At the beginning of the century, I wrote a fair amount about how the bubbles were going to burst as the dotcom fiasco headed down the drain. But once the recession was in full swing, I found myself cheerleading for a recovery that was fairly certain to happen, at least in the enterprise software market. And it did. Oh, for the good, old days.
Today I'm a lot more pessimistic about a recovery and manufacturers' ability to come through in one piece. Cheerleading is looking a little like a fool's errand right now, and here's why.
The dotcom bust was a failure of a brand-new business model — so new there were no rules, no precedents, nothing to go on but vague promises of a preternaturally youthful and ridiculously optimistic class of prognosticators who were going to "disintermediate" the entire brick-and-mortar economy and otherwise change business as we knew it.
What was reassuring, in retrospect, was how safe it felt to watch such a new edifice come crashing down. Sure, the dotcom boom ended with an enormous crash, but what was wiped out had not yet become fully ingrained in our economy and so it was relatively easy to envision dialing back a few years and starting afresh, sans the over-hyped new-economy nonsense and its silly marching band of dotcomers.
This time, what has collapsed isn't something new and untried, but something old and supposedly vetted by many of the finest minds in the financial and economic world. What has collapsed is a combination of laissez-faire financial theory and years of "greed is good" fiscal policy that held that if things were good for Wall Street, they had to be good for Main Street, too.
Take our consumer economy. Robert Reich, a former U.S. secretary of labor and policy professor at the University of California, Berkeley, pointed out in a recent op ed piece that way-too-easy credit helped finance a massive boom in consumer spending in recent years that masked fundamental weaknesses in the economy, particularly with respect to the growing income disparity in our society. While wage earners' ability to spend their own money has been declining rapidly since the Reagan Revolution, easy credit made it possible for these increasingly cash-poor individuals to spend someone else's money and keep the consumer economy, on which so many of us depend, afloat.
Now, with credit markets destroyed and home equity crashing faster than President Bush's poll numbers, this artificial lifeline has been wiped out. So, Reich opines, we can recover from the credit crisis, but we won't be able to recover from the coming consumer spending crisis without some massive repudiation of a policy that has been more than 20 years in the making.
Having seen how quickly calls sounded for dismantling the relatively perfunctory Sarbanes-Oxley regulations, before the ink was even dry, I'm not optimistic that the lessons of Depression 2.0 can actually be learned by a financial and policy uber-class that is depressingly myopic when it comes to understanding how much our well-being — especially manufacturers' — depends on an honest and secure stewardship of our economy.
I fear we're in for something much worse than last time around, and I hope I'm seriously wrong as I write these words. I never thought I'd be nostalgic for the dotcom crash. But I am.