At a White House dinner in February of 2011, President Obama reminded the late and much heralded Apple CEO Steve Jobs that, once upon a time, Apple boasted that its products were made in America and he asked, "Why can't that work come home? Mr. Jobs's reply, according to other guests present, was terse. "Those jobs aren't coming back," he replied.
At the time of that dinner, almost all of the 70 million iPhones, its 30 million iPads and 59 million other products that Apple sold were manufactured overseas. The company employed only 43,000 people in the United States and 20,000 overseas. However, through a network of third-party, low-wage contractors in China, Taiwan and elsewhere in Asia, it utilized the services of an additional 700,000 people to engineer, build and assemble all of its iPads, iPhones and its other accessories and products.
That same year, Apple earned in excess of $400,000 in profit per employee - a sum that was vastly greater than the per employee profits of Goldman Sachs, Exxon Mobil or Google.
In March of 2013, Apple announced that it held $40.4 billion in untaxed earnings outside of the United States as of September 29, 2012, and should it repatriate that cash, the company estimated it would owe $13.8 billion in taxes, or slightly under the federal 35 percent tax rate.
The company also disclosed a worldwide annual revenue in 2013 in the amount of $171 billion. In addition, during the five quarters prior to March 1, 2014, Apple officially reported total acquisition investments of $11.12 billion, in addition to the $1.02 billion in cash "business acquisition" payments.
All of these grim statistics were called to mind again in the light of a fawning and uncritical article by Rebecca Ruiz that appeared in the Business Section of today's New York Times. The purported news story informed readers that Peter Oppenheimer, Apple's senior vice president and chief financial officer, announced his plans to retire this coming in September, after an 18-year career with Apple.
Ruiz's article was effusive in her comments about Oppenheimer's performance as senior vice-president of Apple. She noted that "As chief financial officer for the last decade, Mr. Oppenheimer, who started in 1996 as controller for the Americas, helped oversee a shrewd global financial strategy, with Apple garnering record profit and building a significant pile of cash."
Ruiz also found it a sign of Oppenheimer's business acumen that "As part of the strategy, Apple set up a web of subsidiaries around the world, allowing the company to legally avoid billions of dollars of taxes in the United States. In 2013, Apple raised $17 billion to fund a shareholder payout, a move that potentially helped the company save on taxes."
Ruiz quoted Lawrence Isaac Balter, chief market strategist at Oracle Investment Research, who stated that Oppenheimer's "done a fantastic job building the war chest," and repeated a statement by Timothy D. Cook, Apple's current chief executive, who credited Mr. Oppenheimer with "managing the company's finances during a period of significant international expansion and revenue growth."
At the end of Ruiz's column, we discovered that in fiscal year 2012, Mr. Oppenheimer was lavishly rewarded for his success in having helped to devise Apple's multifarious and ingenious schemes for corporate tax-evasion, and in his having enabled Apple to garner obscene profits for its shareholders on the backs of an exploited third work-force: Oppenheimer earned $68.6 million in total compensation package.
Not surprisingly, Mr. Oppenheimer stated "I love Apple and the people I have had the privilege to work with and after 18 years here, it is time for me to take time for myself and my family," and it was announced that he had been named to the board of Goldman Sachs.
Ruiz's celebration of Oppenheimer's success and the generally enthusiastic press that Apple receives in the media and in corporate culture should be a source of significant worry and concern to everyone who claims to value the model of a market economy.
The U.S. is a consumption-driven economy. For that reason, in the long run, the migration of jobs to China and other third-world countries will prove to be self-defeating: An increasingly impoverished middle class here in the U.S. will eventually be unable to purchase the high-end goods that out-sourced manufacturers such as Apple and other U.S. based corporations import and try to sell to domestic consumers.
Over time, as economic inequality continues to grow and purchasing power erodes, the life-styles of perhaps a majority of Americans will be reduced to that of most Chinese and Indians today.
The problem is that, by and large, entrepreneurs and the boards of directors of corporations don't care about the long-run consequences of their behaviors, no matter how ill-advised or self-defeating. Perhaps they have accepted too blithely, as a corporate credo, John Maynard Keynes' observation that, in the long-run we will all be dead.
The sole goal of most corporations is to maximize profits to please their shareholders. Given a mindset that sincerely believes that the pursuit of self-interest is somehow a public good, entrepreneurs and the other vaunted Masters of the Universe remain utterly oblivious to problems such as poverty and pollution, and they have no idea of how to reconcile basic principles of social justice with their desire to make a living.
Left to their own devices, entrepreneurs and corporations too often engage in practices - such as Apple's well-documented tax-avoidance and its refusal to invest in creating a productive U.S. workforce - that have harmful consequences to the public. This occurs despite the fact that their activities of these corporations are heavily subsidized by taxpayers- e.g. through roads, trains, airports, intangible infrastructure such as employee training and R&D, favorable tax policies, legal standing, and legal protection of trade secrets and intellectual property. Corporations are also permitted under our laws, should they be unable to escape the consequences of their poor decisions, to petition for bankruptcy and re-emerge as a new corporate persona.
An increasing body of evidence suggests that the traditional model of the market economy no longer behaves in the way that its most ardent proponents have predicted. As competition has given way to consolidation, and equal opportunity to plutocracy, the anomalies have now begun to overwhelm the paradigm.
Whatever comes next, more of the same is not the answer.
