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john E. Sununu

Apple, not manufacturing, is America’s future

istockphoto/globe staff illustration

LAST TUESDAY a company in Cupertino, Calif., released its quarterly earnings report, and when trading resumed Wednesday it became the most valuable company in the world. With a market capitalization of $420 billion, Apple briefly overtook ExxonMobil for the top spot. Household names like Microsoft ($250 billion), GE ($200 billion), and GM ($40 billion) trailed far behind.

Apple should reaffirm for us that American innovation is alive and kicking. The look and feel — the very idea — of products like the iPod, iPad, and iPhone are as American as, well, apple pie. But if we want the next technological revolution to start here as well, politicians need to change their industrial-age view — and the stale rhetoric that has developed around it.

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In the 1990s, when Apple was suffering through nearly a decade of stagnant revenues and several quarters of losses, no elected officials were scrambling to “save’’ this national treasure of innovation. There were no special earmarks to bring iMacs to market, or crash programs to miniaturize the iPod Nano. Yet today, the company employs over 60,000 people worldwide, with about two-thirds working in the United States.

Most people would agree that these are good jobs - even great ones. But Apple critics, and there are many, are quick to sniff that they’re not manufacturing jobs. The company’s contractors, mostly in China, are responsible for assembling the iconic products. Instead, the American work force oversees the design of hardware and software; they manage the growing Internet-based platforms for music, books, movies, and applications; and they distribute and sell through Apple’s retail chain.

As with other high-tech firms, including Google, Microsoft, and even old-line names like IBM, only a fraction of Apple’s employees qualify as “manufacturing.’’ But their pay and benefits are among the best in the world. These firms remain global leaders in their fields, and they are growing.

Naturally, President Obama has a plan: punish them.

“If you’re a business that wants to outsource jobs,’’ Obama threatened in his State of the Union address, “you shouldn’t get a tax deduction.’’ That policy - increasing taxes for companies that scale back at home or open new facilities overseas - would have wiped Apple out years ago as it struggled to remain competitive. And it would punish many other resurgent American high-tech firms like IBM, Hewlett-Packard, and Xerox.

All of these companies manage facilities and engage contractors around the world (which come under intense scrutiny of their own, as Apple contractor Foxconn has in recent weeks). Their global footprints help them penetrate markets and reduce the cost of products and services they deliver. They also employ hundreds of thousands here in the United States. When the president insists that “if you’re an American manufacturer, you should get a bigger tax cut,’’ these companies get the short end of that stick, too.

Populist rhetoric aside, no business should be punished simply because the jobs it creates aren’t defined as “manufacturing.’’ High-tech manufacturing, including electronics, electrical equipment, and transportation, employs roughly 4 million US workers. But high-tech services like telecommunications, computer-system design, and data processing employ even more. Skill level and knowledge base, not the label “manufacturing,’’ drive high-paying jobs.

That’s why the real threat to growing our tech employment base will be a shortage of students trained in science, technology, engineering, and mathematics - the STEM fields. In the United States, only 17 percent of bachelor’s degrees are STEM-based. In China, the figure is 52 percent.

Public officials, from the president to local selectmen, talk about the importance of STEM all the time. Yet we provide the same Pell grant and loan subsidy for a four-year degree in puppetry that we do for biomechanical engineering. If our student-aid system doesn’t care which path recipients choose, why should they?

Rather than have the federal tax code picking corporate winners and losers, we should encourage the intellectual capital of innovation: STEM. The federal government spends over $40 billion a year on college aid. Meanwhile, offering a $5,000 cash incentive for every student pursuing a four-year STEM degree would cost less than $2 billion.

Instead, Obama targets businesses like Apple - ironically, in a speech where Steve Jobs’s widow was his invited guest - and it makes no economic sense.

In just 10 years, the market value of Apple has grown from $7 billion to over $400 billion. The returns for mutual funds and pension funds owning the stock have been outstanding, and thousands of employees have earned financial security.

But if you’re one of those Apple millionaires, there’s one last piece of bad news: Obama wants to raise the tax on your stock gains. Sorry. He wants you to be successful, but not too successful; and he would prefer that you manufactured something for a living.

John E. Sununu, a regular Globe contributor, is a former US senator from New Hampshire.
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