The wild gyrations of the stock market in recent weeks, combined with the frightening turmoil in Russia, Asia and Latin America, have shaken many people in the high-tech industry. Uncertainty in the world economy has led some to question the widely shared view that high tech is immune to the business cycles that periodically plunge us into recession.
There are still optimists, of course. Esther Dyson and Donna Hoffman, two prominent technology gurus, told the magazine Industry Standard that the Internet's economic growth is so strong that a recession won't be significant for information technology firms or workers.
They and other industry analysts argue that whatever happens in the economy as a whole, information technologies have "crossed over" from luxury goods to necessities, and that the cost savings from electronic commerce and from restructuring enterprises around networks will offset any losses from depressed revenues.
But the recent jolts in the stock market should prompt some deeper thinking about the character of the "new economy." It's too facile to say that computers, software and the Internet have become necessities for individuals and companies; the high-tech economy is far more complex than that.
If we take a longer, bird's-eye view, we can see that we've created a system with many strengths and an equal number of vulnerabilities. Some of these strengths and weaknesses have the same sources.
What is the nature of the high-tech economy in the last few years of the 20th century?
What we've witnessed over the last 20 to 25 years is the United States' extraordinary ability to pile layer upon layer of "value-added services" on top of a mature industrial and agricultural base. For the last half-century, nearly all the productivity gains in the U.S. economy have come from manufacturing and agriculture, which now employ small fractions of the national work force--2% to 3% in agriculture, 15% to 16% in manufacturing.
The wealth generated by these two "basic" sectors of the economy has allowed us to develop and refine a service economy that now employs the majority of wage earners.
We began with an initial layer of applying computers to business problems. We soon added business-to-business solutions, then more general networking, then Internet ubiquity.
