One of the great joys of my professional life is finding material that makes me exclaim, “I wish I’d written that!” So reading Andrew Zatlin’s new post on Apple Computer’s exploitation of offshoring-friendly U.S. trade policies has gotten my weekend off to a great start. The entire piece is well worth the time of anyone interested in these subjects, so I won’t summarize it. What does deserve more attention is specifying how the Zatlin’s analysis trashes the claims that even though most of Apple’s products are manufactured abroad, the company still generates huge gains for the U.S. economy.
According to the Apple supporters, manufacturing is completely incidental to the company’s fantastic success, and to understanding its role in enriching America. That’s because the real money makers for Apple, and they insist, the nation as a whole, are its professional service operations – research, development, engineering, product design, and marketing. As evidence, Apple’s fans point to numerous studies showing that this professional work, overwhelmingly performed state-side, makes up the bulk of the value of the firm’s products – and that therefore, most of the wealth Apple creates accrues to Americans. And let’s not forget all the company’s immense profits.
One of Zatlin’s key contributions to this debate, however, is making clear that almost none of the domestic wealth Apple has created has trickled down into the rest of the domestic economy – mainly because the company is such an expert tax dodger. I’d add three more points. First, because nearly all of them are very well paid (except of course for the retail workers), Apple’s smallish U.S. employment footprint probably has the same kind of low propensity to spend as other affluent Americans. Therefore, relatively little of these employees’ earnings is circulating throughout the economy. Second, whatever Apple employees spend on imports creates no meaningful benefits or opportunities for their fellow Americans, either. Third, Apple is also keeping more than $150 billion in profits offshore, so they’re not being spent productively in America, either.
The second big contribution made by Zatlin is showing just how much wealth for foreign economies – at America’s expense – has been created by Apple’s reliance on overseas manufacturing foreign-made semiconductors and other high tech components creates. Indeed, the author makes a great case that Apple’s procurement is keeping economies like Korea’s largely afloat, and is significantly buoying China’s remaining growth – which of course in general ain’t what it used to be.
My only quarrel with Zatlin’s post is with its timid policy recommendations. He does recommend adopting industrial policies to create real incentives for domestic high tech manufacturing – largely because, as he correctly notes, the losses in semiconductors and related products fostered by Apple’s practices (and those of so many other companies) undermine U.S. national security. But as long as American trade policies practically invite companies like Apple to supply the high price U.S. market from low-cost and largely unregulated foreign production sites, this corporate “screwing” of America (as Zatlin puts it) is bound to continue.