Apple, Freddie and Doing the Right Thing

Ah, the cultural contradictions of capitalism.

No, today’s subject is not Daniel Bell who published a seminal book of that title in 1976. It is the spectacle—and there really is no other word for it—of educated people demonstrating their wishful approach to economics.

Last week, the New York Times published a series of articles on the contract manufacturers Apple uses. After years of stories about working conditions in China and the Foxconn suicides it’s hard to believe anyone thinks the People’s Republic is a worker’s paradise. My friend John, an engineer who travels there regularly, says he’s never seen any facility that wasn’t terrible. Stygian. Dickensian. Pick your nasty-sounding adjective.

Somehow, though, a bunch of folks missed all that as they enjoyed their iPhones, iPads, iPods and other iProducts from the gang in Cupertino. It took the Times to awaken them to the people behind the products they love and demonstrate they’re not all Jobsian saints.

Predictably, the boobosphere erupted with the social network masses crying, “Shame, shame.” The reaction was extreme. “Why can’t Apple spend its cash hoard on US manufacturing?” they asked. “Who wouldn’t spend $65 more on their iPhone if it created jobs in the US?” The furor spread and now it’s being talked about by Craig Stephens on Marketwatch and other commentators.

But wait, there’s more. (Isn’t there always?) Monday, listeners to Morning Edition on NPR got an earful about the latest misfeasance from recidivist financial giant (and current ward of the state) Freddie Mac. If I understand correctly, Freddie is securitizing mortgages and holding onto the income tranches of pools with higher interest rates.  It also seems the servicing side of the house is tightening the credit quality rules. The result is that refinancing activity is slowed or eliminated and that just happens to make those higher interest income streams more valuable.

NPR did state, unequivocally, that Freddie is doing nothing illegal. They also managed to get PIMCO’s Scott Simon on record as the Captain Renault of this episode.  “We were actually shocked they did this,” he’s quoted as saying.

Imagine, capitalists engaged in capitalism and the world is up in arms. I’ll grant you that Freddie has an optics problem but essentially it’s a highly specialized bank and this looks like classic bank practice.

Our beat isn’t to pump for any one economic system. Codswallop, however, is mother’s milk and there’s enough of it floating about to choke a dogfish. Despite the fact that Apple is loved and Freddie loathed it seems to me the same problem lies behind both these stories. And that problem is a belief– held deeply by some—that when something isn’t right somebody should fix it.

It’s the heart of the modern liberal dilemma.

Really, if Apple pisses you off because of how it manufactures things there’s something you can do. It might even catch Apple’s attention. Simply take all your Apple-branded goods to One Infinite Loop in Cupertino and start a bonfire and don’t replace anything until the manufacturing changes to something you can live with.

Maybe we should expect more of companies but the economists long ago walked away from the moral roots of classical economics. Companies don’t have a moral obligation to behave a certain way. Just think about it. If you and Sally are both customers and you and she disagree on what the moral thing to do is, how is the company supposed to choose? Managers have enough to do without adding moral philosophy to the plate.

So the onus, I think, ought rightly to be on the individual.

Moral choices involve real sacrifices. I used to wear Bass Weejuns. But over the course of 15 years or so the factories were moved from Maine to Tennessee to Guatemala. The price seemed never to budge. I accepted that bargain until the quality began to deteriorate at about the same time I started to grow concerned with solid waste. It’s nuts to throw shoes out every 6 months just because they’re not repairable.

So I switched brands. Allen Edmonds shoes are made in Wisconsin and you can send your shoes back to the factory for recrafting. (Alden shoes are made in the US, too, and offer a similar service.) The price difference between Allen Edmonds and Bass loafers would easily pay for an iPod Touch. That’s my choice, though.

And that’s how it should be. The people irate at Apple and Freddie seem to want it both ways. They want their lower-priced, cool toys. They want lower cost mortgages. They just want the companies marketing those things to behave a certain way and if doing so costs money to either distribute the costs across all customers or make less money.

That may seem like a win for everybody. But it strikes me as a profoundly immoral position.  Moral choices ought to be made freely. Forcing all customers (or citizens even) to accept one mode of behavior as proper and acceptable is arrogant, coercive and, I’d submit, just plain wrong.

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