there was nothing Obama could do to bring those jobs back - not as long as danger and fraud can underbid safety and fairness.

Paul Jobs adopted Steve and raised him on the salary he earned as a machinist manufacturing lasers in the Silicon Valley. You'd think this childhood experience would have created some sort of loyalty in Steve toward the middle class, some understanding of what a living wage and decent working conditions mean. But that doesn't seem to have happened.

What a shame.

Immoral Trade

President Obama was characteristically understated when he said he this week wouldn't tolerate trading partners who don't "play by the rules." Play by the rules? They cheat.

But if we don't want to tolerate trading partners like that, then we can't be trading partners like that. Apple wasn't "playing by the rules" when it ignored one audit after another that reported fraud against Chinese workers. It wasn't "playing by the rules" when it ignored an aid organization's warning that workers in its Chinese plants were in danger of being killed or disfigured in flash fires - and when, a few months later, some of them were.

Vice President Xi offered greater cooperation on trade. But what kind of cooperation? Will he enforce the law? Will he make it illegal to cheat workers? Will he imprison employers who cause their deaths? Will he end these Dickensian conditions? American lawmakers are outraged at Chinese currency manipulation, and they should be. But death and cheating are even higher on the list of moral wrongs.

"Speaking frankly," said Xi, "an important aspect of addressing the imbalance in Chinese-U.S. trade is the United States' own economic policies and structural adjustment." By "structural adjustment," he meant "allowing the last manufacturing jobs in your country to die." China needs to make some adjustments instead.

Americans should reject "greater cooperation" with an immoral trading partner. And we must learn to become moral trading partners ourselves.

Insanely Great

Steve Jobs could be famously nasty to people, but he also had a lot of terrific qualities. And for someone who reportedly mistreated his employees, they sure seemed to stick around. That says a lot about his management abilities. In a world where mediocrity is tolerated in every walk of life, it's profoundly gratifying to come across someone who was so passionate about his work that he wanted to make sure every product was "insanely great." I love that about Steve Jobs.

But it would really have been insanely great if Steve Jobs had shown the world that you can be an innovative corporate leader without losing your moral and social conscience. Jobs knew how to charge more for a product and make people buy it anyway. (Trust me; I know.) If these calculations are correct - and they look sound - he could have settled for a 39 percent profit margin on an iPad instead of the curent 54 percent, or split the difference with consumers, sold them for $784, and made a 46 percent margin. Jobs probably could have sold more of them that way, too, and made just as much money.

Couldn't he have added twenty percent or so to the cost of an iPad so that the people making it didn't have to suffer nerve damage, be disfigured, or die in a flash fire? Couldn't he have adjusted his already "insanely great" profit margins so that Chinese workers weren't forced to live in slaveship-like dormitories while being cheated out of their earnings? Couldn't he have supported unionized workers?

Couldn't he have done those things so that maybe some kid who's being raised by a machinist could grow up to be the next Steve Jobs?

Steve Jobs changed the culture - visually and digitally. He could have changed corporate morality, too. He could have demanded that his own company's ethics be "insanely great."

Instead he reinforced a horror-driven economy that's greatly insane.

Shared Responsibility

"China and the United States face shared challenges and shoulder shared responsibilities in international affairs," said Vice President Xi.

But for each of them, and for their people, the shared responsibility actually begins much closer to home - not with international affairs but with matters domestic: The safety of the innocent. An end to criminal mistreatment of employees. A refusal to enrich ourselves - or buy cool products - with the blood of others. An obligation to demand better from corporate citizens.

I hate knowing what I now know. But I do. You do too. Now we have to act. Our common human bond, the one we share with working people around the world, demands no less.

(The entire China section of WIlliam Black's interview is here. The full interview, which also addresses Wall Street fraud, can be found in the "Conversations" section of the program website for The Breakdown.)

China Is Very "Business-Friendly"

Dave Johnson — Wed, 15 Feb 2012 14:52:02 -0500

China is very, very "business-friendly." Corporate conservatives lecture us that we should be more "business-friendly," in order to "compete" with China. They say we need to cut wages and benefits, work longer hours, get rid of overtime and sick pay -- even lunch breaks. They say we should shed unions, get rid of environmental and safety regulations, gut government services, and especially, especially, especially we should cut taxes. But America can never be "business-friendly" enough to compete with China, and here is why.

Workers In Dormatories, 12 To A Room, Rousted At Midnight

China is very, very "business friendly." Recent stories about Apple's manufacturing contractors have started to reveal just how "business-friendly" China is. Recently the NY Times' Charles Duhigg and Keith Bradsher exposed the conditions of workers at Apple's Chinese suppliers, in How the U.S. Lost Out on iPhone Work. They describe how China's massive government subsidies and exploitation of workers mean, as Steve Jobs told President Obama, “Those jobs aren’t coming back.”

One former executive described how the company relied upon a Chinese factory to revamp iPhone manufacturing just weeks before the device was due on shelves. ... New screens began arriving at the plant near midnight.

A foreman immediately roused 8,000 workers inside the company’s dormitories, according to the executive. Each employee was given a biscuit and a cup of tea, guided to a workstation and within half an hour started a 12-hour shift fitting glass screens into beveled frames. Within 96 hours, the plant was producing over 10,000 iPhones a day.

“The speed and flexibility is breathtaking,” the executive said. “There’s no American plant that can match that.”

Right. No American plant can roust workers out of nearby dorms at midnight to force them onto a 12-hour shift. And the corporate conservatives criticize America for this, not China, saying we are not "business-friendly" enough to compete. This is because we are a place where We, the People still have at least some say in how things are done. (Don't we?) Later in the story,

The first truckloads of cut glass arrived at Foxconn City in the dead of night, according to the former Apple executive. That’s when managers woke thousands of workers, who crawled into their uniforms — white and black shirts for men, red for women — and quickly lined up to assemble, by hand, the phones.

“Business-friendly” = living 12 to a room in dorms, rousted out of bed at midnight for 12-hour shifts, working in a plant paid for by the government, using a neurotoxin cleaner that harms people but enables more production for companies like Apple.

Forced Labor Is The Real "Business-Friendly"

Arun Gupta at AlterNet, in iEmpire: Apple's Sordid Business Practices Are Even Worse Than You Think, writes,

Researchers with the Hong Kong-based Students and Scholars Against Corporate Misbehavior (SACOM) say that legions of vocational and university students, some as young as 16, are forced to take months'-long “internships” in Foxconn’s mainland China factories assembling Apple products. The details of the internship program paint a far more disturbing picture than the Times does of how Foxconn, “the Chinese hell factory,” treats its workers, relying on public humiliation, military discipline, forced labor and physical abuse as management tools to hold down costs and extract maximum profits for Apple.

... Foxconn and Apple depend on tax breaks, repression of labor, subsidies and Chinese government aid, including housing, infrastructure, transportation and recruitment, to fatten their corporate treasuries. As the students function as seasonal employees to meet increased demand for new product rollouts, Apple is directly dependent on forced labor.

... The use of hundreds of thousands of students is one way in which China’s state regulates labor in the interests of Foxconn and Apple. Other measures include banning independent unions and enforcing a household registration system that denies migrants social services and many political rights once they leave their home region, ensuring they can be easily exploited. In Shenzhen about 85 percent of the 14 million residents are migrants. Migrants work on average 286 hours a month and earn less than 60 percent of what urban workers make. Half of migrants are owed back wages and only one in 10 has health insurance. They are socially marginalized, live in extremely crowded and unsanitary conditions, perform the most dangerous and deadly jobs, and are more vulnerable to crime.

Please read the entire AlterNet piece, iEmpire: Apple's Sordid Business Practices Are Even Worse Than You Think. These things are not “costs” that we can compete with by lowering our wages, these things are something else.

Not JUST Low Taxes -- Massive Government Subsidies

These stories also describe how the Chinese government massively subsidizes these operations, assists their low-wage labor-recruitment schemes, and looks the other way at violations of labor and trade policies. The Chinese government is very "business-friendly." They hand money to businesses so they are much more able to "compete." They are so friendly to business that they even own many businesses.

Trade Secret Theft

Another area where China has very "business-friendly" policies is when their own businesses steal from non-Chinese businesses. This NY Times story, U.S. to Share Cautionary Tale of Trade Secret Theft With Chinese Official details just one case of the "unbelievably endemic" problem of Chinese theft of "intellectual property" -- the trade secrets that keep businesses competitive. In this case China's Sinovel sole the software that ran an American company's products, and immediately cancelled their orders for those products because they could now make them in China:

Last March, China’s Sinovel, the world’s second largest wind turbine manufacturer, abruptly refused shipments of American Superconductor’s wind turbine electrical systems and control software. The blow was devastating; Sinovel provided more than 70 percent of the firm’s revenues.

... Last summer, evidence emerged that Sinovel had promised $1.5 million to Dejan Karabasevic, a Serbian employee of American Superconductor in Austria.

If you steal the ideas, processes, techniques, expertise, plans, designs, software and the other things that give companies a competitive edge, then you don't have to pay them and you can just make the things yourself. When you get in bed with a very "business-friendly" country, you might find that they are more friendly to their own businesses. Because they consider themselves to be a country with a national strategy, not a self-balancing, self-regulating "market."

Trade Deficit Drains Our Economy

As a result of our ideological blindness, refusing to understand China's game, we have a massive trade deficit with them. This means hundreds of billions of dollars are drained from our economy, year after year. And to make up for this we borrow from them in order to keep buying from them. But this does not cause their currency to strengthen in the "markets" because China loves this game the way it is going, and intervenes against the markets to keep their currency low. And so it continues, year after year. We believe in "markets" they believe in rigging markets so they come out ahead...

Markets Can't "Compete" With This

Corporate conservatives tell us we need to be more "business-friendly" to "compete" with China. But at the same time Steve Jobs was being a realist when he said "the jobs are never coming back" because he understood that the current political climate, controlled by a wealthy few who benefit from China's "business-friendly" policies will not let us fight this. Why should these companies bring jobs back here, when over there they can roust thousands from dorms at midnight and make them use toxic chemicals for 12 hours a day for very low pay to make iPhone screens that he can sell at fantastically high prices? Why should they, unless We, the People tell them they can't do that to people, and that we won't let them profit from it?

As long as we continue to think that this is about "markets" competing, we will lose. China sees itself as a nation, and they have a national strategy to continue to be so "business-friendly" that our businesses can't compete. Our leaders and corporations may have "moved on" past this quaint nation thing but China has not.

We, The People Need To Act To Fix This

As long as we continue to send our companies out there alone against national economic strategies that engage entire national systems utilizing the resources of nations, our companies will lose. But the executives at those companies are currently getting very rich now from these schemes, so what happens in the future is not their problem. Maybe the companies they manage won't be around later, but that is not their problem. Others are concerned, but are forced to play the game because no one can compete with national systems like China's.

When everyone is in a position where something isn't their problem, or where they can't do anything about it on their own, it means this is a larger problem, and this is where government -- We, the People -- needs to get involved. It is our problem but we have been convinced that we -- government -- shouldn't interfere, or "protect" our industries, because "the markets" don't like "government" -- We, the People -- butting in. This is a very convenient viewpoint for few who are geting very, very wealthy at the expense of the rest of us.

We Need A Plan

In U.S. must end China's rulers' free pass at Politico, AAM's Scott Paul writes, Read it, read it, read it!)

We shouldn’t fear China’s citizens. But we should be worried about the actions of its authoritarian — and, yes, still communist — regime that tightly controls the People’s Republic. And we should be downright terrified by some of our own leaders’ attitudes toward China.

... China is not merely the key U.S. supplier of cheap toys, clothing and electronics: Its government is also one of our foreign financiers. China achieved this status by defying the free market and its international obligations toward more open trade and investment.

[. . .] History didn’t do in the Soviet Union. A sustained and aggressive strategy did. China engaged our business and political elites — and seduced them into believing these policies were no longer necessary.

... There has been no strategy, no effort to prevail economically.

... No one is suggesting that China is an enemy and we should just update our Cold War strategies. No one can accurately define what China’s intentions are in terms of foreign policy or defense. But on the economic front, the lessons of the past are instructive: We need a plan.

We need a plan. We need to understand that China is not competing with us in "markets' they are competing with us as a nation. We need a national economic/industrial strategy that understands the urgent need to fight as a country to win the industries of the future.

It’s not just price, it is things a democracy cannot allow. We can’t ever be “business-friendly” ENOUGH. We have to do something else. We have to understand that We, the People -- the 99% -- are in a real fight here to keep our democracy, or we will lose what is left of it.

Democracy Is The Best Economics

When people have a say they demand good wages, benefits, reasonable working conditions, a clean environment, workplace safety and dignity on the job. We need more of that, not less of that. We must demand that goods made in places where people who do not have a say do not have a competitive advantage over goods made in places where people do have a say. And we must demand that those places give their people a say.

As long as we let democracy be a competitive disadvantage, We, the People will lose.