iNdustrial Revolutions

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To Pivot or Not to Pivot

To paraphrase Otto von Bismarck, “iPads are like sausages, it is better not to see them being made.” It’s an ugly story. Over a hundred employees “injured by n-hexane, a toxic chemical that can cause nerve damage and paralysis” because its use “meant workers could clean more screens each minute.” Other workers killed or injured by explosions. All so that iPads can be built as cheaply as possible, so that Apple can maintain its 44.7% gross margins. Isn’t that awful?

Yes, of course — but let’s try to maintain a nuanced perspective here. This is hardly a new story, and it’s hardly unique to the tech industry. Think of the exploitation of child labor to harvest Egyptian cotton and Cote d’Ivoire cocoa. Plus ça change; a decade ago it was Indonesian sweatshops and Indian fireworks exciting outrage. Think of the exploitation of Congolese workers to mine coltan, used in electronics everywhere. Show me a country with a large population of desperately poor people, and I’ll show you horrific exploitation of impoverished workers.

Please note, though, that the latter is an inevitable symptom of the former; and again, let’s please try to maintain a sense of perspective. It’s awful that a dozen Chinese workers were killed and hundreds injured building iPads–but at the same time, coal mining kills more than two thousand Chinese workers a year (down from almost 7000 ten years ago) and nobody’s suddenly outraged about them. We in the West don’t really seem to care that Chinese employees work under awful conditions and die in appalling numbers — unless they make shiny things that we use. We claim we don’t want people to suffer, but in fact we just don’t want our iProducts tainted by that suffering. Isn’t that more than a little hypocritical?

So what? you might say. It’s all horrible! Stop them all, or any of it that we can stop, right now! Right?

No. Not necessarily. This is a really complex and difficult issue, and there’s no obvious right answer. Over the last thirty years, trade and export-driven growth have been insanely great for China, and made life enormously better for the overwhelming majority of its billion-plus people. (My personal experience bears out all the data, for what it’s worth: in 1997 I spent a month roaming solo through central China, then came back nine years later. China 1997 and China 2006 were like two entirely different nations, and the latter was vastly better off.)

If Apple and other Western manufacturers were to pull production from China to other, better-paid, union-friendlier jurisdictions with stronger protections for worker rights, that would be disastrous for Apple’s profit margins and innovation speed — but it would also be disastrous for China’s people. On the whole, overall, despite the gruesome and heartrending disasters in the spotlight right now, both sides benefit greatly. That’s how and why free trade works.

At the same time, we can all agree that no businesses anywhere should be poisoning their workers and/or generally treating human lives like disposable Kleenex. This is especially true in a nation whose government only accepts trade unions which are powerless government puppets. But I would argue that it’s China’s steadily growing wealth — which comes from trade, and especially, manufacturing — that will ultimately transform it into a nation where real unions and real worker rights can and do exist.

It’s worth noting that Foxconn’s problems are China’s national problems writ small. Hexane pollution and aluminum dust are scale-model versions of the nationwide poisoned milk scandal, or the ongoing catastrophe of Beijing’s hyper-polluted air, or the major lakes entirely conquered by toxic cyanobacteria. Again, employee exploitation is a symptom, not a problem. The problem is ubiquitous grinding poverty – something that trade, investment, and economic growth slowly, over decades, alleviates, albeit at a terrifying cost to the environment.

Think of the West’s Industrial Revolution. That’s more or less the same revolution transforming China right now. Is it possible to have such a revolution without some concomitant Dickensian horrors? The available evidence sadly indicates “probably not.”

In the interim, what Apple (and the countless less-sexy enterprises whose products are manufactured in China under similar conditions) can do to improve the lot of those who craft its wares is this: increase their leverage over their suppliers, by making the threat of moving production elsewhere credible. Foxconn wants to keep Apple happy, obviously – but they’d be a lot more proactive about doing so if they genuinely thought they might lose massive amounts of Apple’s business to someone else.

A concrete example: Apple shouldn’t get Foxconn to manufacture iPads in Brazil: they should have another company entirely build iPads in Brazil. Right now Apple needs Foxconn almost as much as Foxconn needs Apple. Real competition among suppliers would mean that each of them will jump a lot higher and faster when Apple says “worker rights.”

But let’s not get myopic about Apple and iPads, when the landscape of globalization and its excesses is so much vaster and more diverse. Let’s not pretend that the dynamic is purely “rich Western tech companies exploiting poor nations.” And let’s remember that technology, and China’s growing wealth, will probably ultimately solve this problem. Remember that decade-old outrage about child labor in India’s fireworks industry? Well, it’s much diminished these days, thanks to automation and India’s much wealthier society. Similarly, China’s burgeoning online population has pressured its government to pay attention to air pollution… and Foxconn is already roboticizing its assembly lines.

Most of all, let’s not lose sight of the fact that the technology pioneered in large part by the very same cohort of Western companies who outsource production to China is, slowly but steadily, lifting China, India and sub-Saharan Africa out of poverty. That, not where your iPad came from, is the most important story in the world today.

Image: Smog over Tiananmen Square in 2006, by yours truly. By all accounts it’s gotten much worse since.