The Rate of Exploitation (The Case of the iPhone) Tricontinental: Institute for Social Research Notebook No2 The Rate of Exploitation (The Case of the iPhone) Tricontinental: Institute for Social Research Notebook No2 Karl Marx (1818-1883), like many of his sensi- tive contemporaries, was concerned with the wretched condition of factory workers and their trade union activity. It was evident that workers who produced goods in factories found them- selves unable to save money and improve their lot, while factory owners grew richer. The ine- quality between owner and worker increased as the years went by. Much the same kind of situation as that depict- ed by Marx exists today. Companies such as Apple thrive while workers in Chinese factories that make Apple products earn low wages and difficult working conditions. A liberal glance at these numbers would suggest that the worker needs to be paid more, that they need a fair day’s wage for a fair day’s work. Marx called that a ‘conservative motto’ since it pleased the liberal to quote it but it at the same time was utterly impracticable as a solution within the bounds of the capitalist system. Higher wages 2 are necessary, but wages cannot be increased workings of profit and exploitation. We are to a ‘fair’ level without undermining the neces- interested not only in Apple and the iPhone, sity for capital to squeeze as much profit from but more particularly in the Marxist analysis of workers in the production process. The demand the rate of exploitation at play in the production for higher wages – or a living wage – is neces- of such sophisticated electronic devices. It is sary and urgent. But this demand is incapable necessary, we believe, to learn how to measure of liberating the workers from the subordina- the rate of exploitation so that we know pre- tion of human potential to the compulsion of cisely how much workers deliver into the total earning a wage. The demand for a living wage social wealth produced each year. will only intensify the struggle between the classes. The outcome of the struggle must not be higher wages, but the abolition of the wage system. As Marx wrote in Value, Price and Profit, the workers ‘ought to inscribe on their banner the revolutionary watchword – abolition of the wages system!’. In Notebook 2 from Tricontinental: Institute for Social Research, we sketch out the out- lines of the contemporary production process that results in Apple’s iPhone. We move from a look at the iPhone’s production to the inner 3 Part 1: Welcome to the iPhone. What If the iPhone X Were Made in the United States? If the iPhone X were made in the United States, it would be unaffordable for the vast mass of the world’s population. One estimate suggests that if the iPhone were made in the United States, it would cost at least $30,000 per phone. [All dollar amounts in this Notebook refer to the US dollar]. The current (2019) price for an iPhone X varies from about $900 in the United States to about in South Africa would need to work for fourteen $1900 in Brazil and Turkey. and a half years for one phone. At $30,000, the iPhone is simply unaffordable. Almost all of the 70 million iPhones currently in A minimum wage worker in India would have circulation – as well as the 30 million iPads and to work for sixteen and a half years, each day, 59 million other Apple products – are made to afford one phone. A minimum wage worker outside the United States. 4 US President Barack Obama goes to dinner with top Silicon Valley executives, including Steve What Jobs did not mention is that Apple Jobs, in February 2011. benefits from the low taxes along the Global Commodity Chain. If the iPhone were pro- duced in the US, Apple would pay 35% in taxes. Currently, it pays nearly 2% along the Chain. The iPhone is made outside the United States for several interrelated reasons. The first (and What would it take to make iPhones most obvious reason) is the cost of labour. The in the United States? cost of labour within the United States is higher than that in certain parts of the world – notably in the People’s Republic of China, where many of these products are manufactured. The sec- ond reason is the adverse working conditions (no trade unions, long hours) in many parts of the world, particularly in export-process- Those ‘jobs’ aren’t coming back. ing zones that explicitly ban unions and have almost no State regulations. The retreat of the State from regulating workplaces and resource extraction has led to an increase in the nega- tive externalities of production – namely, to the 5 dumping of toxic waste without treatment, the wired into the factory to run the machines and use by mining companies of harsh chemicals to provide electricity; this allowed for longer that pollute water sources, and – as a conse- workdays, with a third shift working late into the quence – the destruction of agriculture. This night. Raw materials would be purchased, out pushes more and more of the billions of small of which would be produced the commodity to farmers and peasants off the land and towards be sold. Then, the capitalist would hire workers wage labour in the industrial production pro- to bring their skills and energy to the factory cess. At the centre of these changes is disartic- and work for a set number of hours to make ulated production along the Global Commodity commodities. Better machinery and advances Chain. This Notebook will focus attention on in cooperation, as well as the division of labour disarticulated production and on the Global amongst workers, made the factories more and Commodity Chain. more productive. But what defined these older factories was that they were – by and large – in one location. Even when the factory was in one The Global Commodity Chain? place, raw materials were sourced from a variety of locations. Factories, therefore, were always Factories were once located in a single place. linked globally to places that their raw materials Land was either rented or bought, and upon came from and to places where their products this land was built a building – the factory. The were sold. owner of the factory – the capitalist – would then rent or buy machinery that was housed inside Gradually, by the 1960s, three technolog- the four walls of the factory. Electricity would be ical changes and three major political and 6 economic changes enabled factories to alter their finished products – on a computer rath- basic structure. er than in a large ledger. If two com- puters – one based in Hong Kong and The three interlinked technological changes were: the other based in California – could be linked across the satellite network, then 1. Telecommunication the business headquarters in California networks. could be informed immediately about drops in inventory and could reorder By the mid-1960s, a large raw materials and products as soon as number of satellites were possible. launched for commercial purposes. These satellites 3. Efficient logistics and allowed for easier commu- standardisation. nication between different parts of the world. It used to take dockworkers days to unload a ship, whose cargo could easily 2. Computerisation. be misplaced in the warehouses that abutted the quays. But dockworkers, The use of computer data- through their radical unions, would bases allowed firms to main- often go on strike not only to increase tain their inventory – their raw their wages and working conditions materials and their stock of but also for political issues. Their 7 political unity needed to be broken. In the be sourced from anywhere in the world. A mid-1950s, container ships began to carry grade of electrical cable or a type of glass goods in large, standard-sized metal con- is no longer arbitrarily measured. It is now tainers which could be removed – within produced to a certain precise standard. hours – from a ship by cranes and placed Thus, it allows firms that source goods to immediately on the back of a truck or on play off one producer against another and a railway flatcar. What this meant was that drive down prices. If workers in one locality it became less time-consuming to move successfully win better working conditions, goods around the world, and it meant that standardisation and efficient logistics allow the dockworkers’ union was substantially capital to route their production process weakened. This process reduced both the away from this ‘trouble’ and towards a more overall transportation cost and the risk of pliant workforce. strikes. But containerisation is just one part of a revolution in logistics. Highly sophisti- These three technological changes allowed cated logistical systems have allowed firms firms to imagine breaking up the factory into to track raw materials and finished products, several components, each located either near making sure that they do not get lost and raw materials or near inexpensive but skilled la- that they arrive at their destinations on time. bour. Even as the production process was frag- None of this would be possible without mented across continents, firms controlled the standardisation (driven by the International entire process through the integrated manage- Organisation of Standardisation), which ment of data about production, transportation, means that any input to production can and inventories. Efficient logistical systems and 8 better transportation techniques made sure that components and products could move rapidly across the world. A capacitor could be made in one place, the screen for the phone in anoth- er, and the various components could then be brought to a third place to be assembled into an iPhone.