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Subject:RE: India - Wave of the Future? From:stephen -dot- arrants -at- comcast -dot- net To:"Anameier, Christine A - Eagan, MN" <christine -dot- a -dot- anameier -at- usps -dot- gov>, techwr-l -at- lists -dot- raycomm -dot- com Date:Wed, 03 Sep 2003 18:53:56 +0000
> Let's say Acme Net-Enabled Widgets (watch out, they explode) outsources
> everything to offshore workers at a bargain-basement rate. Those workers
> prosper for a while. However, Acme's thousands of laid-off US workers
> can't afford the net-enabled widgets anymore, and neither can the
> laid-off employees of all the other US tech firms. We wind up with
> millions of jobless IT workers who can't pay their monthly rent, much
> less buy the products. The low-wage offshore workers can't afford the
> products, at least not at the prices they sell at here in the US. Acme
> Net-Enabled Widgets saves money in the short term, but in the long run
> they lose customers and need to lower the price of their product to
> survive. So much for the savings. Cheaper labor, but smaller market and
> cheaper product. This is better how?
This is better because financial analysts laud Acme for reducing costs to push
up profits, causing the stock to rise. The management and board of Acme
exercise their options and sell their stock, reaping a huge profit. Lots of
small investors things Acme is a good investment and buy more and more stock,
pushing the price up even further. Acme employees invest their 401(k) accounts
in lots of Acme stock. In a few months, Acme reports a third-quarter loss of
over $5 billion dollars, due to "restructuring" costs. As the stock price
tumbles, because Acme isn't selling as many net-enabled widgets, the board
throws out management and installs a new management team which reduces costs
even further by reducing quality, cutting benefits for the remaining employees,
using financial tricks such as derivatives to fund the company. Fourth quarter
financials show that Acme only lost $900 million, but that third-quarter
results have to be restated because OOPS! we forgot to add in even more losses.
And one day, like Enron, folks discover that (A)Acme Net-Enabled Widgets stock
isn't worth the paper it is printed on, (B)Employee 401(k) accounts almost
fully invested in Acme Net-Enabled Widgets lose 96% of their value, (C)
Congressional hearings on corporate accountability go nowhere.
