Introduction

How many different nations and workers does it take for you to buy a cup of coffee in the morning? How many does it take for you to wake up to the sounds of the alarm on your phone? Do the companies that produce these products have high labor standards? Or are there hidden costs to having that coffee or checking your phone?

Thus far, you learned about how the world has become more interconnected. Transportation, communication, and access to skilled labor 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 to something as complex as your smartphone. There are now hundreds and even thousands of people who are involved in the design, production, distribution, marketing, and support of the products we 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 to Asia, and in particular to China.

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. As a result, the United States has seen its manufacturing jobs, such as printing and textiles, fade away. Politicians tend to focus on these changes as harmful. But there has also been a corresponding increase in service industry jobs in such fields as health care, advertising, and tourism services. This means that the American unemployment rate hasn’t necessarily increased. New service industry jobs have been created to replace many of the manufacturing jobs that were lost.

Apple’s iPhone

Over the past 10 years, the Apple iPhone has been one of the world’s most desired items. Apple, an American company, has sold more than 1 billion phones worldwide. Most iPhone owners use it on a daily basis. So, it makes sense to look at how the iPhone is produced and distributed.

Apple makes about half of its phones in Zhengzhou, China. But the parts for the phone come from more than 700 different suppliers and about 30 different countries around the world. Foxconn, a company based in Taiwan, owns and operates the Chinese manufacturing facility in Zhengzhou. The factory has a workforce of about 350,000 people. Most workers make only about $300 a month.

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.

However, low labor costs are not the only reason Apple chooses to make the vast majority of its products overseas. One of the main reasons is that the United States’ workforce does not have the necessary skills. China has focused on training workers to meet the needs of manufacturers. Meanwhile, the United States has become much less focused on training people for factory work.

“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 the 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.¹ It also ensures working conditions meet Apple’s standards. Still, the company has come under fire for continued problems at some factories. It has also been criticized for problems at the African mines that supply the necessary materials for its iPhones. Some of the minerals that are mined and used in the iPhone batteries 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 these wars.

The workers at the Zhengzhou plant produce a huge number of phones—about 500,000 per day. So many workers are involved that a city has formed around the factory. This city provides workers with housing 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 food, housing, and other necessary services 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 the stores that sell the phones.

Starbucks coffee

Starbucks has 28,209 locations in 76 countries. As Starbucks has grown in popularity over the past few decades, criticism of the company had grown as well. Starbucks has responded to these criticisms. It has attempted to make sure that all its coffee is ethically (fairly and responsibly) sourced, produced, and distributed. This involves ensuring that the workers who harvest the coffee beans are not mistreated and that the company’s practices do not damage the environment.

Starbucks has worked with coffee growers in Latin America, Asia, and Africa to ensure that the coffee beans it purchases are ethically sourced. But how much does Starbucks really know about the practices at local farms? In August 2018, for example, some suppliers in Brazil were accused of employing forced labor and children on their farms.

Starbucks claims that 99 percent of its beans have been certified as ethically sourced. But not all are certified as Fairtrade, which many consider to be the highest standard. This is where it gets confusing. There are many different organizations that monitor the practices of coffee producers. Some only require that the coffee farmers be 30 percent compliant.² This allows some coffee farmers to get away with using substandard environmental and labor practices.

Starbucks has also had problems within the United States. 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 closed 8,000 of its stores in the United States to provide retraining for its employees. Supporters say this shows the company is committed to fighting racism. Critics claim the company only acted to prevent its brand and profits from taking a hit.³

 Starbucks has responded to its critics by creating programs that promote ethical sourcing, labor reforms, and diversity. The company created the Global Farmer Fund to encourage production at minority-owned farms. It supports equal pay for men and women. They have also committed to hiring more veterans and refugees. These are steps toward supporting those who have been historically underserved.

When it comes to environmental issues, Starbucks has pledged to create more eco-friendly stores. For example, it has attempted to increase the percentage of recyclable materials in its coffee cups. It has also promoted recycling in its stores. But when you consider the number of single-use coffee cups and straws used and thrown away on a daily basis, these efforts seem slight.

How much should a global company like Starbucks or Apple do to ensure that its 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 more than most other providers of the same goods. However, people are still willing to pay the $4 to $5 for a cup of coffee and $800 to $1,100 for a phone. Until sales begin to drop, these companies will continue to produce goods in the same way. But consumers do have the power to push for change.

1 A living wage is a wage that is high enough for a worker to buy what they need to have a decent standard of living.

2 Compliant meaning that the companies have made the necessary changes to meet certain requirements or standards.

3 “Taking a hit” refers to companies losing money or causing damage to their brand.