Technology helped fuel the economic boom of the 1990s. Then the dot-com bust caught some of the blame for the recession of the early 2000s. If technology is so tied to the national economy, and the current recession started on Wall Street, not in Silicon Valley, can technology lift the tide this time?
Technology boosters argue that their sector certainly can help. And the stimulus bill is packed with funding for high-tech projects. But technology’s influence on the U.S. economy is not as big as you might expect.
Here are some questions and answers about the extent to which the U.S. tech industry could help turn this crisis around.
Q: What happened in the 1990s?
A: Investors got hooked on the idea that the Internet had given birth to a new business model in which companies could afford to grow fast operating at a loss, then turn big numbers of Web visitors into a moneymaking business later. They poured venture capital into startups and sent shares of Web companies soaring, even though many of those businesses had shaky plans at best for becoming profitable. Stock prices ballooned in part because it was hard to figure out how much this new breed of companies was worth.
A combination of high-profile dot-com failures, rising interest rates and debt and overcapacity quickly eroded the optimism. The technology-heavy Nasdaq tumbled in early 2000 and layoffs cascaded from Silicon Valley to New York’s Silicon Alley.
Q: In this recession, the recent stimulus bill pins some hope on technology to help spark a rebound. How much money in the stimulus package will flow into the technology sector?
A: Technology is at the core of many projects outlined in the stimulus bill, from education and health care to green power generation and energy grid management. The bill also sets aside funding to expand high-speed…