Harvesting Prison Labor

And other virtual feats of economic daring.

Forbes, among others, reports that Chinese prison guards force inmates to play online computer games for the guards' personal profit.

The Guardian reports that Chinese prison guards forced their inmates to work as “gold farmers,” playing games like World of Warcraft to attain virtual items which would then be sold on secondary markets.

The Guardian explained in detail how the scheme worked:

As a prisoner at the Jixi labour camp, Liu Dali would slog through tough days breaking rocks and digging trenches in the open cast coalmines of north-east China. By night, he would slay demons, battle goblins and cast spells.

Liu says he was one of scores of prisoners forced to play online games to build up credits that prison guards would then trade for real money.

It's no surprise that ambitious online social climbers who desire to gain status in virtual gaming worlds might want to reduce the effort needed to earn land, castles, or powerful weapons.  Some time back, a gamer friend told us it took roughly 2,000 hours of gaming - approximately one work-year - to earn a decent sword, then win some battles, and eventually become a high-status landowner in games such as EverQuest or World of Warcraft.

Millions of gamers around the world are prepared to pay real money for such online credits, which they can use to progress in the online games.

Given that so many gamers want to avoid so much of the work, an elaborate secondary market has developed for artifacts "earned" in virtual gaming worlds.  If the appropriate financial arrangements are made outside the game, two characters can meet at an agreed spot and transfer the goods.

This practice is called "gold farming."  It's hard to determine exactly how much real cash is exchanged for virtual goods, but the Guardian estimates that there are 100,000 full-time gold farmers in China and that over a billion dollars worth of virtual goods were exchanged for real cash in 2008.

Spinning Virtual Straw into Real Gold

The first time we ran across gaming for profit, we read about an entrepreneur who'd set up a gaming facility in Mexico.  He paid Mexicans to play games and sold their output.  This didn't work for very long - his employees figured out that they could set up their own gaming accounts and go into business for themselves.  It was hard to keep employees slogging away on his behalf.

Labor turnover isn't a problem in Chinese prisons.  Forbes estimated that 80% of all such production of virtual goods occurs in China due to rock-bottom labor costs - prisoners don't cost the guards anything.

They can't use the prisoners full-time, though.  Inmates have to do whatever manual labor the government requires before they're allowed to "play."  One convict who'd left the prison when his sentence was up told the Guardian about his work schedule:

As well as backbreaking mining toil, he carved chopsticks and toothpicks out of planks of wood until his hands were raw and assembled car seat covers that the prison exported to South Korea and Japan. He was also made to memorise communist literature to pay off his debt to society.

The guards had to satisfy government work quotas before they could force the inmates to play games in their "spare" time.

"Spare" time or no, this isn't pin money.   The ex-con told the Guardian that he'd heard guards bragging that they were getting 5,000-6000 Chinese yuan per day.  That's between $750 and $900, not bad for a business which has no labor costs at all and very low staff turnover.

What's wrong with paying your debt to society?

Opportunity Knocks in Strange Ways

The concept of having prisoners work to help pay the costs of their imprisonment isn't new; prison labor has been sold commercially as long as there have been prisons.  It's rare in the United States, though, because labor unions have lobbied for laws which restrict the commercial use of convict labor.  The unions seem to be afraid that the convicts will work for lower wages than their members.

Nonetheless, there are call centers in American prisons.  So long as the call center doesn't process credit card data, at 92 cents per hour, a prison-based staff is a viable alternative to offshoring.  Convicts traditionally manufacture license plates, and states such as Alabama and Arizona use chain gangs to pick up roadside litter and clean graffiti off buildings despite protests from the unions and from various Chambers of Commerce.

American penologists are skeptical of computers in prisons - that's one of the major obstacles to setting up more prison-based call centers.  If this issue could be addressed by locking down computers as securely as the Chinese have done, it's possible that yet another industry could bloom as long as the economics support paying the inmates a buck an hour to play games.

Welfare to Work

One of the reasons that welfare recipients have such a hard time making it into the world of work is that their skills don't make them worth minimum wage.  Playing some computer games is free, however, and someone aspiring to make money gold farming might enjoy the learning curve.  Would the Obama administration count gold farming as job creation?

Unlike the drug trade which delivers a real but harmful product, this industry depends on customers who swap real cash for products that don't really have any tangible existence.

Whither Virtual Goods?

Given that there's a billion-dollar market for virtual goods and that gaming itself is a multi-billion dollar industry, what next?

  • Game vendors want in on the real action.  So far, most of the major games haven't restricted the trade too much because having real prices quoted for virtual goods makes their games seem more desirable.
  • Facebook has defined its own virtual currency, Facebook Credits, which games which exchange money are required to use.
  • Second Life lets participants buy and sell on its own web site.  Having figured out how to charge subscription fees for virtual action, other games will figure out how to get a piece of the real action over time.
  • The World Bank reports that gold farming can have a significant impact in undeveloped countries.  Entry costs are low and most of the revenue stays in the country where it's earned.
  • Gaming environments can create electronic goods at will just as governments print money whenever they want.  Inflation is a real possibility especially if a game starts selling goods it creates out of thin air.
  • A billion bucks per year is big enough to be visible; government regulation is coming.  In 2009, the Chinese government made it illegal to trade virtual goods without a license.
  • Virtual economies have scams and frauds like real economies.  A Second Life virtual bank named Ginko, which means "bank" in Japanese, offered 40% interest, far better than Bernie Madoff's 10%.  When the bank went bust, the equivalent of $750,000 real dollars disappeared.

    The usual suspects are calling for regulation of invisible economies in virtual worlds with no physical reality whatsoever, populated entirely by residents who are there of their own choice and who can withdraw at any time.  Perhaps they're hoping that virtual rules for virtual economies will work better than the real ones have in the real world?

Even Dr. Seuss's Once-ler, for all his insight into the mind of the American consumer, might have found virtual goods a bit far-out - much less a virtual Lorax to complain about his online business practices.  No doubt the Once-ler would have been first in line to peddle nonexistent wares as the market developed, however.

I laughed at the Lorax, "You poor stupid guy! You never can tell what some people will buy."

 - Dr. Seuss

Will Offensicht is a staff writer for Scragged.com and an internationally published author by a different name.  Read other Scragged.com articles by Will Offensicht or other articles on Economics.
Reader Comments

Interesting article, but gold farming is not allowed in World of Warcraft and can get your account banned (same goes for buying farmed gold).

June 15, 2011 9:41 AM

You're right Willy, but insider trading is not allowed on Wall Street either. Nor is dealing in marijuana.

One suspects that if the WoW community doesn't support the laws, they won't be followed all that well regardless of what the game owners do with their terms and conditions.

June 15, 2011 10:34 AM

I play these types of games. I have alot to say about this. (forgive the wall of text and the verboseness of this post, thanks in advance)

The gold farming situation...I do not see how that the figures listed by the prison guards...is even feasible. Virtual gold is a rather...umm cheap "thing" to buy. Plus getting that good gear (which would be worth good money) is hard to get (from the mob which drops it) plus a RANDOM chance (in some cases .5%) to drop, PLUS a 1 out of 40 chance (assuming its a World of Warcraft sytled raid) of winning it. The real time+real money invested in the account (and monthly subscription)..it just does not equal out to the prices I see listed on the standard "gold farming" sites.

The market is simply saturated with this kind of "service" (their words not mine)
Unless of course they are "duping" the item. (which is tantamount to hacking imo)

Now there was a time when these numbers were possible...back in the late 90's...when MMO's (which is what World of Warcraft, Everquest, Eve, Secondlife, Starwars Galaxies, Mortal Online) are. One could make pretty decent actual money. (Think 50bucks would get you 100 platinum in EQ on Ebay circa 2000) But that time has LONG since past.

(in a sandbox game set up)
As far as virtual land/territory...in the games I have played, I took the role of a virtual economist...investing "gold" into the games commodities markets, and flipped that into "virtual real estate". (I would make clans a killing...thus eliminating taxes on clan members...because the clan basically wanted for nothing) I never dealt in gold in a liquid sense, but always in materials. (as gold even in a virtual world loses value...materials have a least likely chance to lose value...esp since they are consumed faster than gold...its a "safer bet") Land was/is easier to get, and the gold to cash value STILL did not support those numbers.

In game fraud and Ponzi schemes, and insider trading, and Rockerfeller type of market manipulation.., buying or selling leaders, armies, and funding rebellions/insurrections or guerilla warfare....can be especially fun or funny. (I've crashed markets by flooding that particular item, to devalue a rival) Why is this type of activity "ok" and not sociopathic (atleast in this instance) Because at the end of the day...its all pixels,...no one gets hurt, nothing of real value is lost...and its for fun...esp when in the context that games like these always focus on hacking something apart with a spear, sword, missile, bomb, or gun.

June 15, 2011 11:34 AM

oh one thing which I forgot to mention in all that (got a tad carried away, sorry)

Alot of these "gold farmers" or "bots" (as they more resemble) are run off of scripting and macro programs running in the back ground. (so very little human interaction...if any) (that is how companies catch you..but counting and watching for strict repetition)...and from what I have read and understand most of these services are based out of Malaysia.

Not sticking up for China...but I suspect they have very little to do with the whole "gold farming" problem. Its easy to "hate on china"...but this is not the reason...even with "eyewitness accounts of it happening"...it could be just a case of demonizing for the sake of demonizing. (because the numbers just do not add up...atleast with how I am familiar with it)

June 15, 2011 11:46 AM

So...who you talking to Fred? Werebits, Offenflight, or are we all Willy's on this bus?

June 15, 2011 12:15 PM

Guess my point is..

I am rather dubious of the claims of "prison labor" being used, and its effectiveness (by the numbers listed). There are better ways to make money from games (now, and even the recent then), by the farming means they suggest. (right church wrong pew, perhaps?)

But keep in mind...I am a game nut, so I can only offer my experience.

June 15, 2011 12:36 PM

@willy, I got it right this time. Point taken, I was addressing werebat's point that the WoO game management doesn't allow trading.

ebtomfool pointed out that they try to catch people / players who act scripted. That's fuzzbusters and radars all over again. People game google page rank, google changes the rules, and on we go. I suspect the same with gaming.

June 15, 2011 1:31 PM
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