The Economy

The most widely accepted argument rationalizing the Internet & technology stock bubble is that these stocks ought to trade at absurd valuations because new technology will make everything so much more profitable. Pile on the Internet and presto! things will become more profitable still. The Internet is the new Klondike, where the 12-pound nuggets are just waiting for you to pick them up off the ground.

Only problem is, the biggest Internet babies haven’t made any profits at all – ever.

EARLIER LIFE-CHANGERS

This tired old story harkens back to the 1830s, when the new technologies – railroads and telegraphs – were also being touted as the New Paradigm that would revolutionise investing and human life. That was right before the bust. The rest of the century unfolds the tale of the new technology – railroads – as they progressed from one stock and bond fraud to another. Who made the big money? The stock promoters, not the little guys, or the little towns and villages who ponied up money for life-changing railroads that were never built, or when they were built, changed nothing.

In the 1/7/2000 Elliott Wave Financial Forecast Bob Prechter wrote, "This dependence on the future prosperity of an emerging technology is an interesting place for the [stock] mania to wind up because almost since its inception, The Elliott Wave Theorist has noted that the most important peaks of the last 200 years have been bound up in periods of intense technological advance. Specifically, we have referred to the peak of Supercycle (I) in 1835, Supercycle (III) in 1929 and the Cycle III of (V) in 1966.

"Even if the Internet is all it is cracked up to be, the pattern at each of these past peaks suggests that the current prices have probably accounted for decades of future growth. After the peak of Supercycle I, for instance, stock prices (at least of companies that survived) did not return to 1832 levels for 28 years. Compared to the innovations of that era, electricity, photography, blast furnaces for the mass production of iron, and indoor plumbing, the Internet is no more than a refinement of existing technology.

"The great hopes of the 1920s, like commercial air flight and radio, were also fulfilled. Still, a long-term chart of RCA illustrates the tremendous human capacity for pricing 40 years of growth into one euphoric moment. … From its top in 1929, RCA declined 97% [sic]. (The Elliott Wave Financial Forecast, P.O. Box 1618, Gainesville, GA 30503; (770) 536-0309, $228 per year.)

It bears repeating that after the crash of October 1929 the Dow Jones Industrial Average did not revisit its nominal 1929 high until November 1954 – twenty-five years and one month later. Adjust that 1929 high for inflation, and stock market investors didn’t really come even again until way up in the 1960s. So much for the wisdom of buy and hold.

DOES THE INTERNET CHANGE ANYTHING?

Modernism’s universal solvent is money. For every argument, every objection, every questioning of goals, there is only one answer: money. If money to be made, everything is justified – and just.

What does everyone forget? When I make a cross-country transaction from Dogwood Mudhole, Tennessee to Denver, Colorado, it is still a transaction between two human beings. In fact, every human transaction is three way: man, man, and the God who watches. If I substitute the Amazon.com transaction for the local bookstore, I have not changed the transaction, I have simply dehumanised it. I have made it faster, but it’s the same transaction. But ask -- Is it any better? In truth, the Internet threatens to kill manners altogether rat dead, because it offers the rude and unmannerly a dodgey anonymity and safe distance. And what is it about e-mail that seduces us to clip words and punctuation out of sentences so that our letters look like they’ve been worked over with a shotgun? A bald and bloody idea hangs there, plucked and flayed, take it or leave it, that’s all.

Like telephone and telegraph, new technologies are only changes of quantity, not quality. They change the speed with which we can transact, and therefore possibly the number of transactions, but not their nature. Neither technology nor the Internet will make us more honest, genteel, noble, or just, nor does technology justify any innovation in morality. The quality of mankind does not change, now or ever. The moral nature of mankind’s relations never change, nor the law that governs them. Technology must accommodate morality, not vice versa.

Finally, I’m just fed up with hearing and reading that all wealth begins and ends in the Internet. That’s not just because I am a sour curmudgeon, but because it’s not true. No national economy can be founded on producing "services." Hogwash. The wealth of the world consists of the things men dig out of the ground. In the beginning goods must be created, for absent goods services are without form and void.

LUDDITES

Toward the end of 1811 in Nottingham, England there appeared a new type of Merry Men: the Luddites. When manufacturers introduced new textile machinery, local handicraftsmen lost their work and their livings. Those still employed were faced with stringent competition and starvation wages. Worst of all, the new machinery produced lace, textiles, and stockings of shoddy quality.

Angry masked bands began to operate at night under the leadership of the mythical "Ned Ludd" or "King Ludd." They smashed socking and lace frames all winder and spring, and spread into Yorkshire, Lancashire, Derbyshire, and Leicestershire. Until 1812 they offered no man violence or bloodshed, but when a threatened employer asked soldiers to shoot at them, he was later found murdered. Parliament passed severely repressive legislation. In 1813 there was a trial at York yielding (predictably) a large harvest of hangings and transportations. They must have got King Ludd, because the smashings stopped – until 1816, but that’s another story.

LIVE IN YOUR OWN TIME

Obviously, we must live as men of our own time. We’re warned against longing for "the good old days." "Say not thou, What is the cause that the former days were better than these? for thou dost not enquire wisely concerning this." (Ecclesiastes 7:10)

But how do you live as a man of your own time when the times have gone mad? How do you accommodate yourself to a Zeitgeist that seeks to overthrow the rule of Christ – a Zietgeist which, after all is said and done and the make-up wiped away, is only the same old Geist, the spirit of the world.

Whenever we’re riding in the car together listening to the radio and we hear some new outrage, unable to hide her bewildered disgust Susan looks over at me and spits out, "We’re dinosaurs."

Well, hand me the brush so I can straighten my scales, but we have to be men of our own time. We live now, and cannot isolate ourselves from it.

Really, I don’t think I’d have any problem living in the Thirteenth Century. That was a nice century. In fact, you could bring me right on up a little past mid-19th century and I’d do fine. But I live in the 21st century. What to do? Somehow I have to bring the best of the 13th into the 21st, without losing the best of either.

Progress – technology -- is neither good nor bad in itself, it’s only a tool. It is also not a god. (Neither is the free market, by the way, regardless what some people believe.) All are tools, simply tools among which we must pick the most efficient to our end.

And what is that end? The chief end of man is to glorify God and to enjoy him forever. If technology serves that end, then we can’t object or repine. If we allow it to become an idol, if we employ it to any other end, then we pervert both technology and our own humanity. Temporal gain becomes eternal loss.

MORE OR LESS FREEDOM?

Americans are hopeless secular millenarians, ever sure that just right around the corner America will succeed in creating heaven on earth. A favourite millennial vision for computer and Internet technology, especially among libertarian types, is that new technology will bring new freedom and new ways of challenging state monopolies and oppression.

Maybe. Maybe not. The sword of technology cuts both ways. Governments can use it in horrible new ways against citizens. Where once Hitler had to employ thousands of black-leather-clad Gestapo agents to spy on his people, nowadays the American government with a spy satellite can read your visitor’s license plate while its parked in your driveway – from thousands of miles away in space. Since 1947 the US, UK, Canada, Australia, and New Zealand have jointly spied on the world under the name Project Echelon. The program reportedly intercepts over three billion e-mails, cell phone calls, faxes, and wireline communications every day. (For more on Project Echelon, see http://209.41.12.102/cgi-local/shoptmc.pl/SID=088297/page=http://www.acm.org/technews/articles/1999-1/1227m.html and http://209.41.12.102/cgi-local/shoptmc.pl/SID=088297/page=http://www.teledotcom.com/424/news/tdc424na_echelon.html

THIS is an improvement for personal liberty?

THE THREAT WITHIN

Then there is the internal threat to liberty, the threat that modernism and money will demand more and more of our time and attention until there is nothing left of ourselves that we can call ours.

Want proof? Go to any metropolitan bookstore. Look at the browsers, shopping around leisurely, tasting of the delights proffered by the shelves – while jabbering into the cell-phones plastered to their ears. What? Face it, we become the slaves of technology, protoplasmic telephone answering machines necessary only to tend the electronic answering machines.

No? If you already have a personal computer, you know that it can serve you in many ways. If you are brave enough to admit it, you also know that you end up serving it. Think of the hours you spend, for example, glued to the computer answering insulting e-mail sent by rude people too cowardly to give you their name or address so you can drive down personally and horsewhip them as they deserve.

THE ANSWER

What is the answer? Judgment and discretion informed by the Word and the Spirit. Humility that confesses that because we can do something is no reason why we should do it. A wise walking away when the time comes. An eternal perspective that acknowledges limitations to technology and a sanctified refusal to idolise or serve it. A responsible questioning of human "authority" when it wants to abandon or destroy the rights, ways, and morals of our fathers. A reciprocal humanity that never forgets to deal with others humanely and personally.

Technology stocks? They are a silly, manic bubble, with a crash and consolidation lurks momentarily around the corner. With railroads, that took about 100 years, and now we have three or four left. Today, since everything has speeded up to 100,000 bps, it will happen faster. The end will be the same.

Technology? Take up what is good and leave the rest behind, remembering, "The chief end of man is to glorify God and enjoy him forever."

-- F. Sanders

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