A Third Wave of Outsourcing?

November 6, 2010 at 6:32 pm | Posted in Labor, Outsourcing, Political Economy, Production | 3 Comments
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Persistently high unemployment figures in the United States have led to strident calls by politicians about ‘unfair’ trading practices by China, India, and other countries and demands to curb outsourcing of US jobs to lower wage locations overseas. Much of the discussion, especially in the context of President Barack Obama’s 10-day visit to Asia, has focussed on low-cost manufacturing in China and white-collar service work to India, a new type of outsourcing pioneered by Amazon.com’s Mechanical Turk service just five years ago, represents the potential to transform outsourcing in some sectors. This represents a further assault on incomes.

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Claiming to take the tedium out of repetitive, monotonous tasks that are notoriously difficult to automate (recognition of handwritten messages or numbers, for instance), a handful of companies are creating software to further deskill digital labor. Essentially, these companies–Microtask, CloudCrowd, Cloudflower, and others–break up tasks into many different component parts both to shield the identity of their clients (as each worker gets to see only a miniscule portion of the document and therefore cannot identify the real client) and to lower labor costs by widely distributing the tasks: Cloudflower claims to have a virtual workforce of 500,000 people in 70 countries while CloudCrowd which was formed only in 2009 claims a virtual workforce of 25,000 and says it has completed 2 million tasks by September 2010 according to its promotional video.

Companies take different approaches. Microtask, a Finnish upstart, contracts with firms and provides software to its clients’ employees which enables them to do a small task–recognition of handwritten numbers, comparison of two images of a product, few minutes of speech transcription–without leaving their computer screen to get more information from the Internet. The software rotates and mixes up the tasks so that there is no monotony while the main computers of the client can compile the tasks performed by its employees–leading to an unprecedented level of control while minimizing the possibility of leaks.

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Other companies directly contract with individual workers. At the Mechanical Turk website, there are are number of tasks on offer and once a person performs a test to show his or her talent at a job–identifying business locations, proof-reading, and such like–they can sign up and do tasks steadily at their own pace and when they want to work. However, Randall Stross reports in the New York Times that when Miriam Cherry, a law professor at the University of the Pacific and her research assistant tried an assignment offering 2 cents “each for finding the contact information of 7,500 hotels and 3 cents each for answering questions about 9,400 toys,” they did not even make the minimum wage!

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As Stross notes, “Worker control is precisely what the Microtask model has engineered out–that’s the source of its insidious efficiency. Just as Ford’s assembly lines a century ago brought work to workers who performed a single, repetitive task, Microtask’s software, via the Internet, does the same. Every two seconds.”

Yet, the so-called ‘cloudsourcing’ (from the Internet ‘cloud’) model is different in crucial respects. By farming out work across the planet, companies do not have to confront organized labor–protests against low wages become infinitely more difficult if workers are spread across many, many jurisdictions. Cloudcrowd, for instance, takes translations of business documents that used to be done by a single person and initially submits it to translation software. The software translation is then broken up into pages and sent to people who look for nonsensical sentences. These are then submitted to native speakers and finally to editors who have no special expertise in the language, but simply make the text more readable. By farming out the work to several unconnected individuals, anonymity is assured and translation costs are minimized–from 20-25 cents a word to just 6.7 cents. And, of course, minimum wage legislation would not apply.

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Even if these widely-distributed tasks do not earn minimum wages in the United States and other high-income economies, they beat the minimum wage in many low-income countries and hence many of the workers for Cloudflower and other ‘cloudsourcing’ companies are located in places like Malaysia and the Philippines. Seen in this light, too, it is not surprising that the new president of the State University of New York at Albany, George M. Philip, could eliminate the departments of Italian, French, Russian, Classics, and Theatre without hesitation!

 

 

Absurdities of the US Electorate

October 25, 2010 at 9:26 pm | Posted in Political Economy | Leave a comment
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Whom the gods would destroy, they first make mad…using this apt Latin metaphor, in a recent post, Ed Darrell notes the absurdity of the current US mid-term election campaign. An electorate that was passive in 2000 when the US Supreme Court stole a presidential election and the ‘winner’ in that election went on to wage war against a country that could not have threatened the US or defended itself is now screaming ‘socialism’ when the government seeks to provide a minimum level of health care to the young and the elderly while careful to preserve the high profits of insurance companies. An electorate seemingly unconcerned with the enormous cost of the illegal wars waged in Afghanistan and Iraq, and the evidence of billions of dollars being distributed in plastic bags, is enraged at a modest stimulus to the US economy. An electorate that does not register the torture of Iraqis by US forces or the ‘rendition’ of alleged ‘terrorists’ for torture by other states sees plans to build a mosque in downtown Manhattan as proof of the Islamicization of the United States. It is an electorate that continues to believe, in spite of all evidence to the contrary, that its first non-Caucasian president is a Muslim.

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The paradox is heightened by the ‘grassroots’ opposition to the elites when it is the elites funding the ‘grassroots’ Tea Party Movement. George Monbiot has documented how the two Koch brothers–owners of the second largest privately held company in the US and each worth over $21 billion–have financed a bevy of special interest groups to fund and sustain the Tea Party Movement so that they can retain more of their profits, avoid regulation, and pay less taxes. And once the John Roberts Supreme Court ruled restrictions on campaign financing unconstitutional, it has opened the floodgates to corporate financing of elections. Never before in US elections have large corporations and wealthy individuals contributed so much to an election campaign as reported by the New York Times and the Financial Times.

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Elite sponsorship of essentially white working class protests is all the more striking as the unemployed workers blame the government for the loss of jobs and the high rate of unemployment, when it is the corporate members of the US Chambers of Commerce–funding the Tea Party candidates–that are responsible for outsourcing US jobs overseas! “American Free Enterprise” is creating more jobs overseas than it is at home!

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In part, this disconnection between perceptions and reality among the electorate is because of the absence of critical voices in the mainstream media. There are hardly any representatives of labor or of working families on news shows in the last two decades. Instead we are fed with a constant stream of well-paid talking heads, representing no opinion but their own. There is, hence no questioning of the functioning of the economic system. John Boehner, the Republican leader poised to become the Speaker of the US House of Representatives, has pointedly refused to specify how he would cut the deficit–and in fact, he cannot.

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It was, after all, under Republican presidents–Reagan, Geoge H W Bush, George W Bush–that the Federal deficit ballooned beyond control. In the absence of critical commentary, the Republican Party and their Tea Party affiliates have been focusing on side issues–on whether President Barack Obama is American-born or whether he is a Muslim–to evade debate on crucial issues. And they have been able to do this because he is not a Caucasian!

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Such racist, and frankly incoherent, rhetoric has gained ascendancy primarily because serious debate has been eliminated from mainstream media–especially television. Instead of sustained debate on serious issues, we are fed a steady diet of inconsequential issues–debate on the mosque in Manhattan, the pastor of essentially a family congregation in Florida threatening to burn the Koran, the racist rants of Juan Williams and Bill O’Reilly–rather than issues of substance.

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Outsourcing and Currency Wars

October 10, 2010 at 4:59 pm | Posted in Political Economy | Leave a comment
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The US Department of Commerce reports that in the last two years, the number of employees of foreign affiliates and subsidiaries of US firms grew by 729,000 while these firms cut some 500,000 jobs domestically over the same period.

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Candidates of both major parties lay the blame for this on the Chinese government intervening in currency markets to keep the value of the renminbi artificially low and thereby gain an unfair advantage against US workers as companies ship manufacturing operations off-shore to take advantage of wage differentials.

But the emphasis in this argument is misplaced. In the first instance, manufacturing jobs have been disappearing from the United States for several decades. The Bureau of Labor Statistics reports that in September 2010 alone, more private sector jobs were created in the United States than in the entire 8 years of the George W. Bush Administration.

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More significantly, a look at China’s trade statistics reveals that its huge current account surpluses with the US and the European Union is counterbalanced by substantial deficits with its East and Southeast Asian neighbors. Indeed, components and intermediate goods dominate intra-Asian trade and China has emerged as a assembly point for parts manufactured elsewhere. This implies that any appreciation of Chinese currency could mean that China could import more intermediate goods and thereby offset any gains that might accrue to US producers from the higher value of Chinese wages. There is also no guarantee that manufacturers wont shift jobs to other low wage countries like Laos, Cambodia, or Vietnam if Chinese wages increase

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