1st January 2000 was meant to mark a new century for the world. After some of the most catastrophic events of the 20th century came and gone, including two World Wars and an abundance of economic failures – the new year was but a welcomed godsend. This would surely, as many perceived, ensure economic and social prosperity for at least the proceeding decades. But instead of catching onto the festive celebratory traditions, a large proportion of Americans fell into a cult of mass uncertainty and hysteria. The economic impacts of this group reaction – known simply as ‘Y2K’- reached approximately $600b; changing not only the technology sector but also the entire economy.
Before the year 2000, many computers were programmed with the common abbreviation of the last two digits of the year. For instance, in 1999 computers only recognised the date of year as ’99’. But as 2000 approached, many feared that the technology would not recognise“00”as “2000,”and perhaps even misinterpret it as 1900. People speculated that when the clocks struck midnight to mark the new century, technology would carry an incorrect date and thus fail to operate or even crash completely. Such a mistake, people assumed, would lead to software and hardware failures in computers used in such critical areas. As such, banking, utilities and government records would collapse; leading the world in wide scale mayhem and panic.
And what happened when the ball dropped over Times Square? Computer clocks simply reset. In what was supposed to be what tech-sceptics had been saying for years: “computers will bring us down”; in reality was an over-inflated bubble of speculation and overreaction. Like in many queer American scenarios, retailers quickly caught onto the recent consumer changes in demand. The Federal Emergency Management Agency (FEMA) even released a ‘Consumers Guide’, which predicted oncoming ‘disaster’ and guided Americans as to what would be needed to survive the ‘disaster’. According to a survey by Decision Analyst (America’s largest marketing research and consulting firm), most Americans were actively preparing for Y2K; purchasing an abundance of gasoline, generators, food and water etc.
In 2004, the United States Department of Commerce’s Economics and Statistics Administration reported how the US government and firms should have expected to react to the Y2K problem, then compared these results with Y2K economic assessments. It found that from June 1999, on a monthly basis, the US economy added approximately 265,000 jobs. Large companies, particularly those involved in finance and IT, exponentially ramped up their hiring to prepare their computer systems for the upcoming tech problems. Programmers, data software designers, technicians and essentially all other IT specialists were in high demand.
But Y2K both positively and negatively hit the economy. In a report by Kevin L. Kliesen entitled ‘Was Y2K Behind the Investment Boom and Bust?’, he points out that America’s economic downturn in the early 2000s can be traced to the surge and downfall in business purchases of information processing equipment and software. The dot-com bubble, as we know, was the economic downturn caused by the over-inflated bubble of the technology sector that had devastating effects as the 21st century began. In fact, according to the Federal Reserve Bank of St Louis, between 1990-95, equipment and software represented a 0.5% of real GDP per capita, whereas in 1996-2000 it doubled to 1.0%. Mass hysteria brings far more than uncertainty to people. It has the power to alter consumer choices, as Y2K saw.
Technology phenomena rarely cause such large disruptions to history, with the exception perhaps being the invention of the internet. Even the ‘Lavender Town Syndrome’pandemic, the term describing the outbreak of Japanese youth suicides supposedly caused by the Lavender Town level in Pokemon in 1996, affected society, let alone the economy, on a smaller basis. Whilst we can reflect at Y2K and see how disasters can shape an economy, but more importantly we can see how firms profit off mass uncertainty.
Y2K may have weighed lighter in comparison to the internet bubble of the 1990s and the GFC. Yet its ripples affected the global economic system in such a unique manner that moulded the destiny of the technology sector.