Unsourcing

It seems at least plausible that a principal contribution to the burgeoning income inequality in the U.S. is offshoring and outsourcing. The mechanism is straightforward supply and demand economics coupled to the de facto compensation mechanisms for corporate executives: if a corporation outsources and offshores those functions and obligations that are typically performed by lower earning workers – custodial, secretarial, customer service, manufacturing, and so on – at lower cost (and almost invariably lower compensation to the workers performing identical functions) than it would incur by hiring its own employees, it simultaneously undercuts the compensation bargaining position of its own and its competitors workers in these lower earning roles, and it boosts corporate profits which are in turn used to justify increased compensation of the high earning executives. The executive rewards incentivize (for the executives) the repetition of this income diverging cycle.

What is only now becoming obvious (at least to me) in the unfolding mortgage debacle is that a significant portion of the U.S. corporate sector has added a third component to the outsourcing/offshoring strategy: unsourcing.

Unsourcing: deliberately failing to perform essential and/or long established and/or legally required corporate functions and obligations, usually as a means only to increase executive compensation. Usage: The Countryslide Mortgage Company recently announced that it will be unsourcing its processing and maintenance of mortgage documents in all future mortgage transactions. Executive bonuses totaling the GDP of Bolivia were distributed following the announcement.

In retrospect, I suppose, we should have anticipated this. Unsourcing is the easiest and least costly of the three strategies to implement. The corporation simply doesn’t fulfill its functions and obligations.

To flesh this out just a bit, my reading of the Daily Caller article linked above (disclaimer: have your favorite stomach remedy handy before reading - it’s sickening) is that one significant element now contributing to a potentially renewed and particularly virulent contagion of the financial sector is through the complete abandonment by – for lack of a better word – “banks” of their admittedly mundane but long established and essential clerical role in processing and maintaining documentation associated with the mortgages that they issued, bought, sold, sliced, diced and apparently pureed.

Now don’t get me wrong. On the scale of evil, unsourcing by Corporate America is probably not the worst. This unfolding economic dark night of the soul has unearthed evil upon evil: gambling, unconscionable greed, collusion, corruption, extortion, narcissism, deception, delusion, fraud, theft, malfeasance, misfeasance, and on and on. But somehow through all that I still, probably foolishly, retained a sense that if we could just peel off those rotting outer layers, thick as they were and difficult and unpleasant as it might be, that there was at least a tiny redeemable core at the center. But there is something so primal about unsourcing as a corporate strategy in such a central position in the economy, that now I am not so sure.

Update: More here.