By the way, Apple Corp has not developed a revolutionary or standout product this decade. Or, put another way, Apple has done nothing that would surprise Steve Jobs (who died in 2011) if he were to come back to life today. iPhone? Still doing that old hat. iBook? Still in it like it's 1999. iPad? Jobs introduced it in 2010. What happened to Apple's automated electric car? Abandoned in 2017. (We will ignore the watch.) So what is Apple doing these days, as the sales of its cash-cow, smartphones, fall? Buying back its own stock. In short, loads of cash accumulated under Jobs is returning to the States—thanks to changes in tax law—and going straight to the pockets of execs and shareholders—the sorry conclusion of this kind of drama. The amounts involved are staggering.
The New York Times reports:
Shortly after Apple used a new tax law last year to bring back most of the $252 billion it had held abroad, the company said it would buy back $100 billion of its stock.On Tuesday, Apple announced its plans for another major chunk of the money: It will buy back a further $75 billion in stock.
The justification for the recent round of buybacks is, according to Apple execs, the expectation that the main source of Apple's revenues, the sale of key products that were developed under Jobs. But the revenues from these products has been falling for the past 2 years. And the corporation is not developing new "must-buy" stuff. It's instead doing something that worried Jobs, depleting its gigantic "war chest," much of which was parked in tax-friendly Ireland. Or, put another way, the corporation has become a cannibal. It's eating itself.
Before making Jobs the hero of this post, it must be pointed out that he was no angel. He stashed the corporation's cash in countries with low corporate tax rates and, as a consequence, deprived the US government and public of much-needed revenue to better fund social and scientific programs. But, on the other hand, he also accumulated this mountain of cash because he never wanted Apple to return to the brink of bankruptcy. He had been there, and the idea of going back haunted his mind and decisions. A corporation as huge as Apple can go down fast, and Jobs was acutely aware of this terrifying fact.
According to MarketWatch:
...under Jobs’ leadership until his passing, Apple... spent the time being incredibly innovative, rolling out must-have products and revolutionizing how we interact with the internet. The company did all that even as Jobs was adamant that Apple also hoard cash, while spending industry-low levels on research and development (R&D), paying no dividend and doing no stock buybacks.
So, basically, Apple has a market capitalization of $1 trillion not because it is making new and exciting things but due to its addiction to buying back its shares—a practice that has no economic justification at all. Also, the corporation plans to entirely eliminate Jobs' cash because it is money that's not, according to the execs, doing anything useful.
New York Times was informed by Alan Auerbach, a figure who formulated a fancy-looking tax scheme that comes down to moving corporate cash from overseas directly to the pockets of executives and speculators:
The money isn’t disappearing... Apple is basically saying: We have all this money and we prefer not to invest it right now, so we’ll give it to our shareholders.
For a response to this rosy picture, the New York Times exhumed Ralph Nader, a politician who rightly knows that the whole buyback business is bad from beginning to end. But no one takes him seriously anymore. He is a crank. The New York Times, after giving the mic to the left, then turns back to the right and reports that corporations "aren’t the government and shouldn’t be expected to invest large sums in ventures that won’t contribute to profits." But a dog's bark contains more useful information than this statement. And the thing we must ask is: Why does the mainstream media always feel it's necessary to report claims that have no basis in reality? The idea that corporations are not governments, meaning tied to the public institutions and programs, is just bogus.
Again, dear reader, I must direct you to a superb book by the British-based Italian economist Mariana Mazzucato, The Entrepreneurial State: Debunking Public vs. Private Myths in Risk and Innovation. What is explained in this text—which, in this decade, is second as a work of heterodox economics only to Thomas Piketty's Capital in the Twenty-First Century (both came out the same year, 2013)—is that almost all of the components of the iPhone can be traced back to huge government investments in research and development. The touchscreen, the battery, GPS system, internet did not spring from the market but state-funded programs in universities and defense departments.
Apple does did not make its products from scratch, but with massive public assistance. The reward of this state-led innovation? Apple's evasion of taxes that fund the kind of research programs it benefited from. That was the order of things under Jobs—make money and stash it. After his death, this stashed cash began returning to the US and increasing the wealth of people who already have too much of it and, unlike Jobs, are going to do nothing of much interest with it. The future of Apple? No need for a crystal ball. You only have to look at the sad state IBM is in today.
