THE INTERNET REVOLUTION – NEITHER BOOM NOR DOOM
BY JULIANNE MALVEAUX
Tech stock investors have been on
the run since the NASDAQ tanked last year.
Even though there has been slight market recovery in the last week or
so, there has also be a bit of caution, if not panic, surrounding the state of
tech stocks. The number of businesses
going bust keeps rising, though many say these businesses were unsound and
poorly backed. All the signs of trouble
ignore the fact that, even after the business shakeout, we are at the tip of
the technology revolution, not in the middle of it.
But I was surprised to find so many Internet cheerleaders at the Global Internet Summit, which took place this week in Virginia this week. I agree with Virginia Governor James Gilmore (R) when he says, “The Internet revolution has just begun,” but chuckle when his co-chairman, John T. Chambers of Cisco Systems, speaks encouragingly about Internet investment. Stock in Cisco, after all, has slid by 70 percent in the last year. Still, one of my favorite investors, Abby Joseph Cohen, says that now is the time to buy. She has reduced her cash position at Goldman Sachs from five percent to zero and increased her share in equities.
It is hard to reconcile this cheer
with layoffs looming large and companies closing left and right. The good thing about these layoffs, though,
is that people are finding work much more quickly than they might have in the
last economic downturn we experiences.
While the economy is especially challenging to those who make
predictions, our economy is dynamic enough now to both generate job gains and
job losses. Our 4.2 percent
unemployment rate, while slightly higher than it has been in the past year, is
amazingly low compared to the rates we have experienced in the past.
I suppose those who are speaking at
a Global Internet Summit have to predict boom times. Part of their reason for doing so, it would seem, would be to
stimulate interest in their product.
And those who had to fasten their seat belts, and change their personal
lifestyles, to get past the layoffs that were experienced last year, have every
reason to expect the doom that some are projecting. The reality is neither boom nor doom. It is, as some have said, the oscillation that takes place around
the development of a new industrial revolution.
This revolution may be televised or even web-streamed, but
it is clear that many Americans are, so far, sitting the revolution out. Half of us are not stock market investors
and pay scant attention to the market fluctuations that obsess the other half
in America. Half don’t even have
computers at home, and are not participating in the new e-commerce that
provides all kinds of opportunities for consumers. Those who aren’t in the revolution are poor, or they are people
of color. Often they are small business
owners.
Hundreds of organizations have
decided that closing the digital divide will be a priority for them in the next
decade. Rev. Jesse Jackson’s
PUSH/Rainbow Coalition, for example, has pledged to wire a thousand churches
for the Internet so that inner-city folks who don’t have computers at home can
have access to them from their churches.
Jackson’s involvement may get some technology companies interested in
what are now called “emerging markets”.
These markets are key to the future profits of some of the companies
that are now faltering.
But there’s a big gulf between a
bunch of Fortune 500 leaders meeting in Northern Virginia, where Internet is
King, and the wiring of a thousand churches in our nation’s inner cities. The gulf, perhaps, may be defined by
different uses of words like “boom” and “doom”. Technology people tend to be optimistic. They now how much more infrastructure must
be created, how much more investing is available, in their sector. Despite a market that has stuttered for a
year, they expect interest rate cuts and the cooperation of a Federal Reserve
Chairman who first engineered this slowdown, and will now do whatever he can to
keep it as short as possible.
I’m not sure that people on the doom
side feel the optimism that others do.
After all, they’ve seen 8 years of expanding economy, and many still
have not benefited from expansion. Now
that the economy has slowed, they see their chances for employment also
evaporating. And, after the Clinton
hype about government investment in emerging markets, these folks see a
different focus coming form the Bush White House.
Our nation will boom and our economy
will expand when everyone has access to the latest technology. The first phase of our Internet revolution
left quite a few people out. Will the
second phase, this phase after the shakeout, do any better?