Apple CEO Tim Cook Makes $378M in 2011, Off the Backs of Chinese Sweatshop Labor

David Callahan is the editor of Demos' Policy Shop blog. Follow them on Facebook and Twitter.

Follow @Demos_Org

The revelation that Apple chief Tim Cook pulled in $378 million in compensation in 2011, more than any other CEO, has sparked the usual debate about how much CEOs are worth. Cook made $300 million more than the next highest paid exec in America, Oracle's Larry Ellison, leading some to wonder whether he's really that much better than his peers (especially since the late Steve Jobs is widely seen as the genius behind Apple's current success.)

But the more intriguing question about Cook's compensation is not whether he should be paid so much; it is how he can be paid so much? What are the forces that allow a single executive to extract so much value from a company, albeit even a wildly successful company? How is it that Apple's employees couldn't get a bigger slice of the pie or the government couldn't skim off more in taxes

The answer, simply put, is that we live in a golden age of capital -- an era more akin to the Robber Baron era than the postwar decades of America's not so distant past. Apple likes to position itself as embodying all that is new and cutting edge; but, in the economic sphere, it is turning back the clock. 

Over a century ago, capital was dominant, in large part, because corporations didn't have to worry about two pesky nuisances: taxes and strong labor laws. Prior to the creation of personal and corporate income taxes, as well as the estate tax, the federal government raised most of its revenues from import tariffs -- a burden mostly borne by ordinary Americans. Men like Carnegie and Rockefeller basically paid no taxes, allowing their fortunes to reach mammoth size. These same Robber Barons benefited from weak labor regulations, as the minimum wage and the 40-hour work week weren't invented until the 1930s. Other irritants -- like worker safety laws, employer social insurance contributions, and environmental standards -- also were largely non-existent during the Gilded Age, which further helps explain why it was so gilded.

We tend to think of the world as drastically different today, and hear endlessly about the tax and regulatory burdens on corporations, but actually the clock has been turned back much more than many people realize -- and Apple has helped to lead the way. 

As the New York Times recently reported, Apple has been a pioneer of tax avoidance -- using offshore tax havens to dodge billions in taxes. Partly as a result, the company has built up over $100 billion in cash reserves, much of which is stashed overseas -- bolstering the company's stock value (which drives Tim Cook's payday) and laying the groundwork for future profitability by underwriting new offshore investments, as reported here.

Now, of course, Tim Cook is much more heavily taxed than the CEOs of a century ago. But he and Apple are far less taxed than would have been the case a half century ago -- a time when government was stronger and offshore tax havens were not yet invented. In 1955, corporate taxes made up 27 percent of all federal revenues, or 4.3 percent of GDP. Now, it's more like 8 percent of revenue and 1 percent of GDP.

Thanks to globalization, the clock has also moved backwards on labor costs. Sure, the U.S. has all sorts of labor laws that it didn't used to have. But those laws don't matter much if you don't make stuff here. Apple's main concern are China's labor laws -- a country that didn't even have a minimum wage law until 2004. And while the minimum wage has gone up recently in many parts of China, it's still not much more than $200 a month for most workers -- or around $1.25 an hour.

As the New York Times documented, Apple products are made in sweatshop conditions, just not in America. An independent investigation, undertaken after the Times' expose, revealed that contrary to claims by Apple's apologists, the wages it pays (via Foxconn) are not adequate for its workers to meet their basic income needs. Apple is getting rich, in large part, because its workers are so poor -- a business model that Dickens once explained so vividly. In fact, Tim Cook was paid as much in 2011 as 81,000 of Apple's Chinese factory workers put together, according to an analysis by Isaac Shapiro of EPI.

Given the success of Apple's fantastic products, Tim Cook would be destined for a large payday in almost any scenario. But that payday is as big as it is because capital is now able to sidestep many of the constraints on its profits. Making 21st century gadgets in a 19th century economic framework: Now there is a formula for success.