When corporate conscience fills in for government regulation

When Apple, Inc., issued its latest Apple Supplier Responsibility Progress Report, there was reason for skepticism over the company's sincerity. It has posted progress reports since 2007, with the most recent reports reaching further into the company's supply chain to find more significant violations of the Apple Supplier Code of Conduct.

With the 2012 report, Apple even released a list of 156 companies that it said supply 95 percent of the components and products it sells. Business writers said the move was a sharp reversal of Apple's previous policies.

“The tell-all on Friday surprised many in the industry and on Wall Street. Experts say rivals and investors pay consultants for exactly this type of valuable intelligence,” Reuters News Service reported. (“Apple reveals supply chain, details conditions,” Jan. 14, 2012)

But as Apple reports on violations of its Code of Conduct, including three businesses with which Apple suspended contracts, it also continues to contract out manufacturing of its products to operations in China and other Asian nations where issues of workplace safety and violations of workers' rights persist.

The reasons are obvious. Plants in China and other Asian countries have lower costs, both from lower wage rates and from lax regulation of workplace conditions. Lower costs on popular products leads to higher earnings and profits. Apple is not alone among American technology businesses in farming out production to low-cost factories in Asia. The Taiwanese-owned Foxconn plants that produce iPads and iPods also are contracted by Dell, Hewlett Packard, Motorola and other U.S. tech companies.

The difference is Apple has been tainted more by revelations of unsafe conditions and labor violations over the past three years. Two explosions in 2011, attributed to unsafe conditions at plants producing Apple products, killed four workers and injured dozens more. Worker suicides in 2010 were blamed on working conditions at Apple contractors. The Progress Reports find repeated child labor and contract labor violations, as well as workers poisoned by chemicals used in production of iPhones.

To demonstrate its concern, Apple expanded audits of its suppliers, finding more violations. In January, it signed on with the Fair Labor Association – an industry-based organization founded in 1999 to set labor standards for non-U.S. manufacturers supplying U.S. companies such as Adidas, Nike, Hanes and Russell. FLA also performs audits of plants. It announced this week it is conducting an independent investigation of a Foxconn plant in Shenzen, China, based on reports of “poor worker conditions.”

But it all follows a New York Times series on worker abuse in plants producing Apple's products, only the latest report published over the past several years in Chinese, American and European media of severe work conditions at Apple suppliers.

In the United States, workplace safety and working conditions are monitored by the government, with the federal Department of Labor enforcing the Occupational Safety and Health Act and the Fair Labor Standards Act.

In China, government agencies often support employers against workers' claims. Workers have a right to quit a job. Immigrant workers signed to labor contracts may not even have that option.

It is clear workplace regulation by business, rather than by government, can lower costs of production. That supports political arguments in the U.S. that government regulation of workplace environments is a reason American manufacturing is not competitive in the global marketplace and aligns with a libertarian position on capitalism and property rights championed by economist Friedrich A. Hayek. In arguing that capitalism opens opportunities to workers, Hayek said organized labor – unions – block the operation of the free market.

“Monopolies of organized groups of workers,” he said, “. . .create an artificial scarcity of their kind of work by preventing those willing to do such work for a lower wage from doing so.” (“The Fatal Conceit/The Errors of Socialism,” 1988, University of Chicago Press)

Workers also can choose to die in a toxic working environment.