Exploring Global Climate Change


• Politician: What are the odds that human behavior is causing climate change?

• Scientist: Highly likely.

• Politician: So you are saying it might not be us?

Global climate change is perhaps the most complex challenge ever to face humanity. It remains to be seen whether humanity is up to the challenge and can frame a global response to mitigate the risk to the planet and human society, because there is significant debate on the issue and policymakers around the globe appear to disagree on the science and the response because of political, social, and economic reasons. The public debate leaves concerned individuals confused about whether and how to take action and with more questions than answers: Is climate change real? Is climate change a result of human activity? What impact will climate change have? What needs to change? In their book, The Science and Politics of Global Climate Change: A Guide to the Debate, Dessler and Larson (2006), provide a definitive guide that summarizes both the science and the political dynamics of climate change, and includes recommendations for policymakers. Through Dessler and Larson’s treatment of the issue, this author learned that the climate is definitely getting warmer, that human activity is probably responsible, and more importantly, that inaction is irresponsible, given the possible outcomes.

Climate change may ultimately affect the lives of every person on the planet; therefore, individuals need to understand the science of climate change and the dynamics of the debate in order to make informed personal and political choices. Often, information on climate change contains bias for or against a particular position. Dressler and Larson are surprisingly effective at maintaining a detached, rational, and unbiased perspective, clarifying the differentiated roles between scientists and policymakers and separating positive and normative arguments to provide the reader clarity on the climate change science. After providing background on the inherent skepticism of the scientific community, the author’s then summarize the overwhelming, peer-reviewed, consistent, evidence of the warming of Earth’s surface temperature; including direct surface air temperature, glacier data, sea-level change data, sea ice data, ocean temperature, satellite measurements, and data from a variety of climate proxies. The earth is getting warmer, but is it a result of human activity? The author’s conclude that human activity is likely the cause of increased warming, because of the measureable increase in CO2 and other greenhouse gases in the atmosphere, and their basic physics. In addition, the rise of CO2 correlates very closely, in both magnitude and frequency, with the rise of the surface temperature. Again, the author’s do an excellent job separating the positive and normative arguments, while summarizing the science of climate change. However, when discussing the potential impact of climate change, there was far more uncertainty, but informative descriptions of promising efforts to reduce uncertainty through computerized climate models. Of course, the primary argument for change was one of risk; given climate change is happening, is probably caused by greenhouse gas emission, and is likely to have far reaching and perhaps devastating consequences for human society, inaction is responsible.

When the discussion turned to potential solutions, post-Kyoto political and economic solutions to reduce emissions occupied most of the dialogue, giving adaption and geo-engineering strategies short treatment. In addition, the potential solutions did not incorporate enough perspective from social sciences that might offer benefits to those seeking to address the need for change. For instance: What leadership lessons can environmental scientist draw from other fields? What is the psychology of climate change? What mass communication phenomenon is at work in the public debate and who are the gatekeepers? How can digital media reshape the debate?

In the end, this author found Dessler and Larson’s work to be an excellent guide to understand the science and politics of global climate change. Before reading this book, this author was like many, who allow the misleading public debate to legitimize inaction. The earth is warming because of human activity and if emissions are not reduced right away, the consequences will likely be disastrous. Inaction is simply irresponsible.


Free Market Energy: Advantage Renewables


The United States requires access to a consistent, low cost, stable, supply of energy to meet the needs of citizens, business, the military, and government; relying primarily on fossil fuels to meet the growing energy needs of the country (Miller & Spoolman, 2010).  Yet, fossil fuels are problematic for a number of reasons, including a dwindling supply (Webster, 2011), harmful environmental effects (Miller & Spoolman, 2010), and international price shocks created by nation-states that control oil production (Allaire & Brown, 2009).  Therefore, to enhance U.S. energy security and economic interests, while reducing environmental harm, the country needs to wean itself from fossil fuels and invest in domestic production of alternative, yet reliable forms of energy.  However, U.S. government energy policy favors the production of fossil fuels through a variety of tax breaks, subsidies, and other government interference.  Some energy analysts believe that fossil fuels should continue to receive subsidies and tax breaks, while private industry develops renewable energy sources (Needham, 2011).  Others, including this author, recommend phasing out tax breaks and subsidies for fossil fuel production, in favor of subsidies and tax breaks for renewable energy alternatives (Miller & Spoolman, 2010).  However, a more reasonable, achievable, approach is to phase out all government energy subsidies and let energy companies compete with the best available technology.

The energy industry receives roughly $20 billion in subsidies and tax breaks every year, with the lion’s share going to fossil fuel industries (Leonard, 2011).  Not only does renewable energy receive far less subsidies annually, but especially when viewed from a historical perspective.  Fund and Healey (2011) found that inflation-adjusted, average annual subsidies for fossil fuels were 5 times that of renewables, while nuclear power was subsidized at a rate of 10 times that of renewables.  In the final analysis, the federal government are underwriting the energy sector unevenly, put renewable energy development at a significant disadvantage, given both the high startup costs of innovation and competition from large, entrenched, subsidized, organizations; hardly a level playing field.

Despite the inherent challenges faced by those committed to renewable energy development, renewables have a distinct advantage; namely, they are renewable.  While coal and natural gas remain plentiful in the United States, concerns over reaching peak oil, coupled with growing demand in the both the developed and developing world, have driven oil prices to record highs, making the development of renewable alternatives feasible despite the high cost of capitalization in the energy industry.  Even the Defense Advanced Research Projects Agency has invested in renewables, developing an algae-based biofuel alternative for jet fuel (Goldenberg, 2010).   In a free market system, devoid of subsidies for either fossil fuel or renewable energy development and production, the advantage goes to renewable energy; it is simply a matter of time and the laws of supply and demand.

More importantly, it may be possible, given the country’s financial woes, to drop energy subsidies entirely.  In a year when four energy companies are in the top ten of the Global 500 Most Profitable Companies, collectively earning more than $90 billion annually (CNNMoney, 2011), while the country is facing massive debt problems, and taxpayers are being squeezed, it would seem the time might be right to level the playing field.  Leonard (Leonard, 2011) believes the time may be right politically as well, given the rise of the Tea Party on the right and a disaffection with ethanol on the left.

U.S. dependence on fossil fuels has become increasingly problematic with the implications felt in the economy, military, industry, politics, and the environment.  In an ideal world, the federal government would subsidize the development and production of renewable energy, minimally, at the same level as fossil fuels.  Unfortunately, the U.S. government uses energy policy to pick winners and losers in the energy sector and provides fossil fuel producers a distinct market advantage.  It is time to phase out all government subsidies in the energy sector and let the most efficient technologies compete in the open market; with the advantages inherent in renewable energy, the shift away from fossil fuels is simply a matter of time.

References

Allaire, M., & Brown, S. (2009). Eliminating subsidies for fossil fuel production: Implications for U.S. oil and natural gas markets (pp. 1-19). Washington DC: Resources for the Future.

CNNMoney. (2011). Global 500 2011: Most profitable companies  Retrieved December 9, 2011, from http://money.cnn.com/magazines/fortune/global500/2011/performers/companies/profits/

Goldenberg, S. (2010). Algae to solve the Pentagon’s jet fuel problem  Retrieved December 9, 2011, from http://www.guardian.co.uk/environment/2010/feb/13/algae-solve-pentagon-fuel-problem

Leonard, J. (2011, February 2011). Get the energy sector off the dole  Retrieved December 9, 2011, from http://www.washingtonmonthly.com/features/2011/1101.leonard-2.html

Miller, G. T., & Spoolman, S. (2010). Environmental science (13th ed.). Belmont, CA: Brooks/Cole, Cengage Learning.

Needham, M. (2011, November 8). Time to eliminate wasteful energy subsidies  Retrieved December 9, 2011, from http://dailycaller.com/2011/11/07/time-to-eliminate-wasteful-energy-subsidies/

Pfund, N., & Healey, B. (2011). What would Jefferson do?: The historical role of federal subsidies in shaping America’s energy future. San Francisco, CA: DBL Investors.

Webster, S. C. (2011, February 9). Peak oil now? Leaked cables show concerns that Saudis running low. The Raw Story  Retrieved December 9, 2011, from http://www.rawstory.com/rs/2011/02/09/peak-oil-wikileaks-cables-show-concerns-saudis-running/


Communications 305: A Digital Media Journey


Life often dishes out irony as if humans required it for sustenance.  I began this class thinking myself a digital native, although I had yet to hear the term.  Working for major software corporation for many years, I ran successful Content Management and Collaboration technology consulting practices that helped our customers take advantage of web technologies and thought myself well-versed in the implications of digital communication on things like security, identity, brand, presence, and other dimensions of the implementation discussion.  I expected to come into this class and excel simply based on the fact that this was a realm I understood and I couldn’t have been farther from the truth.  For while my understanding was perhaps sufficient to help a customer address a need, I missed the big picture that a solid theoretical foundation provides.  In addition, I could have likely added far more value to my customers by helping them think through the implications of digital media on their business, relationships with customers, relationships with partners, and opportunities and risk to their brand reputation.  Life is full of ironies.

             During the course, I started a blog to chronicle my personal journey to graduate with honors, but more importantly as a personal exploration of digital media, and found myself grappling with issues I had previously only encountered as a thought experiment during the class; a powerful way to learn, indeed (Rock, 2011a).

There are a number of perspectives that have influenced my thinking during the course.  I was struck by the simplicity and elegance of Symbolic Interactionism as a theoretical framework, and because it leads to an important philosophical question about the growth of meaning; how will humanity transform as the volume of interactions grow exponentially as the rest of the world joins the network?  In the past, interactions tended largely to be bound in both time and space and now neither is true, there are very few boundaries in the virtual world.

Social shaping of technology is another theoretical perspective that influenced me during the course.  I believe there are deterministic elements of technology that ties to the capabilities that technology affords, and yet observe that often people use technology in ways that designers never envisioned.  Who would have thought during design that Twitter could help overturn an authoritarian regime?  From a purely business point of view, social shaping theory means that we in the software engineering business need to pay close attention to how our products are used.

Of course, the question that most dominated my thoughts during the course was the democratic nature of the medium.  The Arab Spring opened my eyes to the fact that something very different was happening in the world and digital media was at the center of it.  I realized very quickly, that digital media was having profound implications on humanity and wondered at the implications for family, my business, nations, and myself.  It appears to me that Internet and the World Wide Web are significantly shifting the balance of power between individuals, minorities, and dominant hierarchies and believe that humanity may be on the cusp of a new understanding of what it means to be human.  Long have our differences been used as a means of controlling access to resources and our entire system of economics is based on that idea.  I think that the Web is going to give us an opportunity to rethink what it means to be human and how to share.  I know that others see the Web as simply a reflection of humanity, but I do not ascribe to that view because the balance of power is changing, myths are being exposed for what they are, and once dominant entities have given way, while others continue to fight.  It may sound like I am subscribing to some utopian view, and in the end, perhaps I am.  However, throughout history, most power struggles have been violent, and if we look to the example of Libya, this power struggle between Netizens and the dominant hierarchies that control them has the same potential.  I am a firm believer that the natural state of humanity is freedom and so the idea of such a powerful equalizing force appeals strongly to my ideals.


Business, the Web, and the Balance of Power


Image Source: webwizzard

Business has changed significantly over the last twenty years, particularly with the advent of the Internet and the World Wide Web, resulting in fundamental changes to the way business is conducted, as disruptive new business models replace industry norms.  The Internet and the Web have connected people and businesses in ways never before imaginable, creating significant new opportunities to create value and disrupt existing markets, as Google did to advertising, Amazon did to retail, and Netflix did to Blockbuster and the home DVD market.  It appears that many U.S. corporations exist in the space between the traditional business models of the 20th century and emergent business models characterized by fundamentally different consumer behaviors, and are likely to experience significant business disruption by both competitors and consumers alike that take advantage of a new balance of power inherent on the Web.

The Relationship between the Web and Power

         The Web has made revolutionary changes to people’s relationship with each other and with information, as the Web has become the de facto standard for communication and information access in our time (Smith, 2010).   Allowing people to communicate in ways never before imagined, the Web has also changed people’s relationship with media from largely a consumption culture to more of a participatory culture, where individuals are both consumers and producers of media (Shirky, 2009).  The change to a participatory culture has had profound implications on the way consumers interact with each other and with government and corporate institutions, as mainstream media institutions are no longer the sole gatekeepers of information, rather individuals and institutions are free to organize, collaborate, share, and develop media according to their own wants and needs (Shirky, 2009).  The result is that millions upon millions of people, or the crowd, are using the combined power of access to information and the ability to organize to gain power over government and corporate institutions.  Hanley (2010), describes the transformational nature of the web as a constant power struggle “in a constant ebb and flow of winners and losers” between individuals and governments, between consumers and corporations, and even between corporations, or between governments.

Naha Tug of War - Pentax 645D Full Size JPEG

However, it is not enough to note the power struggles without understanding the unique, power-sharing, nature of the web.

Power to Change Dominant Hierarchies

              The Web has demonstrated a significant range of capability to shift power balances or completely upend existing dominant hierarchies, and Social Dominance Theory is a useful lens to evaluate the power of the Web to create change.  Social Dominance Theory (SDT) is a general theory that explains the stability of social inequality in societies with an economic surplus, arguing that three systems, age, gender, and an arbitrary set, oriented on religion, race, nationality, class, ethnicity, or otherwise, combine to maintain dominant hierarchies (Sidanius & Pratto, 1999).  SDT argues the maintenance of inequality occurs not only with the application of force, intimidation, or discrimination practiced by dominants against subordinates, but rather, “the decisions and behaviours of individuals, the formation of new social practices, and the operations of institutions are shaped by legitimising myths…consensually held values, attitudes, beliefs, stereotypes, and cultural ideologies” (Pratto, Sidanius, & Levin, 2006, p. 275).   Legitimizing myths provide a means of justifying, either morally or intellectually, dominating behavior (Pratto, et al., 2006).  For example, a legitimizing myth about Mexican illegal aliens is that they are do not pay taxes, use an unequal share of social services, have higher rates of criminal activity, and take American jobs; a myth that was used to gain passage of the controversial Arizona law, SB1070 (Rock, 2011d).  How then, given the complex interplay between individual behaviors, institutional and societal practices, and cohesive power of legitimizing myths, are the power of dominant hierarchies changed by people using the Internet and the Web?

What is Different about the Web

            Dominant hierarchies are maintained with myths that focus on the trimorphic systems of differences, age, gender, and arbitrary differences like race, class, or ethnicity (Pratto, et al., 2006).  However, on the Web, identities are amorphous, sometimes anonymous, and crafted by individuals (Baym, 2010), eroding the power of the arbitrary-set system to dominate, by allowing individuals to choose which acculturation to accept or shed on a moment’s notice.  Simply put, individuals can shape their personas and this is a key difference from the physical world, that expects behaviors aligned with age, gender, and arbitrary-set systems.

The Web also serves to erode the power of legitimizing myths because the more than a quarter of the world’s population (Hanly, 2010) has access to the what amounts to the sum of human knowledge (Wesch, 2010).   Wesch describes the new media landscape as “ubiquitous computing, ubiquitous communication, ubiquitous information, about unlimited speed about everything, everywhere, from anywhere on all kinds of devices and this makes it ridiculously easy to connect, organize, share, collect, collaborate and publish” (Wesch, 2010).  Ubiquitous access to information makes it very difficult for myth to exist as anything but a myth, because facts and reality and the impact of legitimizing myths are spread across the web at blazing speeds in the form of images and videos that cannot hide fundamental truth, while the diffusion of the net resists attempts to suppress information.  Gilmore (2011) described the nature of the networks treatment of information as “the net interprets censorship as damage and routes around it”.   In the virtual environment, information flows freely and individuals and groups are able to challenge the assumptions of legitimizing myths will information, while circumventing the information control efforts of dominant hierarchy institutions, acting as gatekeepers, that may attempt to control information flow.   Examples of people using the Web to challenge dominant hierarchies are everywhere, including the Chinese people’s challenge to the government during the Sichaun earthquake (Shirky, 2009), the Iranian people’s challenge to the government following the 2009 Iranian Presidential Election (Hanly, 2010), and the recent Arab Spring in the Middle East that has overturned many existing regimes (Rock, 2011b).  The Web is a great equalizer that erodes the power of dominant hierarchies and changes the power dynamics between individuals and institutions, moderating the impact of dominant institutions, or in extreme examples, seizing control of dominant institutions.  While recent events have highlighted the effects of the Web on the balance of power between citizens and governments, what is the impact on business world?

The Web and Corporate Power

             It will come as no surprise to anyone that the business world is about profit.  To the extent that a corporation can dominate a market or industry, a corporation can expect to grow and pass along profits to its shareholders and the greater the profit, the greater the earnings of shareholders and corporate officers.   As noted in the introduction, the Web is having a disruptive affect on the corporate world, where some corporations are seeing their business models and practices challenged, and others are attempting to harness the Web to reach new customers and commoditize existing marketplace leaders.  What differentiates the businesses that take advantage of the new medium versus those that diminish?  What business characteristics allowed Amazon to disrupt first Borders and now Best Buy?  How did Netflix destroy Blockbuster so quickly?  What prevented Blockbuster and Borders, both companies with dominant market positions, significant capital, and great brand recognition, from capitalizing on the opportunity the Web provides?  Perhaps most importantly, what can companies with dominant market positions learn about the changing balance of power?

Corporations that dominate their respective markets are targets for disruption, because marketplace leaders have the highest expectations on their performance.  Well-run companies deliver consistent earnings by using technology to “transform labor, capital, materials, and information into products and services of greater value” (Christensen, 2000, p. xiii).  In the book, The Innovator’s Dilemma, Christensen (2000) argues that well-run companies avoid disruptive technology because disruptive technologies tend to have lower profit, smaller initial markets, and address customer’s future, rather than current, needs, and therefore, good business leaders are reluctant to invest.  Put another way, the investment is fraught with risk.  Were Blockbuster and Borders simply risk-averse organizations in a traditional innovator’s dilemma, or did Amazon, for example, have other advantages besides technical innovation?  To answer this question, we need to look to the equalizing power of the Web.

Image Source: Pink Sherbet Photography

As we examined earlier, ubiquitous access to information has an empowering quality and in the business world, the crowd of consumers can not only access more product and service information than ever before, but can also produce product and service information, creating far more consumer power than existed in previous generations.  Amazon is a great example of a company that harnesses the power of the crowd to provide product information in a metaphor that now dominates the retail industry as companies like Walmart, Best Buy, and others attempt to replicate the transparency and engagement Amazon provides.  In addition, Amazon recognized that the Web offered greater customer reach and the ability to commoditize brick and mortar stores that required expensive storefronts and the labor to operate them.  The result was compelling, as Amazon consumers were offered more information and cheaper products, but more importantly because consumers were offered product insights from other consumers.  Amazon understood that the Web could change the relationship between consumers and products and built a platform that enabled the consumers to engage in a direct relationship with product manufacturers in a show of both altruism and activism; altruistic when sharing positive product experiences, and active when sharing negative experiences.  In short, Amazon built its business on an understanding of changing consumer behavior enabled by the Web.

Risk and Opportunity: A Progressive Example

Image Source: khalid Albalh

In order to understand the changing power dynamics of the Web, I conducted an experiment that simply pitted a consumer and customer, namely me, against a dominant corporation, in this case Progressive Insurance Company.  The opportunity presented quite naturally as it simply required a corporation to behave in its own interests, rather than the interests of a single customer, a situation not terribly difficult to find.  I recently had a family outing on our boat and found that it was losing power and taking on water.  We quickly got the boat out of the water and found that the engine ruined because a mechanical malfunction allowed salt water into the engine.  After filing a claim with Progressive, the claims investigator took the claim information and determined that they would likely deny the claim.  I saw the opportunity to explore the power of social media and to observe what affect it might have.  I put up a blog on WordPress and registered the domain name of Progressivefail.org, putting the story of Progressive’s impending denial on the Web.  Next, I began posting links to existing customer stories of claim problems and consumer satisfaction surveys on Progressive’s track record of paying claims and published the posts via Facebook and Twitter (Rock, 2011c).  I also posted links to Progressives Facebook and Twitter sites and received an immediate response from Progressive’s Twitter account indicating they would look into it.  Within a day, the blog had 87 views and was the first hit on Google when searching for the term “progressive fail; within four days I had received 242 views and the check was in my hands.

The Progressive example highlights how the Web can shift the balance of power between a corporation and their customers.  By simply sharing customer stories on Progressive’s social network, a nearly immediate change took place.  The surprising element of the example is not the immediate payment, but the implication that a single consumer was able to use the Web and Progressive’s own social network to potentially inflict brand damage far beyond the monetary scope of the initial claim.  While Progressive likely intended their use of Facebook and Twitter to open a positive two-way asymmetrical dialogue with their customers, they opened themselves up to significant risk by simultaneously providing consumers with the ability to damage their brand and reputation.  In this example, Progressive is the dominant hierarchy and the legitimizing myth is that of capitalism; it is more necessary for Progressive to profit than to address the specific need of a single customer.

The implication is that a corporation that opens a two-way dialogue with customers on the Web has both risk and opportunity.  If the corporation treats its customers fairly, the Web will work in its favor, while the reverse holds true; should a corporation be perceived as unfair, customers have the power to negatively affect a corporation’s brand and either way, the Web has given consumers far more power over corporations than ever before.

Conclusion

Image Source: Maia C

Individuals, corporations, and governments are all part of a major transformation afforded by the Internet and the World Wide Web, characterized by ubiquitous access to all the information of human society.  Serious implications exist that have yet to be fully understood, or explored; notions of privacy, intellectual property, ownership, relationship, consumer, and producer are all being challenged and reinvented on the Web.  Corporations and governments both have a significant opportunity to take advantage of the Web to build better versions of their selves as they engage the power of the crowd; but they need to beware, because 20th century intentions and behaviors are transparent to the crowd.  Corporations that use the Web to engage customers, need to recognize that social networks are not simply another channel to reach additional customers, rather that use of social networks require ethical business models, because the crowd is vocal. Corporations can no longer exist in the space between the traditional business models of the 20th century and emergent business models, and are likely to experience significant business disruption by both competitors and consumers alike that take advantage of the new balance of power inherent on the Web.

References

Baym, N. K. (2010). Personal connections in the digital age. Cambridge, UK ; Malden, MA: Polity.

Christensen, C. M. (2000). The innovator’s dilemma : when new technologies cause great firms to fail (1st HarperBusiness ed.). New York: HarperBusiness.

Gilmore, J. (2011). John Gilmore’s Home Page  Retrieved September 3, 2011, from http://www.toad.com/gnu/

Hanly, F. (Writer). (2010). Programme 2: Enemy of the State? [Internet]. In R. Barnes (Producer), The Virtual Revolution. U.K.

Ingram, M. (2011, September 2, 2011). Is journalism as we know it becoming obsolete?  Retrieved September 4, 2011, 2011, from http://gigaom.com/2011/09/02/is-journalism-as-we-know-it-becoming-obsolete/

Pratto, F., Sidanius, J., & Levin, S. (2006). Social Dominance Theory and the Dynamics of Intergroup Relations: Taking Stock and Looking Forward. European Review of Social Psychology, 17, 271-320. doi: 10.1080/10463280601055772

Rock, R. (2011a, September 4, 2011). journey24pointoh. journey24pointoh  Retrieved September 4, 2011, 2011, from https://journey24pointoh.com/

Rock, R. (2011b, August 30, 2011). New Media, New Perspectives. journey24pointoh  Retrieved September 3, 2011, 2011, from https://journey24pointoh.com/2011/08/30/new-media-new-perspectives/

Rock, R. (2011c, August 30, 2011). Progressive Fail. progressivefail  Retrieved September 3, 2011, 2011, from http://www.progressivefail.org

Rock, R. (2011d, September 1, 2011). Social Dominance Theory: The U.S. Minority Experience. journey24pointoh  Retrieved September 3, 2011, 2011, from https://journey24pointoh.com/2011/09/04/social-dominance-theory-the-u-s-minority-experience/

Shirky, C. (Producer). (2009, July 23, 2011). How Social Media Can Make History. Talks. Retrieved from http://www.ted.com/talks/clay_shirky_how_cellphones_twitter_facebook_can_make_history.html

Sidanius, J., & Pratto, F. (1999). Social dominance : an intergroup theory of social hierarchy and oppression (Vol. x, 403 p.). Cambridge, UK ; New York: Cambridge University Press.

Smith, P. (Writer). (2010). Programme 1: The Great Leveling? [Internet]. In R. Barnes (Producer), The Virtual Revolution. U.K.

Wesch, M. (2010). From knowledeable to knowledge-able. Kansas City: TEDxKC.


Out of a Job: Offshore Labor, Outsourcing or Something Else Entirely?


Image from: vlima.com

As the United States economy rebounds from the effects of the latest recession, many in the media are calling the recovery another jobless recovery, citing the growth of the gross domestic product coupled with a high unemployment rate.  Both the media and politicians frequently suggest that the trend to outsource manufacturing and move service jobs offshore is the culprit for our economic woes.  As a result, legislators are attempting to stem the tide of offshore labor and outsourcing through protectionist policies that mandate the use of American goods and services, tax corporations that use offshore resources or other draconian measures (Sealover, 2011).  Both the media and politicians are spending their time and energy on the wrong problem.  According to some estimates, offshored jobs will only make up 2% of the jobs lost by 15 million Americans annually (Lael & Robert, 2004).  If outsourcing and offshore labor are not the cause of job loss, who or what is the real culprit?  In short, the culprit is good-old-fashioned, American know-how.

Since before the creation of the Computing- Tabulating- Recording Company in 1911, the predecessor to IBM (“IBM Archives: 1900s,”), businesses in the United States have sought the means to improve business performance through the use of technology.  From advanced robotics and computers on the factory floor to self-service kiosks at airports and grocery stores, automation has displaced far more United States workers than have migrated offshore (Collins & Ryan, 2007).   Daniel Drezner, Associate Professor of Political Science at the University of Chicago also sees technology innovation as the root cause (2004):

There is no denying that the number of manufacturing jobs has fallen dramatically in recent years, but this has very little do with outsourcing and almost everything to do with technological innovation. As with agriculture a century ago, productivity gains have outstripped demand, so fewer and fewer workers are needed for manufacturing. (p. 27)

Former Secretary of Labor, Robert Reich described a tour taken at a U.S. factory, where the entire plant was run by two employees instructing more than 400 robots on the factory floor (Reich, 2009).

The capitalistic process of creative destruction, first described by Engels and Marx is alive and well as new industries consume the flesh of the old (Marx & Engels, 1974).  For example, the newspaper business is a shadow of its former self because of Internet technologies.  It would stand to reason that if millions of jobs and whole industries were destroyed via the relentless advance of technology throughout the last 30 years, then the total number of jobs in the United States would be shrinking.  Yet, even given the current unemployment rate of 9.6% for 2010, the United States has added nearly 47 million jobs over the last 30 years of technology innovation and achievement; therefore additional contributing factors are likely at work (Bureau of Labor Statistics, 2011).

“Historically, the number of jobs has closely followed the growth of the labor force, despite major increases in foreign trade and the advent of a host of new job-displacing technologies” (Lael & Robert, 2004, p. 3).  U.S. Bureau of Labor Statistics historical data for the since 1980 confirms that the labor force has grown at an annual rate of 1.18% while the number of employed workers has grown at a corresponding rate of 1.09% (Bureau of Labor Statistics, 2011).  “When the U.S. economy gets back on track, many routine jobs won’t be returning–but new jobs will take their place. A quarter of all Americans now work in jobs that weren’t listed in the Census Bureau’s occupation codes in 1967” (Reich, 2009).

It is in the nature of journalists to make the public aware of problems.  Equally so, it is in the nature of politicians to attempt legislative solutions.  Henry Louis Mencken once wrote, “There is always an easy solution to every human problem—neat, plausible, and wrong” (Mencken, 1949, p. 443).  The backlash against offshore and outsourcing is the classic example of focusing on the wrong problem.  Instead of focusing on the relatively few jobs moving to lower cost labor pools, the United States should focus on quickly retraining workers displaced because of innovation.  So the next time your hear the media blast the evils of outsourcing or your local politician suggest some new form of protectionist policy to prevent the use of offshore labor; picture them as the Dutch boy with a finger in the dike, trying to stem the tide of innovation, progress and good-old-fashioned, American know-how.

References

Bureau of Labor Statistics, U. S. (2011). Employment status of the civilian noninstitutional population, 1940 to date. In cpsaat1.pdf (Ed.). Washington D.C.: United States Department of Labor.

Collins, D., T. , & Ryan, M. H. (2007). The strategic implications of technology on job loss. Academy of Strategic Management Journal, 6, 27.

Drezner, D. W. (2004). The outsourcing bogeyman. [Article]. Foreign Affairs, 83(3), 22-34.

. IBM Archives: 1900s. IBM – United States  Retrieved May 11, 2011, from http://www-03.ibm.com/ibm/history/history/decade_1900.html

Lael, B., & Robert, E. L. (2004). Services offshoring: Bane or boon and what to do? Brookings Policy Brief(132), 3.

Marx, K., & Engels, F. (1974). The Communist manifesto. Belmont, Mass.: American Opinion.

Mencken, H. L. (1949). A Mencken chrestomathy ([1st ed.). New York,: A. A. Knopf.

Reich, R. B. (2009). Manufacturing jobs are never coming back. Forbes. Retrieved from Forbes.com website: http://www.forbes.com/2009/05/28/robert-reich-manufacturing-business-economy.html

Sealover, E. (2011). Colorado House kills bill about overseas jobs. Denver Business Journal. Retrieved from Denver Business Journal website: http://www.bizjournals.com/denver/news/2011/05/04/house-kills-bill-about-overseas-jobs.html

 

 


Why the Service Economy is Good for US


Imag from : psyberartist

Over the course of the last 60 years, the U.S. economy largely become a service economy, with services growing from 52% of jobs in 1950 to nearly 78% of jobs by 2006 (Hodson & Sullivan, 2008).  While many in the mainstream media appear to bemoan the loss of manufacturing jobs and view the loss as an indicator signaling the decline of the U.S. economy, many see the shift to a service economy as normal process of economic maturation.  Additionally, the shift to a service economy has occurred largely during a period of sustained economic growth.  While typical processes of economic maturation are at work, the U.S. shift to a service economy has unique features that are concerning, like manufacturing job loss, outsourcing, and a shrinking middle class.  Additionally, the pervasive use of information technology in the service sector is a unique feature of the economy that may portend additional economic and wage growth. The shift to a service economy likely has lasting implications for the U.S. economy and may have a lasting impact on U.S. economic power on the global stage.

The economic shift from agriculture to manufacturing and eventually to services describes the well-known evolution of a maturing economy.  According to the World Bank, “these two consecutive shifts are called industrialization and post-industrialization”(Soubbotina, 2004, p. 64). These economic shifts occur as a result of gains in per capita income; as individual income grows, the requirement for food reaches a limit and more is spent on material goods and as the demands for goods are met, more income is spent on services (Soubbotina, 2004).  In a sense, per capita income growth resulting in changing patters of consumer spending is a significant driver of the shift to a services economy.  Bureau of Labor Statistics economist Mitra Toosi (2002) found more than 60% of U.S. employment is generated by consumer spending “with consumers increasingly shifting their purchases to a sophisticated array of personal services” (p. 1).

In addition to shifting consumer needs, increased manufacturing productivity and globalization have also influenced the shift to services.  The popular press often decries the loss of manufacturing jobs and the resulting impact on the U.S. economy, frequently laying blame on outsourced manufacturing to developing countries.  However, Collins and Ryan (2007) found technology-driven manufacturing productivity improvements created more job loss than outsourced jobs.  Former Secretary of Labor and Chancellor’s Professor of Public Policy at the University of California at Berkeley, Robert Reich (2009) vividly described the impact of manufacturing technology on a factory floor:

I recently toured a U.S. factory containing two employees and 400 computerized robots. The two live people sat in front of computer screens and instructed the robots. In a few years this factory won’t have a single employee on site, except for an occasional visiting technician who repairs and upgrades the robots. (p. 1)

Of course, globalization plays a minor, albeit increasing role in the loss of U.S. manufacturing jobs as well, because of the advantage achieved because of inexpensive transportation, lower trade barriers, and cheap labor. However, a Congressional Report found that only 20% of manufacturing job loss since 2000 were a result of trade deficits caused by forces of globalization and those losses were likely ameliorated by job gains elsewhere or reclassification of manufacturing jobs into service jobs (Elwell, 2004).

Of more concern to the service sector is the growing divide between rich and poor resulting in a shrinking middle class.  Some might argue that the shift to a service economy itself is the cause of the growing divide, because service sector jobs appear to be split between low-paying service industries and high-paying service industries (Hodson & Sullivan, 2008).   Low-paying service industries include “retail trade, repair services, personal services, entertainment and recreation services” (Hodson & Sullivan, 2008, p. 249).  There is likely a variety of causes for low-wages in some of the specific low-paying occupations in the service sector.  Personal services, entertainment and recreation services all typically utilize discretionary spending, which are often the first services to be cut during tough economic times.  Another potential cause of low wages in some low-paying service sectors is lack of unionization.  Unions have had some success targeting lower-tier jobs, like janitors and hotel workers (Hodson & Sullivan, 2008), but have struggled with corporations like Walmart, that use strong, anti-union, tactics to prevent unions from gaining a toehold into their organization (Greenwald, 2005).  While low-paying service sector jobs clearly have an influence on service wages as a whole, recent Bureau of Labor Statistics data from May of 2011 show that average wages of private service sector jobs are now slightly higher than average wages of manufacturing jobs (U.S. Bureau of Labor Statistics, 2011).  Therefore, service sector wages are not a sufficient cause of the growing gap between rich and poor.

Rather, government policy is a more likely culprit.  For decades, the U.S. Government has consistently chipped away at the social safety nets put in place by FDR and later by Lyndon Johnson.  In 1996, Clinton passed the Personal Responsibility and Work Opportunity Reconciliation Act, forcing millions of former welfare recipients into the workforce (Wolf, 2006).  Moreover, the taxation policies of the last 30 years have favored the wealthy and placed additional tax burdens on poor and middle-class workers.  Reich (2011) describes the shift in tax policy:

It halved the top income tax rate from the range of 70 to 90 percent … to 28 to 35 percent; allowed many of the nation’s rich to treat their income as capital gains subject to no more than 15 percent tax; and shrunk inheritance taxes that affected only the top-most 1.5 percent of earners. Yet at the same time, America boosted sales and payroll taxes, both of which took a bigger chunk out of the pay the middle class and the poor. (p. 1)

Accordingly, government policies have had a much higher impact on the gap between rich and poor than low-paying service sector jobs.  However, it is important to note, that even with the current challenges in the U.S. service sector, there are bright spots as well.

For example, many of the new service sector jobs are based on what we might call the knowledge economy, a specific class of jobs in the service economy whose value is rooted in information and oftentimes makes use of information technology to innovate.  Bell (1976) describes the post-industrial importance of information in a services economy by indicating, “what counts is not raw muscle power, or energy, but information” (p. 127).  The World Bank considers technological innovation in the knowledge economy as the primary source of productivity, competitive advantage, and the resulting economic growth in the service sector(Soubbotina, 2004).  As a result of both the opportunity space that low productivity inherent in services provides (Hodson & Sullivan, 2008) and continued technological innovation, the services economy is likely to be a continued source of economic growth.

Because of the continued technological innovation and progress, the United States remains a force to be reckoned with on the world stage, although there are signs that U.S. economic standing is weakening.  Recently, Standard and Poor’s, issued negative outlook because of the government’s failure to deal with the national debt in a productive way.  Additionally, some worry that China’s economic rise means a decline in U.S. economic standing.  However, a 2007 Congressional Report found that China’s meteoric economic ascendency will likely have little negative impact on U.S. economic power and may actually grow the U.S. economy (Elwell, Labonte, & Morrison, 2008).

In conclusion, the growth of the service sector has been a boon to U.S. economic growth and the trend will likely continue.  There is little evidence to suggest the service sector is the cause for the growing gap between rich and poor, nor has the service economy negatively influenced U.S. economic standing in the world.  Rather, the continued innovation prevalent in the service sector will likely be a continued source of U.S. economic growth.  Of course, there are significant economic challenges facing the United States, largely wrought by government policy, including a taxation policy that favors the wealthy and a national debt that is affecting U.S. economic power abroad.

References

 Bell, D. (1976). The coming of post-industrial society: a venture in social forecasting. New York: Basic Books.

Collins, D., T. , & Ryan, M. H. (2007). The strategic implications of technology on job loss. Academy of Strategic Management Journal, 6, 27.

Elwell, C. K. (2004). Deindustrialization of the U.S. Economy: The Roles of Trade, Productivity, and Recession. (RL32350). Washington DC: Congressional Research Service Retrieved from http://www.policyarchive.org/handle/10207/bitstreams/2016.pdf.

Elwell, C. K., Labonte, M., & Morrison, W. M. (2008). Is China a threat to the U.S. economy? New York: Nova Science Publishers.

Greenwald, R. (Writer). (2005). Wal-Mart: The High Cost of Low Price [Video]. In B. N. Films (Producer). United States.

Hodson, R., & Sullivan, T. A. (2008). The social organization of work (4th ed.). Belmont, CA: Wadsworth.

Reich, R. (2011). The Truth About The American Economy. Huffington Post  Retrieved 24 June, 2011, from http://www.huffingtonpost.com/robert-reich/the-truth-about-the-ameri_b_869033.html

Reich, R. B. (2009). Manufacturing jobs are never coming back. Forbes. Retrieved from Forbes.com website: http://www.forbes.com/2009/05/28/robert-reich-manufacturing-business-economy.html

Soubbotina, T. P. (2004). Beyond economic growth : an introduction to sustainable development (2nd ed.). Washington, D.C.: World Bank.

Toossi, M. (2002). Consumer spending: an engine for U.S. job growth. Monthly Labor Review, Novermber 22, 22.

U.S. Bureau of Labor Statistics. (2011). B-2.  Average hours and earnings of production and nonsupervisory employees(1) on private nonfarm payrolls by major industry sector,

1965 to date. In empsit.ceseeb2.txt (Ed.). Washington DC: Bureau of Labor Statistics.

Wolf, R. (2006, 17 July, 2006). How welfare reform changed America, USA Today, p. 1. Retrieved from http://www.usatoday.com/news/nation/2006-07-17-welfare-reform-cover_x.htm