There was a good Wall Street Journal piece this morning on Satyam … which by the way is Sanskrit for ‘truth’. The CEO puffed up both revenues and earnings and margins over the past several years.
My first reaction: I guess the whole outsourcing ‘crisis’ wasn’t such a big deal after all.
Remember the wall to wall coverage given to the dangers of outsourcing in the run up to the 2004 presidential election? It was the shark attack story of that summer. John Kerry brought it up in every stump speech that I heard. Serious news anchors did endless special reports on it. Lou Dobbs launched his populist schtick on the issue.
Some of us argued that the threat was exaggerated by a fear seeking press, backed by front-running consultants. It turns out that the supply side of outsourcing was as over estimated as the demand side.
Satyam’s outsourcing based growth story, has now turned out to be an act of creative fiction. Sending jobs offshore turns out to be not as big a deal as believed - not as profitable a labor cost arbitrage as threatened - not nearly the end of the world that the left made it out to be during the run up to the 2004 election!
The story was so big in 04 that the Bureau of Labor statistics started counting the number of jobs outsourced, that is, moved off shore but within the same company. Despite the hysteria, the first such report found that roughly 2976 jobs fit the bill, a rate which if maintained would have taken something in the neighborhood of 10,000 years to eliminate all American jobs. But the pace didn’t continue, the latest figures show only 2,034 such job relocations.
I know this particular episode of Fear Factor is now an old story, but the pattern is not. The outsourcing story was a political hysteria, which helped fuel a financial mania. Remember that next time a politician flogs another panic for political gain.