Notes on Offshoring

Dave Hollis, david.hollis@labournet.info

Introduction

Offshoring is the relocation by a business of parts of its business functions and processes to countries with low wage costs [1]. After having affected production it is now being applied to the IT sector.

As far as production was concerned, the campaigns of the unions against this phenomena were over rather quickly. This is not surprising. It is difficult to argue against cost-savings, especially if the wage costs are vastly different. In the case of software development, where the wage costs make up most of the costs, it is difficult to even begin arguing at a cost level.

So what is the answer? Some think that one can expect an answer from politics. One example is the federation of American trade unions, the AFL-CIO, and the Communication Workers of America [2]. They suggest making the H1-B [3] visas more restrictive. It takes little thought to see that such an approach is divisive, i.e. sets worker against worker, and is not going to change globalisation at all. Another suggestion of the AFL-CIO is to call for an investigation into the effects of offshoring [4].

I also looked on the web to see what I could find in Germany. Perhaps not surprisingly, there was little to be found. In a union publication at Hewlett Packard [5], for instance, there was a call for works agreements, union agreements and help from the European Union. In general, one gets the impression that the unions see no way out on their own – their only possible saviour is government legislation..

These notes define the environment in which offshoring takes place, takes a critical look at not what to do and suggests possible approaches for a campaign.

Finally, my special thanks to Inken Wanzek, Sven Röser, Peter Waterman and Kim Scipes for many critical remarks and comments on earlier versions of this paper.

1. Globalisation is different from international trade of earlier times. Worldwide networking allows Capital to divide and coordinate its activities, e.g development, production and logistics, across the globe.

   This is the starting-point and absolutely necessary for everything that follows in this document. There is often a discussion in left-circles which begins with the statement that capitalism has been international for the last 500 years or so. Although this statement is correct, modern networking has led to capitalism having a completely different way of working.

   On the other hand, today most of the workers, especially white-collar workers, do not feel threatened by globalisation. They often identify themselves with the company’s world-wide presence They often think more like an employer than an employee. They accept that the starting point is now the globe and no longer the nation. Between these two extreme attitudes there is more or less a vacuum.

2. "Offshoring" of software development and similar activities is a continuation of the process we have already seen with production.

   Not so long ago we saw the outsourcing and/or the transfer of production to "low-cost" countries. No one, and especially the trade unions, talks about it anymore because it has become an accepted fact. Now the more human-intensive (software) development is on the line as we can already see at best in the USA.

3. Due to the pressure of competition, Capital is always looking for ways and means to reduce costs and improve productivity.

   One method is offshoring. However, offshoring is a process. It began with production being moved to Eastern Europe. Then it went to South East Asia, e.g. to China. Now China is having to compete with countries like Romania and Russia. In addition, we see a downward spiral for employee rights, social standards and the environment as each country tries to compete. It is a global race to the bottom.

4. A strategy based on the comparison of hidden costs or the particular advantages of a "highly trained" or "skilled" Western workforce, forgets that we are dealing with global companies in a globally networked world. The concepts of "country" or, even worse, a particular "location" belongs to the national industrial capitalism of the 19th century.

   Usually, and repeating the discussion that took place as the production was offshored, trade union opponents argue the case for a particular location or nation. Although some of these arguments may at the beginning of such a process have a certain validity, they are trying to defend the indefensible. Without going into the historical details, the rise of capitalism in Western Europe neither presumes a superiority of Western culture nor justifies the argument that other countries outside of Western Europe are unable to do the same work. It should not be forgotten that countries like China have a far longer cultural history than their Western counterparts.

5. Thinking and arguing in terms of locations or countries eventually degenerates into racism or chauvinism.

   If anyone follows the discussions within the unions, it is easy to see where such a discussion ends. The proposals of the AFL-CIO and CWA on H1B visas is a case in point. (See http://www.techsunite.org/news/techind/h1breforms.cfm) Much of what one reads on the CWA's “Techs Unite” mailing list is another example.

   A union only makes sense if solidarity is one of the cornerstones of its activities. This can neither end at the national border nor, as has actually happened, outside a particular factory gates. To think, argue and act in terms of locations or countries is to play one workforce off against another, one community against another while Capital continues to think and act globally.

6. We are going to have to realise that jobs to be offshored were and never will be "our" jobs. They are jobs provided by the company in order to make profit out of our labour power.

   It is astonishing that so many trade unionists and many white-color workers fall into this trap. Companies do not provide jobs for social reasons nor do they belong to the employee. Companies expect surplus value from them. If more money can be made somewhere else, the jobs will be transferred there.

7. Globalisation from above has to be countered with a globalisation from below. [6]

   This sounds horribly banal. Any campaign on offshoring is going to have to be a campaign on globalisation. You can't deal with the one without the other. Offshoring is an example where globalisation leads to. It is precisely the capabilities brought about by global networking that makes offshoring possible. Yet it is the most difficult point to put and get across. Mostly you get the answer that this may be very well but what are you going to do in this particular case ...

8. Any trade union campaign against offshoring may not refer to or view the receiving countries in the "third-person".

   One of the first things that one notices when following a discussion on offshoring is the use of “us” and “them”. There is no attempt to view those who are going to benefit from the offshoring as colleagues who also have interests. The use of such language betrays the person using it.

9. In its present form the trade union movement is incapable of running the necessary campaign on off-shoring and against globalisation from above.

   Trade unions were built to fight and mirror the industrial capitalism of the 19th century. Their present demise, caused by their rigid structure reflects this.

10. Global capitalism has provided us with the means to fight for and put a globalisation from below into practice – the internet.

    "... Consider that we currently live in a world where almost anyone located in an urban centre can share their message globally with a free blog and a few dollars spent in an Internet café. Access is not – or will not for much longer be – a major communications stumbling block for civil society organisations. The much more pressing need is for civil society to learn how to appropriate the network technologies that we now have access to, bending and molding them so that they can be used more strategically and politically ..." [7]

11. A campaign for globalisation from below will have to be run by the colleagues themselves. This will entail building up our own global structures, parallel structures to supplement those within the unions and using their structures where it is appropriate and possible. This means global networking. Such a campaign may well not be looked at too kindly by some officials within the official trade unions. [8]

    Having seen and experienced the inability of the official trade unions to run the necessary campaigns and create the appropriate structures, the members and non-members will have to do this work instead. We are not talking about taking over the union ourselves. The fight for the leadership of the unions is not our fight. Whoever makes it there are likely to be corrupted anyway. The most important point is access to the resources and structures. Membership in various committees will undoubtedly be necessary. We have no illusions, however, that we can make any fundamental and lasting change to the existing trade union structures.

12. Those workforces in companies with global structures in place will most probably take the leading role in building up a rank-and-file global network.

    Those who work for a "global player" are likely to be those who are first going to develop such a network. Whether those who will do this will have a union background, already be involved in a social movement or just be normal employees, will have to be seen. It could just as easily be the case, for instance, that such a network begins at a sectoral level.

13. A campaign on off-shoring also raises the need for the unions to become part of the social movements.

    "Social movements can be understood as the collective withdrawal of consent to established institutions. ..."[9]

    "One common model for social change is the formation of a political party that aims to take over the state, whether by reform or by revolution. This model has always been problematic, since it implied the perpetuation of centralized social control, albeit control exercised in the interest of a different group. However, it faces further difficulties in the era of globalization.

    "Reform and revolution depend on solving problems by means of state power, however acquired. But globalization has outflanked governments at local and national levels, leaving them largely at the mercy of global markets, corporations and institutions. Dozens of parties in every part of the world have come to power with pledges to overcome the negative effects of globalization, only to submit in a matter of months to the doctrines of neoliberalism and the “discipline of the market.” Nor is there a global state to be taken over.

    "Fortunately, taking state power is far from the only or even the most important means of large-scale social change. An alternative pathway is examined by historical sociologist Michael Mann in The Sources of Social Power. The characteristic way that new solutions to social problems emerge, Mann maintains, is never through revolution or reform. Rather, new solutions develop in what he calls interstitial locations – nooks and crannies in and around the dominant institutions. Those who were initially marginal then link together in ways that allow them to outflank those institutions and force a reorganization of the status quo." [10]

14. A campaign on off-shoring will need to focus on the issues of human rights, decent pay and conditions, winning both women and those who work in the informal economy. [11]

    The issue of human rights for countries like China involves a campaign for independent and free trade unions and direct support for those workers who risk long prison sentences for daring to challenge the Chinese state. The right to free speech, to hold meetings, to organise and to strike are necessary for free trade unions. Such rights are not to be taken for granted – even in Western Europe.

    To organise in the informal sector, to make unions attractive for women, to encourage rank-and-file activity, to bring together workforces from different locations and countries and to combat globalisation from above with a globalisation from below, raises the question of what type of unions are necessary for the 21st century. Looking at recent history, the union of the future is going to have to be networked, have flexible structures and a flat hierarchy.[12]

[1] Slightly adapted from the definition used by the British Trade Union amicus

[2] See http://www.techsunite.org/news/techind/h1breforms.cfm for details.

[3] An H1B visa is a temporary visa issued for special occupations, e.g. accountants, computer analysts, engineers, financial analysts, scientists, architects and lawyers

[4] Wolfgang Müller: Ihr seid einfach zu teuer (You are quite simply too expensive), Freitag, 16.01.04. http://www.freitag.de/2004/04/04042201.php Interestingly, the author, himself a German trade unionist, refers uncritically to an American draft act that would require of foreign call centres that they identify themselves on each call.

[5] http://www.hpneu-igm.de/aktuelles/i_news/Standpunkt_Dez03.pdf

[6] For a detailed exposition on this subject: Globalization from below: the power of solidarity, Jeremy Brecher, Tim Costello, Brendan Smith, South End Press, Cambridge, Massachusetts, USA

[7] Appropriating the Internet for Social Change, Towards the Strategic Use of Networked Technologies by Transnational Civil Society Organizations, Version 1.0, Social Science Research Council, Prepared by Mark Surman & Kathrine Reilly, November 2003, Page 1. http://www.ssrc.org/programs/itic/civ_soc_report/index.page

[8] One of my reviewers, Kim Scipes, USA thinks that I am wrong on this point. In a yet unpublished paper, to be published by Working USA in the first half of 2004, he argues the case for “Social Justice Unionism” instead of the current “business unionism” that is prevelant in the USA. Although there have been many examples of successful transformations of union structures, at least partially, we still see things still going wrong again. Why? For me this raises not just the question of the “iron law of oligarchy” but also what sort of union structures are appropriate for the 21st century in a globally networked capitalistic world and whether the unions will ever be prepared or able to transform themselves.

[9] Globalization from below: the power of solidarity, p. 21

[10] Ibid, p.23-24

[11] These ideas originate from Strategies for the Labour Movement, Dan Gallin, Global Labour Institute http://www.global-labour.org/strategies.htm . I doubt whether this list is complete!

[12] Recent history has shown that network structures with a flat hierarchy and certain other features are very effective, seemingly universally applicable and, in the words of the RAND Corporation, “very difficult to beat”. I am basically arguing for their application to the field of trade unions. See Networks and Netwars, The Fight For the Future, David Ronfeldt and John Arquilla, http://www.firstmonday.org/issues/issue6_10/ronfeldt/index.html