Mitch Ratcliffe-Economy Expert? Not : LUSENET : TimeBomb 2000 (Y2000) : One Thread

This is from the ASK Mitch session on Sounds like the "blame the other guy" theory.

Will Y2K Sink the Economy?

U.S. Ready, Rest of World Getting There

By Mitch Ratcliffe Special to Q U E S T I O N : Given the interconnectedness of the worlds economies, I believe the inevitable problems in Russia, Asia and South America will adversely affect the U.S. I feel certain there will be a recession, perhaps to rival the 1973 oil embargo. Prices of goods, particularly oil and electronics, will skyrocket, and stock markets and employment will drop. Do you agree?  Julia O.

A N S W E R : I dont agree, Julia. Your assumptions rely on other assumptions that are not iron laws of economics, but poorly documented fears for overseas economies. Moreover, you arent factoring in the benefits overseas problems can have for the U.S. dollar and economy, which should offset many of the impacts you predict. Y2K will certainly cause problems, both here and abroad. But those problems will be localized. Companies are preparing better for the potential for interruptions than for any previous disaster, even if those preparations are not perfect. As Joel Prakken, chairman of the National Association for Business Economists said this week, This group of professional forecasters does not think that this is an event that will cause a recession. Its too well-anticipated and most businesses in the United States are well along the way to rectifying their mission-critical problems.

International Problem, Local Effects Overseas, then, is the big worry. However, the news from around the world is following the same trajectory that U.S. Y2K-readiness did in 1998, going from dire warnings to a more optimistic assessment of readiness based on the results of real research and testing of Y2K-susceptible systems in Asia, Europe and Latin America. In Japan, for example, government and business have reversed their earlier gloomy projections and now claim they are nearing readiness for Y2K. Are they lying? They could be, but it would require a vast conspiracy to engineer this false reality across so many borders. The fact is that while the United States, northern Europe and a few Asian countries are heavily computerized, most of the globe is still using largely analog technology and human systems to perform infrastructure management and the paperwork that has been automated in the United States. Only in the last two years has information technology finally resulted in improved productivity in the U.S., yet there is no sign of this kind of productivity jump anywhere else in the world.

Tigers New to IT The Asian tigers, such as Korea, Taiwan and Malaysia, began their aggressive programs of building information technology only in the early 1990s  the earlier boom was due to manufacturing growth. These countries simply dont have as many Y2K problems per company as the United States and Canada. Thats why more than half of the estimated $600 billion in Y2K costs will be spent in North America. Certainly there will be problems. What will they do to the U.S. economy? If U.S. companies werent preparing, especially by stockpiling or switching to suppliers who can guarantee delivery, there would be a potential for the kind of 1973 oil-shock recession you refer to. But, the level of preparation is high. Moreover, most interruptions will be in the flow of information, which will merely slow the pace of the economy. You cite the impacts of the Asian currency crisis and GM strikes on the economy, but I am hard-pressed to find the lingering effects of these problems even a year later. So whats the basis for a two-year recession in your scenario? Y2K will be expensive  the most expensive single industrial problem in history. The way I see it, the tremendous costs are plenty of damage; we neednt see the end of civilization to feel a serious impact.

Mitch Ratcliffe is editorial director of Ziff-Davis ZDY2K Web site and president of Internet/Media Strategies Inc., a Lakewood, Wash.-based consulting company. His columns answering Y2K questions appear each Friday.

-- y2k dave (, May 22, 1999


Mitch, If we are currently dealing with record trade deficits, how can more of the same help us? What about pirated software? What about the fragility of our current economy? Mitch, I appreciate the optimism when it is based on fact. Your piece appears to be another feel-good no problem spin attempt. Better luck next time.

-- cw (, May 22, 1999.

hi, my name is dave...and i'm an idiot

"HI DAVE!!!!"


-- y2kook dave (, May 22, 1999.

somebody from the the debunker crowd not happy.

-- get lost (smu@is dead.bus), May 22, 1999.

Mitch expands on his point here:,6158,2263584,00. html

-- Stephen M. Poole, CET (, May 22, 1999.

This is the point that every polly misses. This is is from the GAO. Mitch does not hold a candle to these and his ramblings.

Even if we were to miraculously fix every one of these domestic issues and make certain all U.S. companies and government agencies will get themselves Year 2000 compliant before 2000, the absolute largest risk to the U.S. and to U.S. citizens is the impact from companies and governments outside the U.S. Far too many companies and governments critical to our continued strong economy, and providers of key resources, are more than 30 months behind private industry in the U.S. Since it takes an average of 30 months for a midsize company to achieve compliance of their most critical systems, many of these lagging foreign companies and governments will simply not have enough time to get their systems fixed before 2000. Failures will lead to a negative impact on our economy and availability of critical resources. We'll see significant impact from failures in these regions, including economic, sociopolitical, investment shifts, market changes, critical resources, national security, and defaults on federal loans. The only way now to combat this enormous issue, is for the U.S. Government to launch significant foreign contingency strategies in order to reduce or negate high risk dependencies on these industries and countries before we begin to feel these ill-effects. Since failures will increase in numbers throughout 1999, increase in volume throughout 2000, and continue at reduced levels throughout 2001, the time to act on this is now.

Mitch wants to know when thing will hit home to Peoria, just wait.

-- y2k dave (, May 22, 1999.

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