31 January 2035: “Kali Sustainable Robotics of Hyderabad has completed its takeover of the remnants of Apple after the fallen giant of consumer electronics filed for Chapter 11 bankruptcy in the US.
“At a mere 100bn New Rupees, the knockdown price brings a final humiliation for a company that two decades ago commanded the world’s most valuable brand. Kali plans to manufacture and market vintage-style ‘tablets’ and ‘smartphones’ as premium-priced legacy products to nostalgic users in China and the West who wish to revisit their youth in the early 21st-century heyday of ‘Chimerica’.
“The company’s chief executive, Draupadi Pandava, vowed that these retro devices would conform to all the environmental standards of the South Asian Federation.
“‘We know that Apple’s clunky stuff makes today’s teens giggle,’ she explained to the Munshin Pan-Asian News Portal. ‘Besides, Apple committed a slow reputational suicide by refusing to pay its fair share of tax. But older folks still have soft spot for these quaint gadgets. Without derailing the UN’s Green Tech directives, we want to give them the chance to scroll down Memory Lane’.”
All firms fade. Even Apple will rot. Hubris seeds nemesis. Just now, users as well as makers of iPads, iPhones and even the humble laptop need a memento mori. Boosted by an army of media cheer-leaders, Apple can still rely on a corporate propaganda system second to none. This week, it surpassed its own high-water marks of hype.
News of world-record profits – $18bn (£11.9bn) in a single quarter – and its $142bn cash pile released a blizzard of financial superlatives. Each iPhone 6, we learned, can turn an astonishing profit of almost 70 per cent.
Who now recalls that, a short month ago, the BBC’s Panorama broadcast a meticulous exposé of forced labour in the factories of Apple’s Chinese suppliers? Chief executive Tim Cook felt “deeply offended” at the time. Yet such investigations barely seem to bruise the shiny skin.
Now, mere spectacular numbers no longer suffice. Apple cultists vie to compare the Californian firm’s wealth and clout not only with rival enterprises but with medium-sized nation-states. Is Apple bigger than Portugal, Denmark or Morocco? Could it buy Lithuania three times over? The figures may strike awe. For example, that cash mountain – the bulk held offshore at low tax rates – makes Cook’s outfit, on one measure, richer than the United Kingdom itself. Last month’s statistics for exchange reserves show that – liabilities aside – the UK Government holds $107bn and the Bank of England $25bn.
Beware raw figures: the urge to stockpile cash may betray insecurity as much as confidence. Both Thailand and Mexico have recently held deeper reserves than the UK. For all the glamour of the brand, neither does its turnover alone give Apple a place at the top of the money-tree. Although its 2014 sales of $183bn may be catching up with stricken Greece (GDP: $242bn), Apple’s income is still dwarfed by those of unloved old-economy behemoths such as BP ($396bn). In the longer term, the headline numbers game means nothing. Whatever happens between now and 2035, Portugal, Morocco, Denmark, Lithuania and indeed Greece all have a much stronger chance of retaining their present status than does Apple.
Apple-worship reflects the current temptation to invest commercial brands with an ersatz form of patriotic loyalty. After all, many smallish states look fragile now, with Greece and its radical new government still chilled by cold winds from markets and the European “Troika”, the committee which holds the euro purse strings.
In addition, next week Brussels will host the eighth round of negotiations over the planned Transatlantic Trade and Investment Partnership (TTIP). This programme for a comprehensive free-trade pact between the EU and US has stirred controversy over the fresh powers that it may grant to corporations to sue governments. To its opponents – and more than 90 per cent of almost 150,000 respondents in a public consultation have objected – the “investor-state dispute settlement” (ISDS) elements of the proposed treaty will hobble electoral democracy and empower footloose capital. As mere politicians meddle and muddle, charismatic chief executives recruit a citizenry of globalised consumers. Many people prefer to rally round a glowing logo, not a tattered flag.
Time, then, for a little treason. Only six years ago, the near-collapse of the West’s banking system proved that sovereign entities, both individually and in concert, still hold the jokers in the game of power. Remember this ultimate supremacy of the democratic state the next time you pass or visit a branch of RBS – 81 per cent of which we own.
Even within the TTIP debates, national interests have begun to find a strong voice. The French have secured a protectionist exemption that covers audio-visual industries. In response to union activism, the UK Business Secretary, Vince Cable, maintains that TTIP cannot “undermine the fundamental principles of the NHS”. A recent campaigning report by Friends of the Earth attacks the ISDS system as “undemocratic, discriminatory, investor-biased and unnecessary”. It reveals that 147 investor-state disputes in Europe have resulted in known awards of €3.5bn (£2.6bn) to companies. A single case cost Slovakia €553m.
However, investors still lost more cases than they won. In today’s climate of sovereignty-proud populism across Europe, the TTIP talks will erect a sturdy platform for foes of the new deal. With Apple’s tax-reduction strategy among those selected for European scrutiny, and the rich nations’ organisation, OECD, committed to reforms that aim to make companies pay where they profit, political vulnerability could sabotage corporate ambition. Elsewhere, Greece’s Syriza government plots its asymmetric warfare against the Troika. That conflict may well affirm the power of the powerless. Democratic legitimacy has put a lightning bolt in Alexis Tsipras’s hands. In any case, the land of Thermopylae and Marathon has form in offering stout resistance against overwhelming odds.
When they choose to act, rather than surrender, elected governments may still have a matchless resilience. Territories, laws and votes can outweigh the heaviest balance sheet. Its tax affairs aside, Apple has not always looked omnipotent. Lawsuits over claims of patent infringement – both by the company and by its competitors – have tied up vast resources in unending courtroom wrangles. The Dickensian tussle over design with Samsung led to a High Court Judge in London, Colin Birss, claiming a footnote in legal history when he rejected Apple’s claim that the Samsung Galaxy tablet had trespassed on its intellectual property. A Galaxy Tab was clearly “not as cool” as an iPad and thus no imitation, His Honour groovily decreed.
More seriously, Apple fell foul of US anti-trust laws over its agreement with five major publishers to set prices for ebooks and so hold out against Amazon’s bargain-basement strategy. Oblivious to the firm’s heft and rep, a mere district federal judge – Denise Cote – excoriated Apple for its cartel-like conduct. (An appeal has now begun.) In this case, Apple and the publishers had good reason to contest Amazon’s beggar-all-neighbours policy. No matter: the almighty corporation was humbled. In the wake of such setbacks, and after the death of founding genius Steve Jobs, a hostile book – Yukari Iwatani Kane’s Haunted Empire – last year portrayed his brainchild as a cracked colossus.
“Outside the echo-chamber” of Apple’s headquarters, she argued, “the notion of the company’s exceptionalism has been shattered”. A few months later, such an obituary sounds distinctly premature. But fortune’s digital wheel spins at a dizzying speed. Even this week’s glittering results conceal an 18 per cent fall in sales of iPads. Those uncool rivals still have plenty of admirers.
Don’t bet on any single firm against the nation yet. Beleaguered and unpopular, the European Commission may give ground to grassroots protest on investor-state disputes rather than risk a further erosion of its legitimacy. In the meantime, heretics against the church of Apple – or Facebook, or Google – can take heart from recent history. From Polaroid to PanAm, Compaq to Kodak, Woolworths to TWA, the holy names of the corporate past have either gone extinct or survived as shadows of their former selves. From the pills we popped to the clothes we wore, ICI bestrode Britain’s industrial landscape over 80 years. It expired in 2008.
“Creative destruction”, the mantra that Joseph Schumpeter borrowed from Karl Marx, still drives capitalism. That’s not to mention the overt malpractice that led to the implosion of Lehman Brothers, the accountancy giant Arthur Andersen and, of course, Enron: Fortune magazine’s “most innovative company” for six consecutive years, but also a criminal conspiracy of gargantuan proportions.
Two decades from now, the beautifully engineered machine that Steve Jobs designed may rank with the extinct Compaq, the shrunken Polaroid – or perhaps with IBM, which after a near-death experience rose from its ashes in the mid-1990s. Meanwhile, across almost every jurisdiction, Apple will depend on the nation-states whose tax-raising duties it challenges to enforce its rights, secure its revenues, protect its property and educate its staff.
In 2013, even Republican Senator John McCain – hardly a notorious Bolshevik – called Apple “one of the biggest tax avoiders in America”. In a late interview, recorded by Walter Isaacson for his biography, Jobs insisted that “the reason Apple resonates with people is that there is a deep current of humanity in our innovation”. That humanity also craves free institutions and accountable states. Corporations, in contrast, are mere despotisms – even if brilliant, enlightened ones. And despotisms die.
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