[lbo-talk] Value of the dollar

[// ravi]

On Jan 31, 2012, at 6:02 PM, Marv Gandall wrote, quoting the Economist:
> Take the iPad, which America imports from China even though it is entirely designed and owned by Apple, an American company. iPads are assembled in Chinese factories owned by Foxconn, a Taiwanese firm, largely from parts produced outside China. According to a study by the Personal Computing Industry Centre, each iPad sold in America adds $275, the total production cost, to America’s trade deficit with China, yet the value of the actual work performed in China accounts for only $10. Using these numbers, The Economist estimates that iPads accounted for around $4 billion of America’s reported trade deficit with China in 2011; but if China’s exports were measured on a value-added basis, the deficit was only $150m.
> 
> The chart shows a geographical breakdown of the retail price of an iPad. The main rewards go to American shareholders and workers. Apple’s profit amounts to about 30% of the sales price. Product design, software development and marketing are based in America. Add in the profits and wages of American suppliers, and distribution and retail costs, and America retains about half the total value of an iPad sold there. The next biggest gainers are South Korean firms like Samsung and LG, which provide the display and memory chips, whose profits account for 7% of an iPad’s value. The main financial benefit to China is wages paid to workers for assembling the product and for manufacturing some inputs—equivalent to only 2% of the retail price.

I can understand the relevance of all this analysis w.r.t the yuan, but w.r.t the larger topic of US jobs, I am not sure this says much. Apple’s workers keep their jobs and their pay (the bit about shareholders is more dubious: Apple does not pay dividends). Also, there are some retail/service jobs generated by Apple’s success (for more on the nature of these jobs, including efforts to unionise, please visit Google :-)). But manufacturing and assembly, which could arguably generate equal or more number of jobs, and would likely be higher paying than the retail/service jobs, all go to China and South Korea.

The idea that we keep the higher end work and the high-paying jobs, while often offered as the solution by rags like the Economist, doesn’t make sense. As Korea, China and India are demonstrating, it is easier for them to move up the chain than for the US to retain that advantage (for an industry example, see Windows vs *nix vendors in the 90s). Second, high-tech jobs are low volume, I would think? And on the flip side, because they are high demand, they are less likely to organise/unionise (“I am management, damnit” as the guy from the 70s show tells an interviewer, after having been laid off his old supervisor role).

I realise even if what I write is coherent, it is a different matter than the subject of this thread or the thrust of the Economist piece above. And apologies for that!

Here is Krugman on Apple and China:

http://krugman.blogs.nytimes.com/2012/01/22/apple-and-agglomeration/

	—ravi