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Course: World History Project - 1750 to the Present > Unit 9
Lesson 4: Economic Interactions in an Age of Intense Globalization | 9.3- READ: International Institutions
- READ: Rise of China
- BEFORE YOU WATCH: Global China into the 21st Century
- WATCH: Global China into the 21st Century
- READ: Hua Guofeng (Graphic Biography)
- READ: Goods Across the World
- READ: WTO Resistance
- Economic Interactions in an Age of Intense Globalization
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READ: Goods Across the World
The article below uses “Three Close Reads”. If you want to learn more about this strategy, click here.
First read: preview and skimming for gist
Before you read the article, you should skim it first. The skim should be very quick and give you the gist (general idea) of what the article is about. You should be looking at the title, author, headings, pictures, and opening sentences of paragraphs for the gist.
Second read: key ideas and understanding content
Now that you’ve skimmed the article, you should preview the questions you will be answering. These questions will help you get a better understanding of the concepts and arguments that are presented in the article. Keep in mind that when you read the article, it is a good idea to write down any vocab you see in the article that is unfamiliar to you.
By the end of the second close read, you should be able to answer the following questions:
- How, according to the author, do cheap labor and unregulated workplaces influence global trade?
- How has the American economy changed in recent years as manufacturing jobs are lost to automation or moved to countries with lower labor costs?
- Besides the extremely high costs that would probably be required to manufacture iPhones in the United States, Apple CEO Tim Cook also notes the lack of skilled workers in the United States as a reason for moving manufacturing to China. Why does this lack exist, according to the article?
- What are “conflict minerals” and what are some examples?
- Why is it difficult to know what products have achieved certification and met ethical standards, such as being “ethically sourced” or “Fairtrade”?
- What kind of complaints against Starbucks are mentioned in this essay, and what are some examples of the company’s responses?
Third read: evaluating and corroborating
Finally, here are some questions that will help you focus on why this article matters and how it connects to other content you’ve studied. Since this is the first reading assignment of the course, you may not connect it to much other than the knowledge you already have.
At the end of the third read, you should be able to respond to these questions:
- How does this article fit into the larger production and distribution frame narrative for this course? Are companies like Apple and Starbucks really new, or are they similar to older ways of doing business around the world?
- Starbucks and Apple have both engaged in efforts to counter or reassure critics that their business practices are ethical. Why do some companies act in immoral ways? What do you think drives the efforts by Starbucks and Apple to act in an ethical way? How does their behavior compare to businesses and reform movements you encountered back in Unit 4?
Now that you know what to look for, it’s time to read! Remember to return to these questions once you’ve finished reading.
Goods Across the World
By Bridgette Byrd O’Connor
Have you ever thought about how many different nations contribute to your morning cup of coffee? What global resources affect your ability to post photos to your preferred social media app? These everyday luxuries are fueled by increasing globalization.
Introduction
How many different nations and workers does it take for you to buy a cup of coffee in the morning before school or for you to wake up for the school day to the sounds of the alarm on your phone? And do the companies that produce these products have high ethical and labor standards? In other words, are there hidden costs to having that cup of coffee or checking social media apps on your phone?
Thus far, you've learned about how the world has become more interconnected. Transportation, communication, and access to skilled labor have improved tremendously in this era. In addition, the ways in which goods are produced and distributed has changed dramatically. This includes everything from something as simple as a cup of coffee or as complex as your smartphone. There are now hundreds to thousands of people who are involved in the design, production, distribution, marketing, and support of the products you use and consume on a daily basis.
Asia is at the center of global production and distribution today. We've seen global trade routes and centers of production change over time. For example, during the early years of the Industrial Revolution, Britain and the North Atlantic zone were the main centers of manufacturing for the whole world. But since the late twentieth century, this role has shifted back to Asia. China, in particular, became a global player in the production and distribution of goods since 2005. Prior to 2005, Japan was the main organizer of trade in Asia. The late arrival of China as the global trading partner may seem strange. But a lot of their power and influence came with the changing nature of the Communist Party in China. The communists sought to maximize profits and establish a more efficient system of communication and transportation. India and China's citizens have benefited from the opening up of international trade markets. They have benefited from job growth that is directly related to export markets. More people may now be employed. But this does not necessarily mean that working conditions have improved or that wages have increased.
This shift in the production and distribution of goods has hurt some nations while benefiting others. Companies moved production to nations with cheaper labor and fewer rules and regulations. As a result, the United States has seen its manufacturing jobs, such as printing and textiles, fade away. Politicians tend to focus on these as negative results. But there has also been a corresponding increase in service industry jobs, such as health care, advertising, and hospitality (tourism industry). There have also been increases in the production of manufactured goods, mainly due to automation. This means that the American unemployment rate hasn't necessarily increased. New service industry jobs have been created to replace the manufacturing jobs that were lost. In contrast, China has a much lower share of service industry employment related to exports. The nations that now lead the world in terms of manufacturing for export markets are China, Japan, Mexico, and Korea while the United States has the highest percentage for the service industry sector followed by New Zealand, Australia, and Canada (Escaith, 173).
Apple’s iPhone
The Apple iPhone has been one of the most coveted (wanted) items in the past 10 years. Apple, an American company, has sold over 1 billion phones worldwide. Most iPhone owners use it on a daily basis. So, it makes sense to include the iPhone in our list of products to trace its production and distribution.
Apple makes most (about half) of its phones in Zhengzhou, China. But the components for the phone come from more than 700 different suppliers and about 30 different countries around the world. In addition to designing and marketing of the product, Apple also acts as the global supplier for its parts. Foxconn, a company based in Taiwan, owns and operates the Chinese manufacturing facility in Zhengzhou. The factory is located on 2.2 square miles and has a workforce of about 350,000 people. These workers are broken into day and night shifts. Most of these factory workers make about $300 a month. This can go up to $657 a month when overtime and years of service are factored in. This factory takes care of the final assembly, testing, and packaging of the product.
Judging from the low cost of labor, you may be wondering how much Apple makes in terms of profits on its iPhones. The company obviously makes a lot. Apple was the first company to be valued at over $1 trillion. But Apple's profit on its iPhones is probably far less than many believe. Apple doesn't release all of its iPhone cost data. But many journalists and bloggers have attempted to break down the costs. Tim Cook, the CEO of Apple, has stated that he's never seen one cost analysis that came close to being right. And there's a good reason for this. There are a ton of costs that go into producing the iPhone. These costs include concept and design, buying the component parts and manufacturing and shipping. They also include marketing, taxes, customs, and policing suppliers. The list could go on and on. So why does Apple choose to make the vast majority of its products overseas?
Forbes Magazine recently published an article about how much it might cost Apple to make the iPhone in America. The cost was very high (about
"There's a confusion about China…the popular conception is that companies come to China because of low labor costs… China stopped being the low labor-cost country many years ago and that is not the reason to come to China from a supply point of view…the reason is because of the skill…and the quantity of skill in one location…The products we do require really advanced tooling. And the precision that you have to have in tooling and working with the materials that we do are state-of-the-art. And the tooling skill is very deep here. In the U.S. you could have a meeting of tooling engineers and I'm not sure we could fill the room. In China you could fill multiple football fields" (Tim Cook, Apple CEO).
In response to this shift in manufacturing to China, Apple has established a Supplier Responsibility Program (SRP). The program is intended to make sure that all of its foreign suppliers are paying a living wage
Apple has created programs such as its SRP to ensure that all of its workers and suppliers are treated well. But the company has come under fire for continued problems at some factories. They have also been criticized for problems at the mines that supply the necessary materials for their iPhones. Some of the minerals that are mined and used in the lithium-ion batteries in the iPhones are considered conflict minerals. This label means that the minerals are sourced in areas that are in the middle of civil wars. So, the funds used to purchase these minerals are often also funding the continued fighting.
Conflict minerals such as tin, tungsten, tantalum, and gold (3TGs) are mainly found in the eastern areas of the Democratic Republic of the Congo (DRC). This nation has had a troubled history. These troubles began in the mid-nineteenth century when European imperialists wanted access to its natural resources. They continued under a dictatorship established after the nation achieved independence in 1960. The DRC has also been involved in wars from 1996 to the present. These wars have led to the deaths and displacement of millions. The mines in the eastern provinces generate the most wealth for the nation. But they've also been a source of corruption, child labor, and labor violations for years. China is the largest importer of these raw materials. And many of these raw materials go into the creation of iPhones and other electronics.
Apple took the extraordinary steps of mapping all of its suppliers and mineral smelters. They then assessed those suppliers and smelters to make sure that they were living up to the SRP. These lists of suppliers and smelters can be found on the Apple website. Posting on the website was done to ensure transparency. Apple is also trying to buy the necessary minerals directly from the mines. This will help avoid paying middlemen for services. But it will also allow Apple to check that these mining companies are not employing child labor.
From start to finish, there are about 400 different steps to the production of the iPhone at its factory in China. The workers at the Zhengzhou plant have a staggering output. They produce about 500,000 phones per day (the equivalent of 350 phones per minute). The Chinese government has even built a customs facility next to the factory. This aids in the shipping process. After the phones clear Customs, they travel a short distance to the Zhengzhou airport. This airport recently expanded its operations as a direct result of the traffic related to the shipment of iPhones. Since the phones are small and lightweight, thousands can be packed into a 747 airplane. This means that they can move quickly around the world to consumers.
The building of the factory in Zhengzhou has completely changed the area. Just as during the Industrial Revolution, a city has formed around the factory. The city provides workers with accommodation and services. Therefore, it's not just the factory workers who depend on Apple and Foxconn for their livelihoods. The thousands of people who have moved to this area to provide necessary services such as rental units, food, gas, and health care to the workers also depend on Apple. In addition, many others around the world also depend on Apple. This includes people who work for the suppliers of raw materials, those involved in the shipping of the phones, and those who work in retail stores and at call centers.
Starbucks Coffee
It's not often that a brand is so well known to people all around the world that all it takes is one image to know the company. Some companies have achieved this level of success. Names that come to mind include McDonald's, Coca-Cola, Apple, Ikea, Samsung, Mercedes, and Starbucks. In fact, the Starbucks symbol and its coffee can be seen and purchased in 28,209 locations in 76 countries around the world. As Starbucks has grown in popularity over the past few decades, so too has the criticism of the company. Starbucks, much like the case study on Apple above shows, has responded to these criticisms. They've attempted to make sure that their coffee is ethically sourced, produced, and distributed to its thousands of stores and millions of customers around the world.
Starbucks has worked with coffee growers in Latin America, Asia, and Africa to ensure that the beans they purchase are ethically sourced. In fact, they announced last year that 99 percent of their coffee has met ethically sourced guidelines. The company is also working hard to reach the 100-percent goal. But how much does Starbucks know about the practices at local farms including those that coerce or force labor or employ children? In August 2018, a complaint was filed by the nongovernmental organization (NGO) Conectas Human Rights and the labor union ADERE MG. It was filed against six international companies including Starbucks, Illy, McDonald's, Nestlé, and Dunkin Donuts. The complaint stated labor violations occurred at Brazilian coffee farms in the Minas Gerais state. It alleges that some of the coffee growers in this region of Brazil have employed forced laborers and children on its farms. This region produces more than 50 percent of the country's coffee exports. The case is pending. But it highlights how difficult it is for large multinational companies to know fully about the labor and ethical practices of each small farm that does business with it.
There are also questions about how much of the coffee produced and distributed by Starbucks counts as being Fairtrade certified. Currently, all of Starbucks Espresso Roast coffee beans are Fairtrade. This means that all of the beans it uses to create custom beverages in its stores meet this standard. Their other brand, Pike Place Roast, is also 100 percent Fairtrade certified. But their many other coffees do not fall into this 100-percent range. As previously stated, 99 percent of their beans are ethically sourced. But not all are Fairtrade, which many consider to be the best certification. And this is where it gets confusing. There are many different accreditation organizations for coffee producers. They include Direct Trade, Utz, Rainforest Alliance, Proudly Made in Africa, and Organic Certified. Each of these organizations has different standards for achieving their accreditation. Some only require that coffee farmers be 30-percent compliant
However, Starbucks has created a number of initiatives to make sure it is committed to ethical sourcing and labor practices. It has also consistently been ranked as one of the most ethical companies both in coffee sourcing and as an employer. These initiatives include a Global Farmer Fund. The fund has invested $50 million to help coffee farmers. This includes supplying loans to over 2,000 women in Colombia to encourage more diversity in coffee farm ownership. The company also created a Supplier Diversity and Inclusion Program. This program fosters "business relationships with companies that are at least 51 percent owned and operated by a minority, woman, LGBTQ, veteran, person with a disability, or small business classified as HUB zone or 8(a)" (Starbucks). In 2018, a Starbucks store manager called the police on two African American men at one of its stores in Philadelphia while they were waiting for a business associate to arrive. After the incident, Starbucks famously closed down 8,000 of its stores in the United States to provide diversity training. The company isn't perfect, but it does strive to correct discriminatory practices. Supporters would argue that this was done as a result of Starbucks' commitment to diversity and inclusion. Critics counter that it was to prevent their brand and profits from taking a hit
Over the years, Starbucks has put its money and time behind programs that help both coffee farmers in other nations as well as its workers across the globe. It has achieved 100 percent pay equity for all genders and races, who perform similar work in their stores around the United States. They are also attempting to close gender pay gaps in all of their markets. They have hired 10,000 military veterans and spouses at their stores. They've also committed to adding another 15,000 veterans and spouses by 2025. In response to the United States' 2017 travel ban on refugees, the company plans to hire 10,000 refugees by 2022. The jobs will be at locations in the U.S., Europe, and Canada. All of these moves have been steps in the right direction in terms of trying to hire and support those who have been historically underserved.
When it comes to environmental issues, Starbucks has pledged to create more eco-friendly stores. These stores will operate on renewable energy. At the moment they have 1,400. Their goal is 10,000 "green" stores—by their definition. In addition, about 62 percent of its stores use renewable energy sources. They also have a goal of distributing 100 million trees to growers in Mexico, Guatemala, and El Salvador by the year 2025. The goal is to achieve sustainable farming practices. They have currently given 21 million trees. Starbucks has also attempted to increase the percentage of recyclable materials in their coffee cups. They have promoted recycling in their stores. But when you consider the amount of single-use coffee cups and straws that are used on a daily basis, the damage seems overwhelming. Critics have also called the company out for other products used in their stores. These products include non-organic milk products and non-GMO (genetically modified organisms) foods.
How much should a global company like Starbucks or Apple do to ensure that their products are environmentally friendly and ethical? Also, how much can they do without owning all of the means of production and distribution? These two companies charge the most for their products when compared to other providers of the same goods. However, people are still willing to pay the
Author bio
Bridgette Byrd O’Connor holds a DPhil in history from the University of Oxford and has taught Big History, World History, and AP U.S. Government and Politics for the past ten years at the high school level. In addition, she has been a freelance writer and editor for the Big History Project and the Crash Course World History and U.S. History curriculums.