On the Floor

The public relations nightmare that Apple is experiencing over working conditions at its suppliers is the result of the tension between its marketing and its image, and reality. It shows what happens when market forces in one country clash with market forces in another.

A report in the New York Times about working conditions at Foxconn and other Apple suppliers in China has triggered petitions for 'an ethical iPhone 5' and calls for a boycott of Apple products.

Apple has an extraordinarily good public image, and stories like these represent a significant risk to the Apple brand. It didn't take long, however, before people started to push back.

One of the most widely-cited counter-arguments is a piece called The Apple Boycott: People Are Spouting Nonsense about Chinese Manufacturing. In it, author Tim Worstall argues that workers in these factories enjoy a better working experience and overall standard of life than most Chinese workers, that suicide rates among Foxconn employees compare favourably against the Chinese national average, and that the incidence of serious injuries and fatalities at these plants compares favourably against the rate of accidents at American factories.

In fairness to Apple, much of this may be true. It is also true that these suppliers supply not just Apple but most of the major electronics companies, including Apple's most significant competitors.

At the same time, one cannot argue that working conditions are far different from what Westerners take for granted. In the Times piece, we learned that workers commonly work twelve-hour shifts, six days per week (and sometimes seven); that they live in crowded dorms with up to 20 people per 3-room apartment on-site at the factory; that riots have broken out over working and living conditions; and that some workers say they "stand so long that their legs swell until they can hardly walk". All this while performing intensely repetitive tasks at astonishing speed.

Worstall's response is blunt:

Well, yes, they’re poor people living in a poor country. That’s what being poor means, having to work extremely hard to make very little. Yes, that is a harsh thing to say but then reality can indeed be harsh.

No one can deny that reality can be harsh. At the same time, its undeniable that Apple - and, of course, the other electronics companies - does not truthfully convey that reality to its customers. Doing so would not be in Apple's best interest. However, if the calls for a boycott succeed, it would demonstrate that having this tension between reality and image is also not in Apple's best interest.

Worstall goes on to make the standard corporatist argument that the behaviour of corporations is outside of their control, because they are subject to market forces. For example:

Wages paid to manufacturing workers in China are not determined by the productivity of those specific workers. They are not determined by US wages, by the profits that Apple makes nor even by the good intentions of the creative types that purchase Apple products. They are determined by the wages paid by other jobs in China and that is itself determined by the average level of productivity across the Chinese economy.

But Apple is made up of humans. It is not a windmill that turns whichever way the winds of the Chinese labour market happen to blow. It is not humanly impossible to demand that a supplier adhere to higher standards than are prevalent in the rest of China.

Setting that aside, let's examine the issue purely from the standpoint of the marketplace, but rather than looking at the Chinese labour marketplace, let's look at the consumer goods marketplace in the West.

Humans respond to a variety of different factors when making purchasing decisions. It is not just about price and quality, but can also be about morality and emotion. In this instance, Apple's customers may be persuaded to boycott Apple because of these subjective factors.

That may seem unfair to some, but isn't that just a risk of globalization? After all, a global company must deal with market forces everywhere it operates: both market forces affecting who makes its products, and market forces affecting who purchases them.

Apple will be forced to balance these market forces, and when it does so, it may result in lower profit margins but better working conditions at its suppliers' factories.

Seen from this perspective, what is happening to Apple's image could be dubbed a market correction. Proponents of globalization should be pleased.