Extolling the virtues of division of labor in 1776, Adam Smith wrote about the great efficiencies that had been brought about to the process of making metallic pins, through the simple process of division of manufacturing operations:
"___ the way in which this [pin-making] business is now carried on ___ it is divided into a number of branches, of which the greater part are likewise peculiar trades. One man draws out the wire, another straightens it, a third cuts it, a fourth points it, a fifth grinds it at the top for receiving the head: to make the head requires two or three distinct operations to put it on, is a peculiar business, to whiten the pins another; it is even a trade by itself to put them into paper; and the important business of making a pin is, in this manner, divided into about eighteen distinct operations, which, in some manufactories, are all performed by distinct hands___ I have seen a small manufactory of this kind where ten men only were employed___. Those ten persons___could make among them upward of forty-eight thousand pins in a day. But if they had all wrought separately and independently, and without any of them having been educated to this peculiar business, they certainly could not each of them have made twenty, perhaps not one pin in a day; that is, certainly not the two hundred and fortieth, perhaps not the four thousand eight hundredth part of what they are at present capable of performing, in consequence of proper division and combination of their different operations. "
Well, the new pins are, inter alia, services rife with PINs (Personal Identification Numbers). One after the other, businesses in economically advanced countries, especially in USA, are looking at their business processes and wondering how to slice up the processes and how to outsource the more labor-intensive parts to those countries where such work can be done cheaply and efficiently. As Adam Smith pointed out over two centuries ago, it is not the overall skill and education of the worker that matters. The great efficiencies result from specialization in narrow tasks, and rapid improvements in these narrow task-skills over time.
So, you have college graduates in India poring over the details of USA's Health Insurance Portability and Accountability Act (HIPAA) and training their ears to the multiethnic accents of American physicians. Why? So that they can listen to voice dictation files sent via the Internet by USA -based physicians and hospitals, transcribe these into text, and email back the transcriptions at one-tenth the cost of getting the same job done in the United States.
Sounds like 1776 all over again...
There are of course differences. Once the division of labor goes global, whether in manufacturing or informational labor, it sets into motion political forces that decry the loss of jobs, and economic forces that want to lower costs at any cost. Moreover, especially now, there are the voices of caution from the security apparatuses that worry about the vulnerabilities that arise from shipping intricate software and information-intensive tasks overseas.
So the Americans IT firms work furiously to automate processes so that some of the new "PIN work" can be kept home, partly as a mild political sop to the rabble-rousing pro-proletarian populist politicians, but mostly as a strong way of ingratiating their firms with the military-informational complex.
And the Indians work furiously to lower costs even further while upgrading their IT worker skills even more. After all, India is not the only outsourcing destination -- the Philippines, Thailand, Vietnam, South Africa, and Ghana are nipping at India's heels. And there is always China. That great global manufactory is in a massive phase of adding on a great global software-service industry. Yes, the world would eventually start taking MSL (Mandarin as Second Language) classes. But that is still decades away. Way before that happens, China is going to saturate perhaps a modest 10 percent of its population with ESL (English as Second Language) training, creating an over-100 million-strong IT workforce ready to take on any comers.
So, dear friends from rich nations, as well as my fellow ethnic Indians, have you practiced your Mandarin today?
At least get started with your new username and password in Chinese -- it is going to be your new PIN.
Nik Dholakia
