By Digoy Fernandez

THE news that a leading international bank — OK, its Citi — will knock off more than 50,000 jobs did not excite the markets, but it raises the specter of diminishing service in a service-oriented industry. I remember all too vividly arguing with a very rude Citi rep a few years ago — probably one from their call center — and recounting this to one of my classmates who was a former high ranking executive of the bank. He agreed that the service of the bank had gone down tremendously. The net effect of all this is that, after I mentioned the incident to my family and friends, they all resolved to bring their banking business elsewhere.

We talk about outsourcing here in the country as if it will be a panacea for all our economic woes. True, employment in this sector is expected to be more stable than most as international companies shed staff and outsource certain functions to firms like those found in this country. But outsourcing can only go so far. The news today about additional woes in Quantas — an airline that had once been proud of its service history — as yet another plane suffered from a failure in one of its systems. The sudden increase in incidents in this airline are said to be traceable to its having outsourced the maintenance function. This is not a wrong move, per se, but an airline certainly cannot take chances that something will go terribly wrong with one of its airplanes as it coasts at 30,000 feet above sea level.

The TV program Air Crash Investigation has highlighted the danger to a plane if one little part gives way, or if a plane passes cursory inspection only to fall from the sky because of something the mechanic forgot to do. One airline that they featured had taken shortcuts in their maintenance schedule by maximizing the length of time between mandatory service schedules, and an air crash was the result. That is why I look apprehensively at any airline that publishes many flights on any given day, and, after considering the number of aircraft that they have available for flight, come to the conclusion that someone is short-circuiting maintenance schedules.

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By Digoy Fernandez

IN the typical Western corporate setting, the initial reflex action in severe downturns like what we are beginning to go through is to lay off staff, close down plants, and cut both expenses and benefits in an effort to pare down costs. Of course, if one multiplies this action thousands of times over as companies across the international spectrum tighten their collective belts, the more pernicious effects of a severe recession become like a self-fulfilling prophecy. The more people lain off and plants closed result in lower spending power all over the world’s markets, making the downward spiral not only inevitable but also longer lasting. There was a trigger, to be sure, and this was the debacle in the sub-prime housing loans and the discovery of crappy credit swap default loans in the portfolio of many an otherwise respectable financial institution. But the period of fault finding is over. Now is the time to think positive to get ourselves going, even if the economy is headed the opposite direction.

With the loss of jobs coming along like a tidal wave, it boggles one to attempt to visualize the effect this will have on consumer spending, the subsequent decline in production, the ejection of families from their homes, and a general sense of malaise. What is one to do then, when faced with an unpalatable situation such as this one?

In our country where the family system remains alive, it is easy to think of a dispossessed family moving back into the parents’ household, or being given the use of an underutilized asset. Not so in many Western countries where homeless or church shelters often provide the only possible fallback for a family that hits bottom. At the very least, in the more socialized economies, there will always be welfare to lean on…but even this is not a bottomless fund and many governments may prove reluctant to support an army of dispossessed people who will not be able to find work.

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