Russia’s ‘hybrid’ wars and China’s belligerent expansionism

A game about he Russian tactic of maskirovka, Moscow’s hybrid war

The Wikileaks revelations described the Russian Federation as a ‘Mafia state’, but is this really such startling news? It was obvious soon after a drunken Yeltsin virtually gifted the resource-rich state industries to highly-placed and cunning apparatchiks that Russia resembled the Wild West rather than developing a conventional system of government for the world’s largest state. Bloomberg’s article here details the the effect of hybrid wars on the Russian economy.

Yeltsin’s actions, and the failure of the political classes to stop him, robbed the extremely poor of the true value of the nation’s assets, running into hundreds of billions of pounds. The instability inherent in what amounts to an unsound economic policy brought about massive losses to these new super-rich a couple of years back because of the volatility of the Russian market. The last decade has also seen oligarchs being jailed or fleeing the country altogether, their underlings being murdered and press freedoms curbed – even to the extent of organised murder of journalists – to stifle debate and possible dissent. 

China is attempting to expand its territory and increase its natural resources, against the wish of smaller nearby states.. Artificial islands are under construction in the disputed South China Sea as the Chinese state makes relentless efforts to expand it’s geographical boundaries at the expense of its neighbours. In 2012 the Communist Party reclassified the South China Sea as a “core national interest”, placing it alongside such sensitive issues as Taiwan and Tibet. It means China is prepared to fight to defend it. 

Beijing’s claim includes the Spratly Islands, Scarborough Shoal and the Paracel Islands and the area it encompasses comprises an “expanse stretching right up to the coasts of the Philippines and Vietnam and even Borneo.” The vast majority of the South China Sea is claimed by the Chinese, in an area which is demarcated on maps by the ‘nine dash line’. 

This territorial ultimatum by China is yet another example of the Asian superstates flexing their muscles knowing that their surrounding neighbours are too small and weak to make a stand. To resolve this imbalance these countries are forced to align themselves with the US, or as in the case of Ukraine, the EU, in order to make the playing field more even. Of course, alignment with the US is deeply unpopular to the world at large, paradoxically because they see the US as ‘the bully’ or thinking of itself as ‘the world’s policeman’. Such arguments provide no resolution to the problem of the balance of power between smaller states and superstates, nor the possibility that China and Russia will almost inevitably seek to take advantage of the weaknesses of more democratic states and their unwillingness to stand up to them.

The most alarming aspect of this new world is that, in twenty-five, maybe fifty years, it will be Russia that will have the single largest economy – along with China – and they will probably be calling the shots (no pun intended). Many in Europe fear the spread of Islam, and their fear may be justified if it concerns those involved in terrorism. What the fundamentalists should fear – along with us – is the new world order that is about to emerge. The freedoms that we cherish and that the Islamic fundamentalists despise may be swept away by these countries as they expand, but the paradox will be that none of us will gain from a ‘Mafia’ overlord and fledgling democracy overseen by a proletariat in the coming generation. You only have to look at human rights in China, and the treatment of the Uighur Muslims in Urumqi, and what happened in Georgia and Azerbaijan to realise what the future may bring. These superstates are slowly expanding and will become larger as time goes on. We are feeding crocodiles here and weill will be on their menu in the future.


One bad Apple …

The iPhone 4s costs a hefty £499 for the 16gb model, when bought at the Apple Store  – correspondingly the 32gb model costs £599 and the 64gb model £699 – but have you any idea what they cost to make or, more relevant, what is the profit margin for Apple Inc for each iPhone sold through their dedicated outlets?

Recently, California based iSuppli, a global leader in market intelligence providing comprehensive industry reports on the electronics sector, carried out research that revealed an estimate of the materials that make up the iPhone 4S 16gb model and the costs amounted to £118. This figure is a long way from the final sale price of £499, but remember that labour costs have to be added to find out the gross profit margin.

Most of Apple’s electronic products are made in China by a company called Foxconn, which is primarily an original design manufacturer. Its clients include major international electronics and information technology companies. Notable products which the company manufactures include not only the iPad,  iPhone, iPod, but the Kindle, PlayStation 3, and Xbox 360. Earlier this year, ABC’s ‘Nightline’, a show in the US, went into the Foxconn factories and their investigation ended up revealing that workers earn just £1.12 an hour.

Horace H. Dediu, an electronics industry analyst with a focus on mobile phones – and especially Apple Inc – made a calculation using the ‘Nightline’ report to estimate that Apple  incurs labour costs of between £7.86 and £18.56 for every iPhone it makes, representing an average of just 3% of the iPhone’s sale price. The ‘New York Times’ has harshly criticised the labour practices of Apple’s factories, and featured an interview with a former employee of Foxconn, who said: “Apple never cared about anything other than increasing product quality and decreasing production cost. Workers’ welfare has nothing to do with their interests.”

The bottom line is that material costs appear to be about £118. Furthermore, Dediu has calculated that an additional £58 is spent on manufacturing its smartphone, a cost that includes the labour costs, transportation, storage and warranty expenses. Assuming those figures are accurate, we reach a total of about £176 to manufacture an iPhone that retails at £499. This represents a profit for Apple of £323 per iPhone.

This demonstrates why the share price of Apple Inc is so high. However, for them to maintain their high profits and low manufacturing costs, the company pays its workers in China appallingly low wages. There are two observations that stem from these figures: Why are we being ripped off and why are Apple so disgracefully contemptuous of the people that buy and make their products?