The Ieconomy

C M Y K Nxxx,2012-12-27,A,001,Bs-4C,E1_++

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NEW THREAT OF DEFAULT NEW YORK SERVICES LOST

House Leadership Urges Damaged Hospitals Are Senators to Act — Closed — Treatment Timing Is Unclear Is Harder to Get

The iEconomy By JONATHAN WEISMAN By NINA BERNSTEIN and JENNIFER STEINHAUER When a young woman in the WASHINGTON — With just grip of paranoid delusions threat- five days left to make a deal, ened a neighbor with a meat BY the new york times staff President Obama and members cleaver one Saturday last month, of the Senate were set to return the police took her by ambulance to Washington on Thursday with to the nearest psychiatric emer- no clear path out of their fiscal gency room. Or rather, they took morass even as the Treasury De- her to Beth Israel Medical Center, partment warned that the gov- the only comprehensive psychi- Nomination for The 2013 pulitzer prize ernment will soon be unable to atric E.R. functioning in Lower pay its bills unless Congress acts. Manhattan since Hurricane Treasury Secretary Timothy F. Sandy shrank and strained New category: Explanatory reporting Geithner, adding to the building York’s mental health resources. tension over how to handle a The case was one of 9,548

year-end pileup of threatened tax GILLES SABRIE FOR THE NEW YORK TIMES “emotionally disturbed person” increases and spending cuts, for- calls that the Police Department ON THE LINE Workers assembling Hewlett-Packard computers at a plant in Chongqing, China, operated by Foxconn of Taiwan. mally notified Congress on answered in November, and one Wednesday that the government of the 2,848 that resulted in trans- would hit its statutory borrowing portation to a hospital, a small in- limit on Monday, raising anew crease over a year earlier. pple Inc., with its enormous profits, messianic founderthe threat of anda federal default wildly as Signs popularof Changes Takingproducts, Hold in had Electronics become Factories in China But the woman was discharged the two parties remained in a within hours, to the shock of the standoff. Pu got her chair. This autumn, she even mental health professionals who Mr. Geithner wrote that he THE iECONOMY heard that some workers had received cush- had called the police. It took four By KEITH BRADSHER a company almost above reproach. It took the persistencewould take “extraordinary of meas- a dozen New YorkThe Road toTimes Reform businessioned seats. more days, and strong protests ures” to keep the government and CHARLES DUHIGG The changes also extend to California, from her psychiatrist and case- afloat but said that with so much CHENGDU, China — One day last sum- where Apple is based. Apple, the electronics workers, to get her admitted for uncertainty over the shape of the mer, Pu Xiaolan was halfway through a shift lieved that comfort encouraged sloth. industry’s behemoth, in the last year has tri- two weeks of inpatient treatment, reporters to penetrate the curtain of America’s wondertax code and futurecompany government inspecting and iPad cases whendiscover she received a But inthe March, unbeknown troubling to Ms. Pu, a crit- pled its corporate social responsibility staff, said Tony Lee, who works for spending he did not know how beige wooden chair with white stripes and a ical meeting had occurred between Fox- has re-evaluated how it works with manufac- Community Access, a nonprofit A long the Treasury could shuffle high, sturdy back. conn’s top executives and a high-ranking Ap- turers, has asked competitors to help curb agency that provides supportive accounts before the government At first, Ms. Pu wondered if someone had ple official. The companies had committed excessive overtime in China and has reached housing to people with mental ill- underside of Apple’s success. Their look at the decisions of couldthis no longer one pay its creditors. iconicmade a mistake. company But when her bosses helpsthemselves to a explain series of wide-ranging re-howout to advocacy the groups it once rebuffed. ness, managing the Lower East For months, President Obama, walked by, they just nodded curtly. So Ms. Pu forms. Foxconn, China’s largest private em- Executives at companies like Hewlett- Side apartment building where members of Congress of both gently sat down and leaned back. Her body ployer, pledged to sharply curtail workers’ Packard and Intel say those shifts have con- she lives. parties and top economists have relaxed. hours and significantly increase wages — re- vinced many electronics companies that they Psychiatric hospital admission global economy is changing and how American jobs are beingwarned that transformed the nation’s fragile The rumors were in true. an increasinglyforms that, if fully carried out interconnected next year as must also overhaul how they interact with is always a judgment call. But in economy could be swept back When Ms. Pu was hired at this Foxconn planned, could create a ripple effect that foreign plants and workers — often at a cost the city, according to hospital into recession if the two parties plant a year earlier, she received a short, benefits tens of millions of workers across to their bottom lines, though, analysts say, records and interviews with psy- did not come to a post-election green plastic stool that left her unsupported the electronics industry, employment ex- probably not so much as to affect consumer chiatrists and veteran advocates world. compromise on January’s combi- back so sore that she could barely sleep at perts say. prices. As Apple and Foxconn became fodder of community care, the odds of nation of tax increases and night. Eventually, she was promoted to a Other reforms were more personal. Pro- for “Saturday Night Live” and questions dur- securing mental health treatment across-the-board spending cuts. wooden chair, but the backrest was much too tective foam sprouted on low stairwell ceil- ing presidential debates, device designers in a crisis have worsened signif- Yet with days left before the small to lean against. The managers of this ings inside factories. Automatic shut-off de- and manufacturers concluded the industry’s icantly since the hurricane. The As a direct result of the series, called “The iEconomy”: Continued on Page A18 164,000-employee factory, she surmised, be- vices appeared on whirring machines. Ms. Continued on Page A14 Continued on Page A20 Toyota Agrees Coca Licensing Is a Weapon in Bolivia Drug War Syrian General Whose Task l More than a million workers at the Chinese factoriesTo Deal that in Suit make Apple’s iPhones and Was Halting Defections Flees By WILLIAM NEUMAN Over Speedups TODOS SANTOS, Bolivia — There is nothing clandestine By KAREEM FAHIM and RICK GLADSTONE about Julián Rojas’s coca plot, iPads got 25 percent raises. Their working conditions significantly improved after BEIRUT, Lebanon — Syria’s cow this weekend. Russia, one of By BILL VLASIC which is tucked deep within acres of banana groves. It has been government suffered an embar- Mr. Assad’s most ardent foreign DETROIT — Toyota Motor mapped with satellite imagery, rassing new setback as the top defenders, has in recent weeks Apple’s supplier plants were opened to outside inspectionsagreed on Wednesday to pay catalogedfor in the a government first data- time. general responsible for prevent- suggested it was open to a negoti- more than $1 billion to settle a base, cross-referenced with his ing defections within the military ated transition that would ease class-action lawsuit related to is- personal information and became a defector himself, mak- him out of power. sues of unintended acceleration checked and rechecked by the lo- ing what insurgents described on Opposition figures said Gen- l in its vehicles. cal coca growers’ union. The Wednesday as a daring back- eral Shallal’s defection had taken Some 30,000 employees at Apple stores got raisesThe proposedof up settlement, to filed 20same goespercent. for the plots worked roads escape by motorcycle weeks to prepare and ended with in a Federal District Court in Cal- by Mr. Rojas’s neighbors and across the border into Turkey. a four-hour sprint by motorcycle ifornia, would be one of the larg- thousands of other farmers in The defector, Maj. Gen. Abdul to the Turkish border, driving est of its type in automotive histo- this torrid region east of the An- Aziz Jassem al-Shallal, the chief through woods and on muddy l ry. If the agreement is approved des who are licensed by the Bo- of the military police, was one of roads. In a video broadcast by Al Apple announced it would invest $100 million to bymanufacture Judge James V. Selna, Toyota livian government some to grow computers coca, in the the highest-ranking military offi- Arabiya, the general said that he would make cash payments for the plant used to make cocaine. cers to abandon President Bash- had taken the step because the the loss of value on vehicles af- President Evo Morales, who MERIDITH KOHUT FOR THE NEW YORK TIMES ar al-Assad in the nearly two- Syrian military had deviated fected by multiple recalls and in- first came to prominence as a Augustine Calicho, 45, separating the seeds from dried coca year-old uprising against him. from its mission to protect the United States. stall special safety features on up country, and had transformed leader of coca growers, kicked leaves in Villa Tunari in the Chapare region of Bolivia. His departure, first reported to 3.2 million cars. out the Drug Enforcement Ad- by Al Arabiya late on Tuesday into “a gang for killing and de- While there are still individual ministration in 2009. That ouster, evening and confirmed by oppo- struction.” personal-injury and wrongful together with events like the ar- orthodox approach toward con- Mr. Morales’s Bolivia, an accom- sition figures on Wednesday, “The regime army has lost l Apple tripled its social responsibility staff, re-evaluateddeath lawsuits pending againstits restdealings last year of the former head withtrolling the growing of coca, plishment that has largely oc- came as a flurry of diplomatic ac- control over most of the country,” Toyota, in addition to an unfair of the Bolivian anti-narcotics po- which veers markedly from the curred without the murders and tivity suggested the possibility of the general said in an interview business practice case brought lice on trafficking charges, led wider war on drugs and includes other violence that have become movement toward a political soon the Saudi-owned channel, by the attorneys general of 28 Washington to conclude that Bo- high-tech monitoring of thou- the bloody byproduct of Ameri- lution to the Syrian crisis. A dep- which has heavily criticized the manufacturers, asked competitors to help curb excessivestates, the class-action case was overtimelivia was not meeting its globalin sandsChina, of legal coca patchesand in- can-led measures to control traf- uty Syrian foreign minister flew Syrian government. the largest legal action related to obligations to fight narcotics. tended to produce coca leaf for ficking in Colombia, Mexico and to Moscow for meetings with Opposition fighters embraced economic losses by vehicle own- But despite the rift with the traditional uses. other parts of the region. Kremlin officials, and the interna- the defection as more than a sym- ers. United States, Bolivia, the To the surprise of many, this Yet there are also worrisome tional envoy who met with Mr. bolic blow to the government be- reached out to advocacy groups it once rebuffed.The It suit waspublicly filed in 2010 after world’s identified third-largest cocaine pro- experimentits suppliers has now led to a sig- signs thatfor such gains are being Assad in Damascus earlier this cause of the general’s primary re- Continued on Page A3 ducer, has advanced its own un- nificant drop in coca plantings in Continued on Page A4 week was planning to visit Mos- Continued on Page A15

the first time. INTERNATIONAL A4-15 BUSINESS DAY B1-7 Morsi Appeals for Unity Dockworkers Prepare to Strike President Mohamed Morsi of Egypt After nine months of talks, East Coast l Other computer companies like Hewlett-Packard and Intel begantook responsibility to for “mistakes” rethink dur- longshoremen how are threatening they a strike ing the constitutional approvement pro- that would shut down seaports from cess but pledged to respect the voters Massachusetts to Texas. PAGE B1 deal with overseas suppliers. Analysts predicted a ripple effectwho opposed through it. PAGE the A5 entire Adoption Ban Sent to Putin SPORTSTHURSDAY B9-14 A bill to ban adoptions of Russian chil- Knicks Pull Out a Victory industry. NATIONAL A16-18 dren by United States citizens was sent J. R. Smith’s last-second shot helped the Successor to Inouye Is Chosen to President Vladmir V. Putin, who has Knicks, who were without the ailing not said if he will sign it. PAGE A12 Carmelo Anthony and Raymond Felton, Lt. Gov. Brian Schatz, one of three final- beat the Phoenix Suns, 99-97. PAGE B9 ists chosen by Hawaii’s Democratic Par- l Congress opened an investigation into the dubiousty, was named tactics to succeed the late Sena-thatHOME Apple D1-8 and other ARTS C1-10 tor Daniel K. Inouye. PAGE A17 Emily Posts for a New Age Fighting His Own Army Severe Weather Moves East Etiquette technology companies use to reduce their tax bills. counselors The book “The Insurgents,” by Fred A storm that brought tornadoes to the around the Kaplan, recounts how Gen. David H. Pe- Deep South and blizzards to the Mid- country are traeus worked to make counterinsurg- west was forecast to cause heavy snow offering a less ency American military policy. PAGE C1 and rain in the Northeast. PAGE A16 formal approach to EDITORIAL, OP-ED A26-27 NEW YORK A19-24 teaching man- ners to chil- Nicholas D. Kristof PAGE A27 The Times series revealed: Where the Legal Guns Are dren, stepping A newspaper’s publication of informa- in for parents tion on handgun permit holders has who no longer have the desire, the time drawn reactions nationwide. PAGE A19 or the know-how. PAGE D4 U(D54G1D)y+,!%![!#!? l The irresistible allure of low-cost manufacturing partners in China, all hungry to meet Western demands on short notice, leading Apple and other computer makers to pull production from the United States and abandon a home economy desperate to add jobs; l The harsh, at times deadly conditions under which Chinese workers assembling iPhones, iPads and other Apple devices live and work; l The extraordinary and sometimes questionable lengths to which Apple, the most profitable company in America, and other technology companies go to reduce their tax bills; l The low pay and high turnover at Apple’s popular stores; l The lottery-like odds of trying to earn a living by devising apps for the iPhone or iPad. l The shrewd use by technology companies, including Apple, of America’s antiquated patent system to thwart competitors, sometimes stifling innovation.

The series also truth-tested a claim that Apple and other tech companies often make: that they can’t create more jobs in America because Asia’s manufacturing prowess just can’t be duplicated elsewhere. In fact, The Times showed, Japanese automakers made similar arguments three decades ago, and they proved baseless. Indeed the Japanese (and Germans and South Koreans) now build millions of cars a year in the United States. Moreover, The Times found, Brazil has persuaded Foxconn, Apple’s Asian manufacturing partner, to start making iPhones and iPads in that country. Finally, the iEconomy series offered a disturbing glimpse of the future. A new wave of robots, far more adept than those now used, is already replacing workers around the world in both manufacturing and distribution. To tell these stories, The Times had to penetrate a company so obsessively secret that it refused to give Times reporters interviews or access to any operations. Apple employees know that speaking to a reporter without permission is grounds for termination. To unearth the more than six dozen knowing Apple insiders who spoke to The Times, reporters built a database of hundreds of current and former Apple executives and contacted each of them. Though many immediately hung up, enough were persuaded to talk that a detailed portrait of how Apple operates could be drawn. (The series has had no factual corrections, and there have been no challenges to its accuracy.) The “iEconomy” series began with a simple question: Why doesn’t America make any cellphones — the most ubiquitous consumer product of our time? And what does that omission say about how technology companies, and especially Apple, conduct business? To answer those questions, The Times assigned staff in six nations, led by Charles Duhigg in the United States and Keith Bradsher and David Barboza in China. Assisted by multimedia reporters and producers and more than a dozen translators, the Times team visited Chinese laborers near their factories and at their homes. Times reporters collected tax documents from four continents and tracked down former executives who helped create convoluted tax-avoidance plans like “Double Irish With a Dutch Sandwich.” They cultivated sources at the White House and at Singaporean ministries, at Caribbean bureaucracies, and at schools and municipal agencies in Apple’s hometown. The series quickly went viral, drawing thousands of reader comments and attention across the political spectrum. “I don’t usually like the NYT,” Ari Fleischer, press secretary to President George W. Bush, tweeted, “but this article about why Apple doesn’t hire Americans for manufacturing is a must read.” Jon Stewart and Rush Limbaugh discussed the series on their broadcasts. Award-winning financial columnist Allan Sloan sent this e-mail to an editor at The Times: “You guys are doing terrific Apple stories that, to steal a phrase, may change the world.” Henry Blodget of Business Insider wrote, “The article illustrates just how big a challenge the U.S. faces in trying to stop the ‘hollowing out’ process that has sent middle-class jobs overseas — and, with it, the extreme inequality that has developed in recent years.” The Times translated its series into Chinese on overseas Web sites. The Times also translated reader comments back into English, so that the views of Chinese readers — many of whom thanked The Times for its reporting — could be shared with an American and European audience. Thanks to the “iEconomy” series, we all better understand the darker side of the elegantly designed devices we hold in our hands. The New York Times is proud to nominate “The iEconomy” for the Pulitzer Prize for Explanatory Reporting.