The Y2K Stimulus

Yes, fixing the Year 2000 bug is causing alarm and costing billions. But it's also goading many offices to improve.

Past turn-of-century celebrants have sometimes included end-of-the-world groups led by prophets of doom. In our technology-driven age, it's perhaps not surprising that a millennium computer bug has spawned prophets of techno-doom.

We're referring, of course, to the notorious Year 2000 (Y2K) computer crisis. That's the potential mess caused by old software programs that read only the last two digits of a year.

Last week the usually matter-of-fact Wall Street Journal displayed a dramatic split on the subject. On page 1, the regular Monday "Outlook" column was headlined "Year 2000 Is Costly, But Not Catastrophic." But, at the top of the editorial page, Deutsche Morgan Grenfell's normally cautious chief economist, Edward Yardeni, zoomed into Armageddon mode.

Calling himself a "Y2K alarmist," Yardeni forecast a recession, possibly a depression, business failures, a collapse of essential US government services including national defense and air traffic control, a 3.7 percent drop in gross domestic production, and possible $1 trillion drops in stock market capitalization and nominal national production.

Two days later, reliably independent economic columnist Robert Samuelson jumped in to add more possibilities: failed telephone systems, power brownouts, uncheckable credit cards, unreliable flights, haywire mortgage interest billing, and potential doubling of unemployment.


So which is right? Costly-but-not-catastrophic, as the Journal's page one column assessed? Or recession-maybe-depression plus chaos in Pentagon systems and air traffic control?

It may not surprise you to hear that this newspaper continues to believe in the intelligence and ingenuity of human beings, when alerted to errors that need correcting. No, that's not Voltaire's Dr. Pangloss whispering in our ear. In the past year we've had numerous briefings from financial, business, and government Y2K fixers. After the Yardeni alarm, we had a long talk with the CEO of a world-leading software-fixing firm heavily engaged in correcting Y2K problems in both the private and government sectors.

What we heard remains sobering, but also encouraging in an unexpected way. Y2K is speeding useful change. In summary:

The global financial services and telecom industry, heavily dependent on computers, hit the panic button early. It has task forces pushing to test new systems by year-end 1998 or early 1999.

Governments, notoriously slow on computerization, have known about Y2K for a long time, but tended to complain that legislators haven't given them enough funds to rewrite all software. Al Gore is belatedly ringing alarm bells.

Manufacturing firms are pressing. Big carmakers, for example, have told myriad parts suppliers "fix your software or become ex-suppliers."

Many small companies have been slow to start. But that risks public inconvenience, not catastrophe.

Y2K is exposing the poor quality of computer applications software now in daily use. Many companies are glad they've been forced to clean up and streamline their basic computer systems, well beyond the date snafu.

Y2K is providing a litmus test separating fast-acting, look-ahead managers from complacent ones. It may goad some leadership shakeups.

The nation that rushed the Manhattan Project and moon landing is likely to prove it can overcome the two-digit chasm. In the process, it may also streamline many kinds of basic daily operations. Stay tuned.

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