Straight Talk about Globalization from Tim Cook

When Steve Jobs used to appear at the D: All Things Digital conference, he could dazzle his audience with his blue-sky visions, just as he would any other audience. However, as Andrew Nusca observed in his report from the conference for Between the Lines on the ZDNet Web site, Tim Cook has never pretended to live in a world of visionaries. Rather, he deals with harsh realities; and one of the realities he has come to understand best is that of supply chain management.

He thus used his slot at the conference to address the “made in America” question, explaining why Apple, and just about every other major company with a product, bases production on a globalized supply chain and why, as a corollary, there really is no place for the United States in that chain. Nusca’s summary of his remarks is well worth reading. Most important is that it teases out all of the down-side consequences that Tom Friedman either could not or would not put on the table back when he first started riding his globalization hobby-horse.

For those who like to cut to the chase, here is the crux of the argument as to why American manufacturing cannot play in the world of the global supply chain:

The reason: there’s a very real tradeoff between what’s good for workers and what’s good for business. When push comes to shove, business wins — which is why Apple’s American employees enjoy comparatively nice perks while employees of its supply chain partners live in 8,000-strong dormitories, ready to be woken up at midnight to start a 12-hour shift making new parts for an iPhone that received last-minute design changes from California. 

Imagine trying to do the same with an American worker. Unions would never stand for it, obviously, and chances are the rest of the family unit wouldn’t, either. 

My point is not to illustrate the benefits and drawbacks of unions, or even what’s fair; rather, I’m trying to illustrate a landscape in which American companies can go overseas for greater flexibility, lower price and sheer speed. So long as there are nations in this world willing to do work others aren’t, outsourcing will exist. In the capitalist system, businesses can’t win in the free market unless they exploit every advantage.

We happy few who still have a sense of history will probably have trouble reading those paragraphs without hearing a chorus singing “The Internationale” in the back of our collective heads. Written in the aftermath of the Paris Commune, it was probably the first song to state explicitly that “exploit every advantage” always meant exploiting labor to the benefit of both management and shareholders. The basic idea was that workers around they world must group together (“Groupons-nous”) for the “final struggle” (“la lute finale”) between the humanity of those workers and the objective interests of capitalism.

“The Communist Manifesto” echoed the vision of “The Internationale.” All that ensued, however, were new governments, mostly totalitarian. The new boss was the same as the old boss, and the workers were still the “damned of the Earth” (“damnés de la terre”). Several generations of new bosses have now come and gone in both political and manufacturing sectors. The state of the workers has not changed; and the sad truth is that, if the Internet empowers anyone, it is the shareholders for whom return-on-investment matters more than quality-of-product, let alone anything as intangible as worker quality-of-life. Meanwhile, “The Internationale” echoes as a faint memory, even less memorable than “Lucy in the Sky with Diamonds.”

As an afterthought, it is worth noting that Nusca’s perspective extended beyond Friedman to one of the other great visionary hucksters, Richard Florida. This seemed appropriate since I noticed that Florida’s book, The Rise of the Creative Class, is about to be “revisited” in a revised tenth-anniversary edition (as if a new edition could possibly add value to the first one). Here is how Nusca took on Florida:

Manufacturing is a powerful driver of the American economy, but it’s just one part of it. Whatever happened to the concept of a creative economy? (Answer: we realized we can’t win on creativity alone. There needs to be some elbow grease, too.)

In other words the workers figure in creativity, too. Read the stories about the Manhattan Project or the building of the first programmable digital computers. (Yes, I am beating the drum about history again.) You will find plenty of warrants for that claim in those accounts. Our would-be “visionaries” have forgotten about the workers; and, from that point of view, they are no better than heartless shareholders and may even be significantly worse.