Economic fallout of bug is a puzzle : LUSENET : TimeBomb 2000 (Y2000) : One Thread

Register Staff Writer 08/09/1999 -------------------------------------------------------------------------------- The Year 2000 computer problem is a wild card for Iowa's economy, business experts say.

Despite troubles in the farm sector, the Iowa Economic Forecasting Council has predicted that Iowans' personal income will increase nearly 5 percent in 1999. But the potential for computer havoc after midnight on Dec. 31 has economists pondering what's ahead for next year.

Some experts worry that computer glitches will disrupt worldwide trade, causing problems with the flow of goods and services. A recent State Department report to Congress warned that "a breakdown on any part of the supply chain would have a serious impact on the U.S. and world economies."

Others see a silver lining. They point out that Iowa companies are spending millions of dollars to upgrade computer hardware and software, making their operations more efficient, more productive and potentially more profitable.

"There are so many analysts making assessments that, jiminy, it could drive you crazy," said Harvey Siegelman, economist for the Iowa Department of Economic Development. He said he takes comfort because a massive effort is under way to respond to Y2K issues.

The problem is that some computer programs might fail when the date changes to 2000. Because older software was written to recognize only the last two digits of a year, such programs could read the digits "00" as 1900 instead of 2000.

Jim Aipperspach, president of the Iowa Association of Business and Industry, said it's hard to determine with certainty whether the state's economy will be hurt by the Y2K bug. If the bug causes any significant problems, it will have a negative impact because of a heavy dependency by Iowa companies upon technology, he said.

"If companies are not prepared, it will have a profound effect. But my sense is that companies are doing what they need to do to be prepared," said Aipperspach, chairman of the general business task force of the Iowa Industry/Government Y2K Council.

Staying Calm

Ken Stone, an Iowa State University retail economics expert, said he suspects major retailers, such as Wal-Mart, will be ready to respond if Y2K problems develop. Smaller retailers tend to be less dependent upon technology, and some Main Street merchants in rural Iowa don't even have computers, he said. So the overall impact of Year 2000 computer glitches may be minimal upon Iowa retailers, he said.

"I think the biggest difficulty will be just to keep people calm," Stone said.

Bob Wisner, an Iowa State University farm economist, predicts a high priority will be given to fixing computer problems overseas if foreign nations begin to curtail the purchase of grain or other farm commodities from U.S. sources because of Y2K difficulties.

"I would be very surprised if problems lasted more than a few weeks," Wisner said. "It could have some initial negative impacts on the markets. We could lose some business that would be difficult to make up. In short, it would not be particularly good news over the short term for farm prices."

Thomas Noble, associate director of the Iowa Manufacturing Technology Center in Ankeny, said there is no question that many Iowa businesses are becoming more efficient and productive by replacing outdated hardware and software.

"At a lot of firms, they are getting newer versions, and they are going, 'Wow,' " Noble said.

Good Shape

Noble thinks that compared with other states, Iowa will be in good shape to respond to Y2K problems. But there is still a fear of the unknown, he said.

"What we don't know is that some seemingly insignificant event somewhere will cause a cascading problem that no one can anticipate and totally cope with," Noble said. One example could be electrical problems, he added.

He compared potential Y2K troubles to what happens when a labor strike occurs at a General Motors auto plant, or when a major automotive supplier is hit by a worker shutdown.

"They start fretting about shutting down the whole enterprise, and when General Motors goes down, all of their suppliers and contractors are in trouble," Noble said.

But Y2K worriers should remember that Americans are flexible people, Noble added.

"My guess is that if something happens, we will soon figure out a way around it."

-- y2k dave (, August 09, 1999

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