Sunday, January 22, 2012

How corporate greed, neglect of public education doom America

Sunday's New York Times observes symptoms of distress and diagnoses an illness in America.

Problem is, corporate interests own the cure and choose not to administer it to us.

The text is extensive, but here are a few of the highlights. Read and weep.

When Barack Obama joined Silicon Valley’s top luminaries for dinner in California last February, each guest was asked to come with a question for the president.

But as Steven P. Jobs of Apple spoke, President Obama interrupted with an inquiry of his own: What would it take to make iPhones in the United States?

Not long ago, Apple boasted that its products were made in America. Today, few are. Almost all of the 70 million iPhones, 30 million iPads and 59 million other products Apple sold last year were manufactured overseas.

Why can’t that work come home? Mr. Obama asked.

Mr. Jobs’s reply was unambiguous. “Those jobs aren’t coming back,” he said, according to another dinner guest.

The president’s question touched upon a central conviction at Apple. It isn’t just that workers are cheaper abroad. Rather, Apple’s executives believe the vast scale of overseas factories as well as the flexibility, diligence and industrial skills of foreign workers have so outpaced their American counterparts that “Made in the U.S.A.” is no longer a viable option for most Apple products.
One former executive described how the company relied upon a Chinese factory to revamp iPhone manufacturing just weeks before the device was due on shelves. Apple had redesigned the iPhone’s screen at the last minute, forcing an assembly line overhaul. New screens began arriving at the plant near midnight.

A foreman immediately roused 8,000 workers inside the company’s dormitories, according to the executive. Each employee was given a biscuit and a cup of tea, guided to a workstation and within half an hour started a 12-hour shift fitting glass screens into beveled frames.

Did you catch that? Company has a factory. Factory workers don't live in homes, they live in factory dormitories -- ones that house eight thousand individuals. When materials arrived near midnight, the workers were rousted from bed, given "a biscuit and a cup of tea" and sent to work for a 12-hour shift.

That's not employment; that's slavery by some prettier name.

Within 96 hours, the plant was producing over 10,000 iPhones a day.

“The speed and flexibility is breathtaking,” the executive said. “There’s no American plant that can match that.”

If that is true, it may be because we do not engage in a sort of slavery sanctioned by a hybrid corporate-federal government.

But while Apple is far from alone, it offers a window into why the success of some prominent companies has not translated into large numbers of domestic jobs. What’s more, the company’s decisions pose broader questions about what corporate America owes Americans as the global and national economies are increasingly intertwined.

“Companies once felt an obligation to support American workers, even when it wasn’t the best financial choice,” said Betsey Stevenson, the chief economist at the Labor Department until last September. “That’s disappeared. Profits and efficiency have trumped generosity.”

Truly, "Made in America" was once a rallying cry, an ad campaign and a deciding factor in how consumers spent their money. Now it's a wistful memory.

Over the holidays, I received a Sunbeam heating blanket that worked for three days before quitting. It was returned and replaced with a duplicate, which worked less than a week. With a call to the Sunbeam customer service line, I learned that all of the component parts of the blanket, from the fabric to the heating elements, to the controller, were manufactured in China and shipped to a factory in Waynesboro, Mississippi, to be packaged and distributed to retailers. At one time, I complained, Sunbeam was an American company and made American products. Response: Sunbeam makes American products that are manufactured in China and packaged in America for distribution.

Which is not the same. The difference stems from nothing more than corporate greed.

That's greed exhibited by corporate interests who criticize our public schools for not turning out trained assembly-line slaves.

Though Americans are among the most educated workers in the world, the nation has stopped training enough people in the mid-level skills that factories need, executives say.

To thrive, companies argue they need to move work where it can generate enough profits to keep paying for innovation.

Once, we prized innovation and genius for its capacity to strengthen our nation. Now, we define innovation and genius by its capacity to generate corporate profits and by nothing else. A century ago, Western civilization produced an Einstein who, given time and resources to apply himself to thinking, revolutionized science. Today, that Einstein would be arrested in intellectual development and made a corporate slave -- on an assembly line, given biscuits and tea, for a 12-hour shift.

Left to their own devices, corporate interests in America would transform public education into public workplace training centers. Haven't they already begun?

In its early days, Apple usually didn’t look beyond its own backyard for manufacturing solutions. A few years after Apple began building the Macintosh in 1983, for instance, Mr. Jobs bragged that it was “a machine that is made in America.” In 1990, while Mr. Jobs was running NeXT, which was eventually bought by Apple, the executive told a reporter that “I’m as proud of the factory as I am of the computer.” As late as 2002, top Apple executives occasionally drove two hours northeast of their headquarters to visit the company’s iMac plant in Elk Grove, Calif.

But by 2004, Apple had largely turned to foreign manufacturing. Guiding that decision was Apple’s operations expert, Timothy D. Cook, who replaced Mr. Jobs as chief executive last August, six weeks before Mr. Jobs’s death. Most other American electronics companies had already gone abroad, and Apple, which at the time was struggling, felt it had to grasp every advantage.

In this sense, Apple was a late-adopter of the manufactured-abroad model, the very opposite of the other corporate behemoth that may as well be credited with creating that model: Wal-Mart. Nearly three decades ago, locally-based media outlets were documenting the demise of locally-owned retailers as Wal-Mart moved in, soaked up the customer base and starved Mom-and-Pop competitors. Its secret was its business model, buying and retailing the products of Third-World countries at bargain-basement prices and targeting the working class, those hardest-hit by economic instability. Its success, of course, was historic, astronomical.

And our most recent governor promoted it more than he promoted his own state, certainly attended to its needs more than he attended to the needs of South Carolina's working poor.

Trying to find American-made, American-manufactured products in a Wal-Mart today is like searching for needles in haystacks.

For Mr. Cook, the focus on Asia “came down to two things,” said one former high-ranking Apple executive. Factories in Asia “can scale up and down faster” and “Asian supply chains have surpassed what’s in the U.S.” The result is that “we can’t compete at this point,” the executive said.

I suspect not. How many American companies could demand that their workers live in factory-owned dormitories and be run out of bed with a half-hour's notice before starting a 12-hour shift?

Oh, that's right. We had mills in South Carolina, and mill villages, and the control that mill owners demanded over their workers in the villages looked and sounded an awful lot like the Times is describing in today's China. But all that ended when the mills were bought up by multi-national conglomerates and private equity firms -- paging Mitt Romney -- and shipped overseas.

It's not an issue of supply chains; it's an issue of control and profit.

The impact of such advantages became obvious as soon as Mr. Jobs demanded glass screens in 2007.

For years, cellphone makers had avoided using glass because it required precision in cutting and grinding that was extremely difficult to achieve. Apple had already selected an American company, Corning Inc., to manufacture large panes of strengthened glass. But figuring out how to cut those panes into millions of iPhone screens required finding an empty cutting plant, hundreds of pieces of glass to use in experiments and an army of midlevel engineers. It would cost a fortune simply to prepare.

Then a bid for the work arrived from a Chinese factory.

When an Apple team visited, the Chinese plant’s owners were already constructing a new wing. “This is in case you give us the contract,” the manager said, according to a former Apple executive. The Chinese government had agreed to underwrite costs for numerous industries, and those subsidies had trickled down to the glass-cutting factory. It had a warehouse filled with glass samples available to Apple, free of charge. The owners made engineers available at almost no cost. They had built on-site dormitories so employees would be available 24 hours a day.

The Chinese plant got the job.

“The entire supply chain is in China now,” said another former high-ranking Apple executive. “You need a thousand rubber gaskets? That’s the factory next door. You need a million screws? That factory is a block away. You need that screw made a little bit different? It will take three hours.”

And we reward such companies with record-breaking profits, quarter after quarter after quarter, while our own college graduates move back home because there are no jobs to find.

For all the derision that our corporate masters gave China -- in fact, didn't they call it "Communist China" for years? -- they now seem quite comfortable with "communist China" and the record profits to be realized from collaboration with a government that fully subsidizes its national industries, and fully controls its workforce.

Let's hear it for the red, white and blue.

An eight-hour drive from that glass factory is a complex, known informally as Foxconn City, where the iPhone is assembled. To Apple executives, Foxconn City was further evidence that China could deliver workers — and diligence — that outpaced their American counterparts.

That’s because nothing like Foxconn City exists in the United States.

The facility has 230,000 employees, many working six days a week, often spending up to 12 hours a day at the plant. Over a quarter of Foxconn’s work force lives in company barracks and many workers earn less than $17 a day. When one Apple executive arrived during a shift change, his car was stuck in a river of employees streaming past. “The scale is unimaginable,” he said.

Foxconn employs nearly 300 guards to direct foot traffic so workers are not crushed in doorway bottlenecks. The facility’s central kitchen cooks an average of three tons of pork and 13 tons of rice a day. While factories are spotless, the air inside nearby teahouses is hazy with the smoke and stench of cigarettes.

Foxconn Technology has dozens of facilities in Asia and Eastern Europe, and in Mexico and Brazil, and it assembles an estimated 40 percent of the world’s consumer electronics for customers like Amazon, Dell, Hewlett-Packard, Motorola, Nintendo, Nokia, Samsung and Sony.

“They could hire 3,000 people overnight,” said Jennifer Rigoni, who was Apple’s worldwide supply demand manager until 2010, but declined to discuss specifics of her work. “What U.S. plant can find 3,000 people overnight and convince them to live in dorms?”

The factory houses its workers, feeds its workers, pays its workers $17 a day and demands 12-hour shifts, six days a week.

And our own federal government can't agree that education is a national necessity, and our state government begrudges such funding as it appropriated in 1995 to support public schools in 2012. Is the disconnect not obvious?

In mid-2007, after a month of experimentation, Apple’s engineers finally perfected a method for cutting strengthened glass so it could be used in the iPhone’s screen. The first truckloads of cut glass arrived at Foxconn City in the dead of night, according to the former Apple executive. That’s when managers woke thousands of workers, who crawled into their uniforms — white and black shirts for men, red for women — and quickly lined up to assemble, by hand, the phones. Within three months, Apple had sold one million iPhones. Since then, Foxconn has assembled over 200 million more.

So in addition to housing and feeding its workers, the factory also clothes them -- and color-coordinates them by gender.

Control and profit.

Companies like Apple “say the challenge in setting up U.S. plants is finding a technical work force,” said Martin Schmidt, associate provost at the Massachusetts Institute of Technology. In particular, companies say they need engineers with more than high school, but not necessarily a bachelor’s degree. Americans at that skill level are hard to find, executives contend. “They’re good jobs, but the country doesn’t have enough to feed the demand,” Mr. Schmidt said.

Absolutely false. Such graduates are not hard to find; they simply demand more in compensation, as a class, than corporate entities are willing to pay in America -- which is true across many professions, including education.

Furthermore, if supply is a challenge, consider for a moment that output is dependent upon input. When you deprive children of adequate education in their formative years, you shouldn't complain when they don't magically present themselves as engineers when you want engineers.

And when the costs of attending college to earn advanced degrees are prohibitive, and student aid is not a Congressional budget priority, and graduating with a bachelor's degree alone leaves young people with tens of thousand of dollars in debt, don't whine that you can't find enough engineers with doctorates. Perhaps if we redirected our national resources -- let's say the amount of a war or two -- to promoting education from early childhood through advanced graduate studies, we might do ourselves a favor.

It's a radical idea, but it worked well enough from the Roosevelt to the Johnson administrations, and America was the choicest place on the planet for corporate interests.

Modernization has always caused some kinds of jobs to change or disappear. As the American economy transitioned from agriculture to manufacturing and then to other industries, farmers became steelworkers, and then salesmen and middle managers. These shifts have carried many economic benefits, and in general, with each progression, even unskilled workers received better wages and greater chances at upward mobility.

But in the last two decades, something more fundamental has changed, economists say. Midwage jobs started disappearing. Particularly among Americans without college degrees, today’s new jobs are disproportionately in service occupations — at restaurants or call centers, or as hospital attendants or temporary workers — that offer fewer opportunities for reaching the middle class.

Would you like fries with that?

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