Too many people are erroneously blaming the current meltdown of the US economy on the recent dot-com crash. In reality, the slowdown of the US economy, with some saying it may plummet into a real recession, has been predicted for at least five years as analysts warned of the "over-heating factor".
"The dot-com crash was just a contributor, or one of the catalysts - not a fundamental cause," said Douglas Reed, managing director of ISP (Internet Service Provider) and network integrator, Data Pro, a company which primarily focuses on emerging corporates in SA. Reed said the vogue now is to "dot-com bash".
"Investors, companies and people in general are taking their eye off the ball and are missing out on true e-business investments and initiatives. In the US, research shows that more than 70% of companies in the US and Canada are actively perusing e-business plans. This certainly does not signal a lack of faith in the e-business model. But locally, a number of companies seem to have taken the dot-com crash as a reason to stop looking at, and implementing, e-business strategies."
Commenting on the slowdown in the US, Reed said the latest statistics show that the year-long decline in stocks has wiped off almost $5.3 trillion in value as measured by the Wilshire 5000 Total Market Index.
"Sure, the dot-com crash has done a lot to pull the stock levels down to these low levels. But economies the world over are, to a large extent, built and run on sentiment. The dot-com crash - besides wiping out the lion`s share of most investments from the man-in-the-street - also served to dampen the overall sentiments. Just like people can talk themselves into depression, so too can people talk an economy into a recession. Coupled to this is the very real fact that, fundamentally, the US economy was overheating and had been overproducing for a number of years. Growth was unprecedented. The dollar became so strong that, simply put, export suffered because other economies could not afford to buy dollar-based products any more - or not at previous levels. This economic implosion was obviously worsened by the dot-com crash. But if it wasn`t the dot-com contagion, it would have been another contagion, at another time."
In the meanwhile, said Reed, the fundamentals of an e-business driven economy remain strong. "You don`t throw the baby out with the bath water. Just because the ridiculous hype of the dot-com boom caused its ultimate demise, doesn`t mean that companies should now eschew e-business strategies. It doesn`t mean that died-in-the-wool traditionalists can go burying their heads in the sand believing the dot-com, or e-business boom, is going to go away - just because they fail to understand it. It is not going to go away."
And thankfully, too, the US economy, despite going off the boil, is not going to go away either. It will no doubt rebound.
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