While the author may be perceived as anti-capitalist this is actually a very good read. These topics are critical for understanding how your costs add up, who pays them, and where the margins come from. I am surprised it didn't get more votes.
The author's claim is that labor costs are being pushed down, suppressed and hidden from public view. Yet if we examine a time series Chinese labor costs, the price inflation over the past 13 years is phenomenal: http://imgur.com/rkEOiPj Even if workers are not being compensated the full amount they are owed, the competition for labor means they are being paid a great deal more (3x-8x) than they would have been paid in 2001. If we accounted for inflation, it isn't as much but still there.
I strongly agree with the hidden & unpaid value of environmental pollution.
The author also should mention the hidden value captured by China's artificially low interest rates and other government expenditures. I also did not notice anything about confiscation of land.
Plenty of problems with a supply chain involving countries where citizens have minimal to no rights. Certainly it should be a concern for Apple and other companies as China re-balances (today's Hong Kong protests perhaps just a tremor of what is to come.)
The author argues that this surplus extracted value doesn't end up primarily in Apple's pockets, but in consumer's.
The author incorporates the concept of "reproductive labor" as an unpriced input, a cost accounting I've not seen before and have some skepticism of but is interesting nonetheless.
It tries to account for the extra extracted value that come from hukou restrictions, giving purchasers of their labor some level of monopsony power.
Instead of focusing myopically on "proletarians" like most Foxconn diatribes do, the paper also brings up the usually unaddressed issue of exploitation of Chinese management and engineering resources.
"Between mid-2010 and mid-2011, Apple sold a little more than 100 million iPads, all assembled in China"
Well... No.
Apple started selling the iPad in April 2010 (Fiscal Q3 2010).
Between mid-2010 and mid-2011, during five fiscal quarters (Q32010 + Q42010 + Q12011 + Q22011 + Q32011), Apple sold a total of 28.73 million iPads.
That's a really gross mistake, it took me two minutes to get the official info from Apple's investors website.
I'm surprised nobody spotted that during editing.
Edit: the error is probably related to the announcement of 100 million iPhones sold to date during the iPad 2 launch event in 2011.
From Wikipedia (well sourced content): "On March 2, 2011, at the iPad 2 launch event, Apple announced that they had sold 100 million iPhones worldwide"
Does this remind anyone else of Peter Thiel's notes on value systems? The entire time, I was thinking about how Peter was emphasizing that finding the right size market was key. Too big, and the competition erodes your profit away. The higher level tiered companies had to face much more competition, and Apple utilized that by having them compete with each other.
If you are interested in learning more about this, I highly recommend reading Economics of Strategy as it talks about the benefits and costs of being horizontally and vertically integrated. There are also some good anecdotes on how one can obtain economic profits, which reflects the opportunity cost of a venture, compared to accounting profit which just takes into account the total profits, through various forms such as competitive advantages.
The author's claim is that labor costs are being pushed down, suppressed and hidden from public view. Yet if we examine a time series Chinese labor costs, the price inflation over the past 13 years is phenomenal: http://imgur.com/rkEOiPj Even if workers are not being compensated the full amount they are owed, the competition for labor means they are being paid a great deal more (3x-8x) than they would have been paid in 2001. If we accounted for inflation, it isn't as much but still there.
I strongly agree with the hidden & unpaid value of environmental pollution.
The author also should mention the hidden value captured by China's artificially low interest rates and other government expenditures. I also did not notice anything about confiscation of land.
Plenty of problems with a supply chain involving countries where citizens have minimal to no rights. Certainly it should be a concern for Apple and other companies as China re-balances (today's Hong Kong protests perhaps just a tremor of what is to come.)