AMITIAE - Thursday 3 May 2012


Economics 101: Business Insider and Apple Job Creation


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By Graham K. Rogers


Apple


There has been an onslaught of articles in recent times that have taken aim at Apple: with its operations in China, payment of taxes and the alleged weakness of a post-Jobs Apple. These articles have made points that apply to many companies, but only Apple is named: they get more hits that way.


The headline on Business Insider caught my eye first (as it was meant to do): "EXCLUSIVE: Apple Has Destroyed 490,000 American Jobs." Alongside was a picture of Tim Cook with his face shaded red. The writers, Eric Platt and Ben Duronio, were incensed that Apple claimed half a million jobs had been created. They tell us that in reality 490,000 were destroyed. If my maths is right that still means there is a positive figure of 25,000 in a time of financial stress.

They know that, they write for a business newspaper. This really is a hatchet job as the two of them try and place the blame for other companies' closures and layoffs at Apple's door, then cop out with, "But that's another story."

Actually, it is not. To suggest that Apple is wholly responsible for Cisco's Flip Camera closure or AOL's shrinking, because of the iPhone, or because Google was preferred (at least back then), or that Apple should have chosen the US postal service, when no one else does, rather than FedEx or DHL (Apple's Cards uses the US Postal service), is disingenuous at the very best. Any company is expected to make decisions that are in its (and the shareholders') best interests. Not to do so, would be the real failure.

The list of companies that are used on the second page of the article is a joke. All of these were either in trouble (e.g. Kodak, Sony, HP) which had little to with Apple and some (for example IBM) have also moved a considerable part of their operations abroad. It becomes risible when the list includes Microsoft. The problem is, that these may have failed as a result of bad management in the face of Apple's successes. They failed to see some vivid writing on the wall. There ought to be no blame for that levelled at Apple.


To put forward this sort of idea in a business publication appears to show wilful ignorance of the realities of economics over the last 40 years or so. The UK where I am from is a good example. The traditional industries, such as steel making, shipbuilding, coal mining, car making, that used to employ hundreds of thousands (if not millions) are gone.

There are some small remnants, but these industries are no longer the major employers they were. The demise of coal and steel hit some regions particularly hard with whole towns out of work overnight. If the population does not have the ability to spend, the services that used to support them (food, clothing, transport) also have reduced income and in their turn are forced to contract, which usually ends up with more out of work.

Many of the areas that were depressed in the 1980s and later, have now revived to an extent. Some of those who were made redundant were able to to retrain themselves and there were some exceptional successes, like the late Jim Hesselden who developed the Hesco bastion (for flood management) and with the fortune he made from that bought Segway. He was later killed while riding one.

While other tales are less dramatic, large areas of towns like Sheffield (formerly steel and coal) and Newcastle (shipbuilding and coal) have evolved in terms of the industries they now host. As a note, Nottingham is less well known for its lace and bicycles nowadays owing to changes in lifestyles of those who would have bought these products. Like the cities above (and others) Nottingham industries have evolved to reflect the changing needs of the society as a whole.

These few sentences hardly reflect the major changes that occurred throughout industrial Britain after the 1980s and which also occurred elsewhere. The world's economies have seen some major changes, partly due to the problems in US banks, which saw credit problems. If companies do not have credit with which to buy the materials (or pay the staff) they are also forced into making unwelcome changes: not money, but credit helps the world go round.


Inflation too from the mid-1960s onwards has seen a general rise in prices and subsequent increases in wages. A report on the BBC earlier in the week told us that in 2011, hourly manufacturing costs were in the region of €35 in France and €20 in Britain (Eurostat).

With the highest figures for 2010 in Denmark ($57.53), the United States figure then was $34.74. The same cost in Estonia, Hungary, Taiwan, Poland, and Mexico were all below $10, with the Philippines at $1.90. Not all countries were covered in the news release from the Bureau of Labor Statistics, US Department of Labor.

We note that this week, Ford has opened a new plant in Thailand to make something like 150,000 cars for the region. Aren't these jobs that could have gone to American cities; or the General Motors diesel engine factory here?


As Steve Jobs told Barack Obama referring to the manufacturing in China that many American companies take advantage of those jobs are not coming back. But, as in the UK, the US economy is evolving. Some of the companies that use Chinese facilities include HP, Microsoft and Lenovo, all mentioned in the Business Insider article as having lost jobs because of Apple's successes; or are Platt and Duronio unable (or unwilling) to factor this information in?

As older, more traditional manufacturing industries contract, different businesses are created. There were no Apple stores in 2000. There are now almost 400 worldwide, many of which are in the US: jobs created. There are also Apple outlets in a number of more mainstream stores, such as Walmart and Target.

At Cupertino and the surrounding areas, there are thousands of new jobs within Apple -- as a hardware company, its major expansions are in software and services. The expansion of the company (taking the parallel of the contractions in the UK in the 1990s) -- no matter how Platt and Duronio fudge the figures -- is creating new jobs in related industries, service industries and even education (presumably the kids have to be educated).


With the stream of articles that have been appearing of late, blaming Apple, Tim Cook and the late Steve Jobs for all the world's ills (but with one eye on that massive cash pile) it would seem that Wall Street is eager to bring down the giant that Apple has become.

A black colleague at Illinois State University, describing black Chicago culture to me (as a naive Brit) in 1986, called this the "Chicken in the Barrel" syndrome: when one chicken rises above the rest, the others pull it down.

Actions have consequences.


Graham K. Rogers teaches at the Faculty of Engineering, Mahidol University in Thailand. He wrote in the Bangkok Post, Database supplement on IT subjects. For the last seven years of Database he wrote a column on Apple and Macs.


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