On the same day Apple Inc. is set to announce its fourth quarter financial results, the GoodElectronics Network and SOMO are publishing a paper that is critical of the company’s business model and impact on society. The paper explains how Apple is short-changing societies by seeking to maximize financial returns on its enormous profits instead of reinvesting that value into the real economy.
The multinational shrewdly minimises its corporate costs through the relentless offshoring of production and related ‘activities’ to low-wage countries and tax havens. Its accumulated returns far exceed Apple’s capacity to reinvest its earnings productively. As a result, Apple increasingly operates like a large institutional investor, investing most of its mounting cash pile in financial markets.
Apple as an example of a worldwide trend
While perhaps one of the most extreme examples, Apple is just one of countless multinational corporations that have collectively come to embrace Wall Street’s maxim of maximizing shareholder value at all costs, leading to a global ‘race to the bottom’. The overall outcome of these developments is paradoxical.
Never before have corporations been more awash with cash. Outside of a small group of corporate managers and shareholders, few in society benefit. On the contrary – corporate financial investments reinforce troubling trends of high unemployment, rising debts, inequality and fiscal austerity in Europe and the US and precarious and badly paid jobs in the Global South.
When corporations avoid paying their fair share of taxes, governments around the globe are forced to raise rates for other types of taxes (such as sales taxes)and/or reduce investments in public services. All this at comes a time when workers worldwide are struggling with reduced purchasing power. As a result, mounting corporate riches based on cheap labour and relentless tax dodging reinforce ballooning public and private debts.
Changing this business model will benefit society and – in the long run – companies themselves
To contribute to a more balanced and sustainable economy, governments should enact and enforce regulations to ensure that multinational corporations:
- pay their fair share in taxes
- pay decent wages
- invest their cash reserves in productive rather than financial assets.
Ultimately, these changes will also benefit multinational corporations, such as Apple, and their shareholders by contributing to a strong and sustainable society that will supply Apple with workers to build and consumers to buy its products for years to come..
The paper Rich corporations, poor Societies: The financialisation of Apple is written by SOMO and published by the GoodElectronics Network.