2nd February 2012

Pride will have a fall, and even the world's largest corporation by market capitalisation might need to start looking over its shoulder as a small backlash gathers momentum.

Apple is the darling of the technology sector, producing a stream of iconic, aesthetically pleasing products consumers did not know they needed. And that's just it, how sustainable is a business model based almost exclusively on delivering the next market ‘wow', which by implication means it has to go on endlessly innovating just to stand still, rather than designing for long-term excellence?

Founded in 1976, Apple was part of that golden generation of high-tech companies that encompassed a new American dream; back then Apple boasted its products were designed and made in America; now hardly anything it makes is made in the USA, in fact Apple now reflects not so much the American dream as the arch-exponent of globalisation, which has seen a jobs drain from the West to the East.  Almost all of the 70 million i-phones and 30 million i-pads that have become an omnipresent part of UK life are assembled in China.  Cheap labour, flexible factories and the sheer scale of production makes US manufacturing of Apple's products a distant memory.

This is already raising questions; but the implications for labour, human rights and conflict minerals go to the heart of Apple's sustainability difficulties.

Continue reading…


More from Mindful Money:

Apple storms ahead – but is it unstoppable?

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17 thoughts on “Apple”

  1. Drf says:

    Hi Shaun,

    I think you are absolutely correct concerning any taxpayers’ further liability in the government’s nationalization of RBS.  The only real need for it being nationalized is that the enterprise has failed yet again after already being bailed out at least once before by the taxpayer; (the reality is that there has been more than one bail out already in effect, but that has not been declared properly in a public fashion). So RBS should be allowed to fail.  It is insolvent anyway.  The existing shareholders thus only have a share in insolvency.  Why should they thus be compensated for anything?  They have invested and lost it all; that is what Capitalism is.

    Once RBS does fail the government could then nationalize it without any compensation to existing shareholders, and protect all existing deposits.  Of course, it is in any case unthinkable in reality that a supposed Tory government would even consider nationalizing anything!  The very fact that they are shows just how left-wing this country has become, which I have been pointing out for some while is the root of most of our economic problems. The proper approach in a Capitalist economy in any case would be for the official receiver to market either the total enterprise so that it was purchased by new owners, or for the assets to be split up and marketed as may be possible.

    1. Anonymous says:

      This smacks too much of Railtrack, where ministers deliberately made the company insolvent by withholding promised loans, even though it was reporting profits at the time. Class actions would be inevitable. Here are two easier, more honourable options. 

      1) Offer the outside shareholders fixed rate preference shares for their holdings, leaving the state with 100 per cent of the equity. Of course, the preference shares could not immediately pay dividends.
      2) Propose a scheme of arrangement in which the outside shareholders take control of some unwanted part of RBS, say investment banking, leaving the state with the clearing bank.    

      1. Drf says:

         Hi outsideratdisqus,

        I do not agree that there is any similarity with Railtrack at all.  RBS is in trouble all on its own, without any denial of promised loans or any other factor where Ministers have done anything whatsoever to cause it to become insolvent.

        You seem to have have completely distorted Shaun’s and my point. RBS is already in reality insolvent.  It has already had government aid to save it from insolvency at least once and in effect more than once. Minsters have thus done all which could be expected and more to save it.  Yet it is still mismanaged and gets into further solvency difficulties.  Minsters can in no way be held responsible for that. 

        In a real Capitalist economic system any entity which is badly managed by amateurs and becomes insolvent fails and the shareholders lose all the money which they invested. I cannot see any real or significant reason why things should be any different in this case, and that I understood as the point which Shaun was making.
        “Frankly the UK taxpayer is fully on the hook because in such a
        scenario what value would the 18% of shares they do not own have?
        Virtually none. And here we come to the uncomfortable bit so I hope that
        you are in the words of BBC childrens programmes sitting comfortably.
        Why should the UK taxpayer have to pay £5 billion for an extra stake
        when the only reason the shares have any value is because of their
        support? I feel sorry for RBS shareholders as they have not been told
        the truth about the value of their shares and past mismanagement of the
        company. But I feel that there is no reason for UK taxpayers to again
        overpay for shares in RBS.Frankly once was too much and anyway as we go
        through the balance sheet I suspect  UK taxpayers will find quite enough
        things they are liable for.” 
        It seems as if you did not read Shaun’s blog properly?

        1. Anonymous says:

          Dear Drf,
          You will have noted that my alternative “painless” options do not involve any outlay from taxpayers, but would avoid severe effects on confidence. 

  2. Spacemanc says:

    If the Scots vote for independence in a couple of years, then how will the UK government be able to justify owning what will then be a foreign bank? If they vote yes, the divorce negotiations are going to be fun!

    1. Anonymous says:

      Hi Spacemanc

      I did think of what I believe is still called the West Lothian issue. This has changed somewhat I agree as possible independence has moved onto the agenda. The obvious debate is what share of RBS will be handed over to Scotland?

      As to the fun bit well I am sure that the document linked too below will come up at som epoint…

  3. Anonymous says:

    Hi Shaun,

    After the Northern Rock fiasco, I’d hope the government would learn and change tack.

    Surely it would be better to offer the RBS shareholders a simple
    choice – you pay your share of the additional funds needed or accept
    bankruptcy and total loss on your shares ….  This might save on legal bills

    The bondholders should also be given the choice of buying out RBS or taking losses.

    I also strongly agree with your suggestion that nationalisation is a step on the road to breaking up RBS and selling the viable parts to the highest bidder.

    Time to cut the losses. To quote Maggie Thatcher – it is losing money, any sale price is good value.

    1. Anonymous says:

      Hi Expat

      I agree entirely and if done properly a lot of doubt about RBS’s balance sheet would be settled. We will not like what we see in terms of so far hidden losses but if we can return it or parts of it to actual banking we will taking a step on the road to recovery.

  4. JW says:

    Hi Shaun
    RBS should be allowed to go bust and then the state can pick up the pieces and sell on at a profit. It should not act as a ‘banker’ or ‘lender’.
    Legally, ethically and morally its is the right thing to do.
    By the way I commend the way you strictly keep politics out of your blogs. There is too much emotion in ‘isms’ being the cause of problems. Of course politicians of different hues influence events, but I think the problems faced by the western world and Japan are macro in nature. Take where I am currently living, France. Most in the UK label it as ‘socialist’ definitely ‘left wing’, yet there have been more right wing governments in France since WW2. Compare the UK and France economically and there is a cigarette paper between them, yet they are almost always described as having very different political systems etc.
    The problems facing us are overwhelmingly macro;
    1 For 4 decades ‘capital’ has increasingly taken the value and that means a very few ‘win’ at the expense of the many.
    2 Globalisation has accelerated this effect
    3 Demographic changes mean fewer working people support a ‘services demanding’ older population
    4 Robots remove people from the value chain everywhere and at every level. 
    5 Energy is not cheap and mindless ‘green’ initiatives make decision making about this endlessly difficult.
    Politicians from whichever ‘ism’ you like cannot cope with these effects. They just try to keep the ‘status quo’ for as long as they can, sometimes for selfish reasons, but mainly because they can’t cope with the changes developing.
    Keep up the great work Shaun, you are one of a few sane voices who help to lighten the murky gloom.


    1. Spacemanc says:

      “Politicians from whichever ‘ism’ you like cannot cope with these effects. They just try to keep the ‘status quo’ for as long as they can, sometimes for selfish reasons, but mainly because they can’t cope with the changes developing.”
      Are you sure that it’s not simply a case of the politicians reflecting the  voters?

      1. JW says:

         Could be, they spend half the time ‘testing’ possible policies with groups , so they tend to follow rather than lead. As the communication of what is actually going on economically is pretty dire, its a recipe for stagnation.

        1. DaveS says:

          Politicians have implemented the policies but they didn’t invent them.

          4 decades ago something changed. The changes were implemented by Reagan and Thatcher govts but they didn’t invent the economic philosophy.They started the big structural changes that we call globalisation. They de-industrialised our economies, opened trade, promoted service sectors, lowered taxes and in Reagan’s case opened the door to deficit spending on a massive scale. The govts that followed them pursued the same policies, whether right or left, but if anything they pursued them more aggressively. Blair was in the Telegraph the other day pleading that we don’t throw away Thatchers legacy – unbelievable really.

          In my mind it was largely driven by the desire of Western capitalists to exploit the limitless supplies of super-cheap labour in the East. They could rid themselves of costly and troublesome Western labour and massively boost profits.

          Only problem is the Western employees were also the consumers – how can you make profits if your consumers are unemployed. Solution – the debt driven service economy – genius really. You no longer have to employ your consumers. And the banks sit in the middle making a margin on the debt flow.

          So my question is – who did figure all this out ?

          1. JW says:

             It is known as the ‘Chicago School’.
            The more extreme measures are to deliberately create chaos to maximise advantage.

          2. DaveS says:

            Thanks – they have a lot to answer for.

            Henry Ford (pretty strong capitalist) once doubled pay overnight for his workers. Not for philanthropic reasons – he realised to grow the company he needed to create consumers who could afford his cars.

            These guys figured out how to to do the opposite – take their workers income away and get them to consume more. The answer was debt. They had to borrow and keep borrowing, they had to have collateral to borrow with and the debt costs had to decrease so they could continue to borrow more.

            I feel this pretty much explains the mess we are in.

    2. Anonymous says:

      Hi JW and thank you.

      As to the RBS situation it is actually quite common as one looks around the world, where insolvent banks are supported by the taxpayer but allowed to trade on and to have shareholders. The UK made this mistake with Northern Rock and ended up with shareholders trying to sue in one of the most bizarre legal cases I can think of. But Ireland has done the same and we see Spain ploughing down that road.

      If RBS is declared insolvent at 24:00 on a Sunday night then at 00.01 the UK taxpayer steps in then the legal issue should be settled. As the UK taxpayer is liable anyway we may as well take charge.

      Speaking of bizarre events did you see the ECBs press conference?

  5. Anonymous says:

    I’m a bit puzzled about why the taxpayer, with over 80% of RBS, is not in control. How did that occur? 

  6. Mac says:

    If RBS is declared insolvent at 24:00 on a Sunday night then at 00.01 the UK taxpayer steps in then the legal issue should be settled. As the UK taxpayer is liable anyway we may as well take charge.

    Some of us said that at the time…………..with the added spin off the government would have had an ideal vehicle to deliver its lending quotas.  And if the rest of the banking sector didn’t get in line…………….. such thing!  

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