iPhone, T-Shirts : Sweated Labour makes US, Germany rich

3.

Apple, with not a factory to its name, was valued at $324.3 billion

Apple’s iPhone exhibits general trends and fundamental relationships, but in an exaggerated and extreme form. Hon Hai made $2.4 billion in profits in 2010, or $2,400 per employee, compared to $263,000 in profits reaped by Apple for each of its 63,000 employees (43,000 of whom are in the United States); this figure is expected to rise to $405,000 in 2012. On March 11, 2011, Hon Hai’s share price valued the company at $36.9 billion; meanwhile Apple, with not a factory to its name, was valued at $324.3 billion. ¹¹

Apple’s share price has soared in the year since, its market capitalization almost doubling to around $600 billion, overtaking Exxon to become the world’s most valuable company. Further boosting its share price, it has accumulated a huge $110 billion cash stockpile that it has no productive use for.

a “paradox of assembler misery and brand wealth,” – Hon Hai

Meanwhile, in what one study called a “paradox of assembler misery and brand wealth,” Hon Hai’s profits and share price have been caught in the pincers of rising Chinese wages, conceded in the face of mounting worker militancy, and increasingly onerous contractual requirements, as the growing sophistication of Apple’s (and other firms’) products increase the time required for assembly.¹² While Apple’s share price has risen more than tenfold since 2005, between October 2006 and January 2011 Hon Hai’s share price slumped by nearly 80 percent. The Financial Times reported in August 2011 that “costs per employee [are] up by exactly one-third, year-on-year, to just under us$2,900. The total staff bill was $272m: almost double gross profit…rising wages on the mainland helped to drive the consolidated operating margin of the world’s largest contract manufacturer of electronic devices…from 4–5% 10 years ago to a 1–2% range now.”¹³

Seeking cheaper labor and to reduce dependence on the increasingly restive Shenzhen workforce, Financial Times columnist Robin Kwong reports that Hon Hai “has invested heavily in shifting production from China’s coastal areas to further inland and is in the process of increasing automation at its factories. As a result, Hon Hai last year saw its already thin margins shrink even further.”¹⁴ The combination of sharply rising wages, heavy capital spending, and relentless cost-cutting by companies like Apple is bad enough, but worst of all is the chronic sickness which Hon Hai’s and China’s principal export markets have fallen into. Kwong concludes, “it is not hard to see why the last thing Gou needs now, after building all those inland factories, is a slowdown in demand.”¹⁵

The T-Shirt

Workers at the factory, 85 percent of whom are women, earn just €1.36 per day for a 10–12 hour shift

The iPhone’s dazzling sophistication and iconic brand status can too easily blind the observer to the exploitative and imperialist character of the social and economic relations it embodies. Nevertheless, the same fundamental relationships can be seen across the entire range of consumer goods. Take, for example, the humble T-shirt. Tony Norfield, in “What the ‘China Price’ Really Means,” tells the story of a T-shirt made in Bangladesh and sold in Germany for €4.95 by the Swedish retailer Hennes & Mauritz (H&M). H&M pays the Bangladeshi manufacturer €1.35 for each T-shirt, 28 percent of the final sale price, forty euro cents of which covers the cost of 400 grams of cotton raw material imported from the United States; shipping to Hamburg adds another six cents per shirt.

oppression of workers in the poorer countries is a direct economic benefit for the mass of people in the richer countries

The remaining €3.54 counts towards the GDP of Germany, the country where the T-shirt is consumed, and is broken down as follows: €2.05 provides for the costs and profits of German transporters, wholesalers, retailers, and advertisers (some of which will revert to the state through various taxes); H&M makes sixty cents profit per shirt; the German state captures seventy-nine cents of the sale price through VAT at 19 percent; and sixteen cents covers “other items.”¹⁶

Thus, in Norfield’s words, “a large chunk of the revenue from the selling price goes to the state in taxes and to a wide range of workers, executives, landlords and businesses in Germany. The cheap T-shirts, and a wide range of other imported goods, are both affordable for consumers and an important source of income for the state and for all the people in the richer countries.”

Bangladesh garment workers protesting against low wages.

The Bangladeshi factory makes 125,000 shirts per day, of which half are sold to H&M, and the rest to other western retailers. Workers at the factory, 85 percent of whom are women, earn just €1.36 per day for a 10–12 hour shift. The machine each worker runs produces 250 T-shirts per hour, or eighteen T-shirts for each euro cent of the workers’ wages. The factory is one of 4,500 garment factories in Bangladesh employing more than 3.5 million people. Their low wages partly explain, according to Norfield:

“why the richer countries can have lots of shop assistants, delivery drivers, managers and administrators, accountants, advertising executives, a wide range of welfare payments and much else besides. The wage rates in Bangladesh are particularly low, but even the multiples of these seen in other poor countries point to the same conclusion: oppression of workers in the poorer countries is a direct economic benefit for the mass of people in the richer countries.”¹⁷

(Continued …)

From : Value Added versus Value Capture by John Smith

Courtesy : Monthly Review

The GDP Illusion

John Smith

Value Added versus Value Capture

by John Smith

John Smith teaches political economy, human rights, and genocide studies at Kingston University in London. His forthcoming book on imperialism and globalization will be published by Monthly Review Press.

The GDP Illusion