Apple and Foxconn in India

Terrors, eh, just terrors:

And that was when something snapped. Two days later hundreds of workers marched against the appalling conditions at the camps that house its estimated 15,000 workers. For hours protesters blocked the main road into the vast industrial estate to demand better conditions.

Foxconn, the Taiwanese company in charge of the site, suspended operations on December 18 promising improvements after its customer, Apple, put the site “on probation” — meaning all orders were placed on hold.

The controversy is the latest in a familiar line to hit Foxconn, the biggest private employer in neighbouring China, and Apple, the world’s most valuable company. A series of suicides at the vast Foxconn City industrial park in Shenzhen, China, in 2010 prompted international condemnation and brought promises of improvements to working conditions.

Foul conditions, foul job, £100 a month.

Yes, this is exactly what it was like in China in 2000. Things had vastly improved by 2010 when those stories about suicides turned up – the ones where the rate inside the factories was lower than that outside in China more generally. And now those very same factories pay a thoroughly – by global standards – middle class wage.

Hmm, why?

No, not because of unions. Nor labour activists. But because if they didn’t pay that much better wage no bugger would turn up for work. As Paul Krugman has pointed out the wage in any particular factory is determined by the general wage rate of the economy around it. Which is, in turn, determined by the general level of productivity in that surrounding economy.

That’s just the way it works. Rich countries pay high wages to everyone, poor low to all. So, to increase wages in one place the necessary thing is to make the whole country rich. Which is exactly what China has done this past couple of decades, what India as yet has not done. And that’s it. Wages are shitty at the Apple/Foxconn India factory because wages are shitty in India.

GDP growth, it’s what raises wages.

19 thoughts on “Apple and Foxconn in India”

  1. Must admit I find your comparison encouraging Tim. Perhaps in 20 or so years, India will China-ize and reach its level of prosperity.

    At least one thing I’m sure of. Neither India or China have any time for the Green nonsense, except as another excuse to rob the Western taxpayer.

  2. Wages are shitty at the Apple/Foxconn India factory because wages are shitty in India.

    The Apple/Foxconn factory is there because wages are shitty in India.

    Where is left after that? I don’t think Africa will be suitable, so I guess iPhones will have to cost more.

  3. Not so much. The factory is there because there are large tariffs on imports of finished phones, no tariffs on imports of phone components up to 85% (or whatever) of the value of the phone.

  4. Very unequal income distribution. 500 million – no, really – peasants farming 2 acres of land each. 100 million maybe city dwellers on approaching European wages.

  5. “The factory is there because there are large tariffs on imports of finished phones,”

    So this then is just journalistic fluff, — on the first line.

    “For weeks, workers had battled against wave after wave of illness as they toiled to build iPhones destined to sit under Christmas trees across the globe.”

  6. “As Paul Krugman has pointed out the wage in any particular factory is determined by the general wage rate of the economy around it” As hundreds, perhaps hundreds of thousands, of people have noticed before him.

    Is it evidence of some sort of inferiority complex among economists that they love to attach the name of an economist – preferably an American one – to the most humdrum of observations?

  7. So this then is just journalistic fluff . . .

    Not entirely, a quick bit of onlining reveals that the Indian operation also make phones for the worldwide market. No surprise.

  8. Well, the first person to point it out on a formal basis was Ricardo. And Krugman’s essay on Ricardo (Ricardo’s Difficult Idea) is both well known and very, very, good. So, yes, take the point, and yet…..

  9. The Other Bloke in Italy

    Stop Press: I have just read in the Mail that the Creature, Blair, has been given a knighthood.

  10. Bloke in North Dorset

    When I started working in India in ’95 doing GSM licence bids all the locals I worked with were very proud that there were over 1m $millionairs. \probably a few more.

    On import tariffs, I don’t know what they are now but when we got round to negotiating with suppliers they were something like 80% on software and 20% of hardware. We spent a lot of time working on getting those suppliers to rebalance their price schedules.

  11. @ Tom
    Some of them, but not all and, in earlier centuries quite a few started with earldoms anyhow (apologies to the 3rd Marquess of Salisbury who was PM three times).

  12. “A series of suicides at the vast Foxconn City industrial park in Shenzhen, China, in 2010 prompted international condemnation and brought promises of improvements to working conditions.”

    A quote from a 2013 article by Mr. Worstall:

    [quote]
    It really is time that the Reader in Economics at Cambridge University got with the program. At the time of that spate of suicides Foxconn had nearly 1 million workers in its plants. There were up to 14 suicides (it depends whose count you want to use) among that 1 million. The average rate of suicide in China is 22 per 100,000 people per year. That is, the suicide rate at Foxconn was under 5% of the general suicide rate of the Chinese population. It’s extremely difficult to see why any blame should attach to Foxconn or Apple over this.
    [end quote]

    So basically lowered the suicide rate, which is something that we should have been celebrating.

    Incidentally, this is why I’ve followed Tim’s writings for many years because he spots the things that others miss. I’ve often referred to him as the Frederic Bastiat of our times.

  13. The Other Bloke in Italy,

    “Stop Press: I have just read in the Mail that the Creature, Blair, has been given a knighthood.”

    I’ve just stopped caring about who gets what awards. They just gave Order of Saint Michael and Saint George to Daniel Craig, an award generally for serious diplomats and spies. And for “services to cinema” even though he’s been in a couple of good Bond films, Layer Cake and Knives Out.

    My MP got one for running a few small departments unspectacularly and voting with the government 100% of the time. Bit of a twat in my opinion, not fit to share the same title as Ridley Scott and James Dyson.

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