Y2K: Capitalism Fails the Test, by Brian McNeill

To increase profit and market share, capitalists have always zealously embraced technological innovation. Since the advent of the industrial revolution in the nineteenth century, corporate chieftains have looked to technological advances to lower their labor costs and the price of whatever widget they are making.

In their relentless drive for profits, during the last twenty years, everyone from the pet store owner down the street to the CEO of General Motors has embraced computers with the most enthusiastic of bear hugs. These marvels of engineering and mathematical wizardry have increased productivity in absolutely every sector of the economy. Digital technology has been seen as part of the answer to almost every problem that confronts a modern economy. From the operating room to the factory floor, from oil wells on the bottom of the Gulf of Mexico to the surface of Mars microprocessors have been the key to doing whatever it is we want to do, and doing it cheaply.

In the closing days of the century some fear that the love feast with technology may be over, and capitalism facing its greatest challenge ever. Like a story out of The X Files, we discover that what we embraced as a friend, turns out to be our worst enemy. As most now know, the Year 2000 (Y2K) problem centers on the coding of dates in software programs. Unless repaired, many computers will read dates in the year 2000 as if they are in the year 1900, due to the convention of presenting dates in a two digit month, two digit day, and two digit year format. This makes January 1, 2000 into 01/01/00, and the computer will not understand that 00 stands for 2000 and not 1900. The six digit convention was adopted to save memory in the early 1960s when computer memory was vastly more expensive than it is today, and when programmers had no idea that their programs would still be running at the end of the century.

Fixing the software in large organizations like the Social Security Administration, the Federal Aviation Administration, the United States Postal Service, or one of the large money center banks like Citicorp takes years and millions of dollars. The Social Security Administration says that they were able to complete the job in about six years starting in 1994. The fix includes reviewing literally millions of lines of computer code. Social Security is way ahead of other federal agencies. The FAA and Medicare (HCFA) are way behind schedule. You may not care if your doctor does not get paid, but does it matter if your airport shuts down on December 31? Does it matter if the mail is not delivered, or you cannot get cash from your ATM machine?

That level of calamity may be small compared to other potential disasters. The most worrisome problems center on nuclear facilities in the countries of the former Soviet Union. Some defense experts say that their nuclear weaponry relies on 60s era computers that are very vulnerable to Y2K problems, raising the possibility of a false launch due to a failure in their early warning radar. Their nuclear power reactors are also a concern. No one knows how much of a risk they present, perhaps not even the Russians. The Russian government has adopted a fix on failure approach to Y2K and simply does not have the money to work on the problem beforehand.

Equally as grave, are concerns for the infrastructure in this country. Electrical generation and distribution facilities, natural gas wells and distribution pipelines, municipal water systems and sewage treatment plants all make use of what are known as embedded chips. These are microprocessors that help operate or monitor industrial systems. Oil platforms in the ocean have hundreds of them, many below the surface. Oil refineries and chemical plants also are home to thousands of these chips. A debate rages in engineering circles about how many of these chips are date sensitive and so will or will not be affected by the rollover to the year 2000. The expectation is that only a small percentage will be affected and fail. Optimists think that the number will be less than one percent of all the chips in use throughout the world. That translates into a mere several hundred million chips, and no one knows where exactly they all are. When they can be found, workers discover that many chips have been programmed in computer languages that are no longer used, and so must be replaced because they cannot be reprogrammed. Replacing the offending chip is often impossible without also replacing the part. Often parts are not available and must be specially ordered.

To fix this problem before it becomes a disaster takes a great deal of time and money. Banks, accounting firms, and stock brokerage houses often have the money to do these repairs and so may come out just fine. After all, they have it easy. All they have to do is go through millions of lines of computer code, rewrite the offending parts, and then test to make sure everything works. At this late date they are all assuring us that they have done just that, whether or not it is true, in order to avoid mass panic, and, heaven forbid, a stock market correction.

The utility companies, (electricity, natural gas, telecommunication, local water, and local sewage services) do not have it so easy. They must deal with the embedded chip issue, as well as the software problems. These organizations are also reassuring everyone that they are working very hard on the problem, and that there is nothing to worry about. Most reassurances, however, also come along with a disclaimer. Disclaimers usually have two parts: 1) we cannot guarantee service on January 1, 2000 or after because we never absolutely guarantee service anytime; and 2) although we know we will be ready, we cannot be so sure about our suppliers and if it turns out that they are not ready then something unpleasant is remotely possible. In other words, if the coal train does not arrive at the power plant you may not have electricity in January, but that is beyond our control.

Those who have been following the Y2K issue, either as a professional pundit or as a fin de siecle hobbyist, agree on two things and nothing else. No one really knows with absolute certainty what will happen on January 1, 2000, and, given the risks, it makes sense for individuals, communities, and businesses to make some preparations should problems occur. After all, for those in northern climes, we are talking about a possible loss of heat in what has traditionally been the coldest part of winter when sub-zero temperatures are common. It is not unreasonable to expect some brownouts, or erratic electrical service for the first few weeks of the new year. Although power industry PR people and their public announcements poo-pooh it, this is what many experts think is likely. Without much looking you can find people who make arguments for the possible breakdown of the power grid for large sections of the United States leading to social calamity.

As it now stands, the capitalist societies around the world have proven incapable of preparing for this possible threat. Admitting that it remains only that, a possibility, nevertheless, in the face of possible threats prudent people and societies make preparations to avoid unnecessary suffering. Think of what happens in the coastal areas of the Carolinas when a hurricane is approaching. Although there is always uncertainty of where the storm will hit land, and how strong the winds will be, local authorities evacuate people to minimize the loss of life. In the face of Y2K, capitalist societies have proven incapable of making such preparations and therefore prove the irrationality of the system once again.

Prudent preparation for the looming Y2K dangers would involve making plans for emergency shelter for large numbers of people, and for providing them with food and water for two to four weeks. Except in a few small towns in the United States, this is not being done. It is possible, but it is not being done.

Prudent planning would involve being honest with people about the possible dangers so that they could prepare privately, and if problems develop they would be more able to provide for themselves rather than need to rely on state assistance. In the United States, federal authorities have told people to prepare for the equivalent of a three day snowstorm, a bump in the road. No one in authority has raised the realistic possibility of erratic electrical service, difficulties with the supply of natural gas, and the almost certain shortages of gasoline that will develop next winter.

We can only guess at why the population is not being warned, and heading the list is that such warnings would disrupt the economy, putting corporate profits at risk. If Y2K blows up in a major way, putting profits before people will not just be a leftist critique of capitalism, it will mean cold rooms filled with hungry people.

Another reason why government authorities may not be warning people of Y2K dangers is that if they did, people would demand that government services expand to meet this need. Such services would be expensive, and would require tax dollars at a time when the prevailing ethos in the country is less government and more privatization. Y2K may prove to this generation as the depression did to those in the 1930s that smaller government and laissez faire capitalism is great for the wealthy but it is hell for the workers when a national crisis arrives.

We will all be better off if the new year arrives with no major disruption of our lives. It will be an unqualified good thing if no one goes cold or hungry because a predicted and preventable problem never materialized. The captains of capitalist government and industry are betting your life that it will turn out that way.

-- Brian McNeill (brian.mcneill@cwix.com), June 28, 1999

Answers

Umm, I understand you to say that capitalist countries around the world have failed to prepare for this (Y2K) threat.

I don't quite understand what you're implying, because the non-capitalist countries have failed to an even greater extent to prepare.

IOW, capitalist countries, even with all their faults, have responded better than non-capitalist countries.

So what else is new? True capitalism just about always responds to changes better than any other form of economic system.

-- Dean -- from (almost) Duh Moines (dtmiller@nevia.net), June 28, 1999.

Well if the "problem" is capitalism, I would hazard a guess that it is also the cure.

-- Unc D (unkeed@yahoo.com), June 28, 1999.

I'd say one of the problems is that short-term profit goals are often a higher priority than long-term profit goals--that and the fact that Y2K is not a recurring problem that managers have had to deal with in the past. Y2K is a unique event.

The problem is not capitalism. Part of the problem is human nature, and part of it is our ability to create systems more complex than any one individual has the ability to comprehend.

-- Linkmeister (link@librarian.edu), June 28, 1999.

Amen, Linkmeister.

-- GA Russell (ga.russell@usa.net), June 28, 1999.

Brian McNeil: our resident Marxist, how nice.

And the solution to the root cause of evile ie: capitalism is?

Socialism?

Fascism?

Globalism?

I think you can find all of these three possible solutions embodied by the Liberal Democratic Party and the Blue-Blood Limp-Wristed Republicans now running the country into the grave.

What is going to be born out of Y2K, global calamity and the coming financial collapse is going to be very, very nasty for most Americans left alive.

But a boon to those that pledge their financial souls to the new global Fascism soon to rise from our ashes.

-- patriotgame (born@namerican.net), June 28, 1999.

Brian,

The problem is not capitalism, it is laissez faire capitalism.

I would be more than happy to debate this with you, either publicly at this address;

http://www.greenspun.com/bboard/q-and-a.tcl?topic=The%20Government% 20of%20the%20United%20States, or privately at my email.

Rick

-- R. Wright (blaklodg@hotmail.com), June 29, 1999.

Linkmeister & company I agree with you.

Brian, you sir are an idiot. The real threat to our way of life comes from the government, and the government sanctioned monopolies.

The US Federal Government is a basket case. If (when) the various agencies fail to get their work done after Y2K, civil unrest will result. Government "services" in danger? Absolutely.

If the power grid goes down, perhaps it's because they did not have to compete! They have government sanctioned monopolies - NOT capitalism.

Telephones - hmmm. We have a better chance here. Lots of long distance companies competing. 'course local companies are monopolies. Hmmm, not captilism either.

Now Banks, highly regulated, but still competition. SOME of them will make it. Not without taking hits. Then again, with lots of FDIC insurance, they've been sleeping with the lion for awhile.

Department of Defense - well, their the eggs in the FedGov's basket.

Let's recap, shall we? IF there are problems, the most likely places that problems will occur are in the decidedly NON-capitalist parts of the economy.

I suppose you'd like to replace the remaining parts of the economy with centralized government controls, eh? Kinda like Russia & China & North Korea? Success breeds success, right?

As stated above, CAPITALISM is the ONLY hope we have to get out of this mess. The FEDGOV will be hurting bigtime - and dragging the rest down. Much like a tapeworm or any other parasite eventually takes its host down. Doesn't always kill it, but certainly makes it unhealthy.

Jolly

-- Jollyprez (jolly@prez.com), June 29, 1999.

Very good post Jolly!! I don't think Brian is an idiot though. He is at least thinking "how and why can this happen".

-- R. Wright (blaklodg@hotmail.com), June 29, 1999.

Some things govt. does better than private industry, some things private industry does better than govt. Some things are natural monopolies on the face of it, most things are not. Debate is always over just where to draw the lines, how much control and who gets control.

Its like the debate over what to call killing another human - duty (in war), patriotism, accident, manslaugher, second degree murder or first degree murder. Or just plain killing. Doesn't matter to the corpse how I solve my moral dilemma - the corpse is still a corpse, dead is still dead. And if I kill someone, I either feel sanctioned to do the deed, or I think I can get away with it. (Or I am dangerously insane, very uncommon in the real world) Most of this stuff is just playing with words.

Its late, and I am going to bed.

-- Paul Davis (davisp1953@yahoo.com), June 29, 1999.

Paul, you are wrong. Debate about gov systems is not limited to periphical (word?) actions in said system.

-- R. Wright (blaklodg@hotmail.com), June 29, 1999.

The basic problems of Y2k No regulations on software (you must have a license to cut hair in my state, but there is no regulations or standards for computer programmers.

This is clearly a governmental problem, we pay the government regulate industries they may place harm on the citizens.

Remember, there is nothing wrong with the technology, just the standards are designed to stop working after 1999.

Our federal government should have regulated the software industry and set up standards for our technology to work beyond 1999. They did not and we will have to pay for it.

Capitalism is great as long as the earth can handle its by product consumption of natural resources. But as you can see, we are quickly running out of land, clean water and air.

If Y2K do not get us something else will.

-- Arthur Washington (ARTWASH@webtv.net), June 29, 1999.

Government can do two things efficiently: make war, and inflate the currency. For anyone who thinks socialism is moral, read "The Gulag Archipelago" by Alex. Solz. To anyone with a desire to really learn about capitalism (the only moral form of government), I suggest these books, all by Ayn Rand: The Fountainhead, Atlas Shrugged, To The New Intellectual, Capitalism: The Unknown Ideal, The Virtue of Selfisheness, and An Introduction to Objectivist Epistemology.

-- katsmith (katsmith10@hotmail.com), June 29, 1999.

Capitalism is dead:

We have fascist democrats who want all our guns

Communist Republicans who want us to recite the ten commandments

Imperialist CEO's who keep dividends to themselves to finance stock options and their own financial empires.

To quote dilbert: "I fear our lawyers (legistlators) have turned against us, I suspect rabies"

Hitler, you fascist bastard, I thought we killed you back in the forties; apparently I was mistaken.

-- Otay (Spanky@lilrsacles.com), June 29, 1999.

My favorite Economics professor (Scottish) made an annual reading of Adam Smith's works.

The critique of capitalism I best remember from Smith was:

"People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices."

AN INQUIRY INTO THE NATURE AND CAUSES OF THE WEALTH OF NATIONS, by Adam Smith 1776

Online at http://socserv2.socsci.mcmaster.ca/~econ/ugcm/3ll3/smith/wealth/wealbk 01

y2k cuts across political boundaries, and economic philosophies. It definitely makes large, bureaucratic corporations look almost as bad as government. But then Smith, Jefferson, and most of us would probably advocate small, locally-based, privately-owned (me: worker- owned) enterprises as the ideal economic model. Maybe y2k pushes us in that direction.

-- jor-el (jor-el@krypton.uni), June 29, 1999.

"Hitler, you fascist bastard, I thought we killed you back in the forties; apparently I was mistaken."

-- Otay (Spanky@lilrsacles.com), June 29, 1999.

Right on Otay!

Brian,

You're marxist drooling is, how to say, sickly. I can hear you saying, "I've been telling these people for years how right I am."

You sound like Red Rodger from San Francisco, he calls all the right wing radio stations and tells us in his patronizing way that we are stupid.

One day Red Rodger called up from Waikiki Beach and told us that we should be giving more money, via government, to the poor. Ken Hamblin, The Black Avenger asked Red to give up some of his money to the poor. Red Rodger, who is independently wealthy stated, "My money wouldn't even make a dent in the problem of the poor."

What an ass.

-- freeman (freeman@cali.com), June 29, 1999.

Capitalism, as currently practiced, bears as much resemblance to Adam Smith's ideas as the recently defunct Soviet Communism does to the ideology of Karl Marx (or Grouco Marx, for that matter). Smith's "invisible hand" would have handled Y2K much better than this extant system of short-sightedness, greed and selfishness.

It is ironic to hear working stiffs and minor investors whine about big government or the NWO while being buffetted by the whims of a global economic dictatorship. This financial/industrial "kleptocracy" has already bought and paid for your friendly neighborhood representative, senator and president---and media. Only a kindergarten economist like Kenboy Decker thinks that this is the way capitalism is supposed to work.

Don't argue with me. Take it up with David Korten ("When Corporations Rule the World") or Richard J. Barnet ("Global Dreams: Imperial Corporations and the New World Order"). Written by credentialed scions of industry, neither of these critiques could be considered by any but the most obtuse to be Communist screeds. They are certainly more germane than the simplistic, puerile rantings of Ayn Rand, which most of us outgrew by the time we graduated high school. If you have less time, Jay Hanson features a nice economics section at http://www.dieoff.org/page1.htm

Brian, that's a nice terse, informative essay for Y2K novices. I rarely see "fin de siecle" used correctly or so creatively. ;-) I didn't see anything socialistic about it; perhaps I'm not as hypersensitive as some of the rock-ribbed reactionaries that haunt this forum. Btw, I got a 404 on that link you recommended.

Hallyx

"I hope we shall crush in its birth the aristocracy of our monied corporations which dare already to challenge our government to a trial of strength, and bid defiance to the laws of our country." --- Thomas Jefferson

"The Corporation is an ingenious device for obtaining individual profit without individual responsibility."---Ambrose Pierce

-- (Hallyx@aol.com), June 29, 1999.

R - I think you missed my point. There has never been, and never will be, a government that has everything done by contracting or private concerns. There really can't be, by the nature of govt. And some things that can be done privately should not be - such as gathering of taxes. That was done by contractors in the Middle Ages - and turned out to be a horribly corrupt process.

By the same token, some business practices are naturally monopolies. Local cable service is one such - the company that lays the lines is expecting to reap the benefits for a long time to come - and isn't going to allow any other company to transmit over their lines unless forced to.

So the debate is not periphial(?), it is basic. And it really is about deciding which side of the line a particular enterprize is on.

-- Paul Davis (davisp1953@yahoo.com), June 29, 1999.

Much as the case with money, "bad capitalism" drives out "good capitalism", which, I think, was the whole point of Rand's Atlas Shrugged. (I agree that Rand's writing is almost cartoonish in its portrayal of good vs. evil, but it make its point).

It all comes down to human nature, the golden rule, our very souls. The best designed systems will decay and pervert if the attitudes and intentions of enough of its participants are to do violence to others, be it social, economic, or physical.

Even "good" capitalism won't be without its flaws. And America hasn't exactly been running "good" capitalism for about the last 125 years. There's always some b*st*rd out to screw someone and they'll do it under whatever "ism" is at hand, whether Socialism, Communism, Capitalism, Fascism, Racism, or Catholicism. And the more screwing going on, the less robust, the less sane, the system will be. If Y2k pukes, it will be for the usual reasons: relinquishment of personal and public responsibility, evasion of personal and public accountability, and wholesale sacrifice of the future for the sake of expediencies.

-- Nathan (nospam@all.com), June 29, 1999.

Italics OFF!

-- Nathan (nospam@all.com), June 29, 1999.

Dear Fellow Workers, thanks for all the feedback. If nothing else, this is a good place to be heard. Since the hour is late, I'll roughly try to respond to most of you.

First, we all know that the purpose of an economic system is to satisfy the material needs of a society. We clearly disagree on how well capitalism has done this. I tend to side with the survivors of the Asian financial crisis on the benefits of global capitalism, that is the poor of Thailand, Indonesia, Korea, Mexico, Russia, and Brazil, el.al. Y2K may bring home to us what these people already know, that capitalism does not work and is an irrational system because it does not provide for the material needs of the workers who produce all, and I mean ALL the wealth.

Dean in DesMoines, what "non-capitalist" countries are you referring to? Everyone is capitalist, even "Red" China. Stalinist states like North Korea are just another version of the same exploitation game, the workers there have as little say as the workers here.

What am I proposing instead? An extension of democracy to the workplace. We are all in favor of democracy here are we not? Wouldn't it be nice to have more say in what goes on at work, or do you like being told what to do all the time?

To R. Wright, happy to debate, here or anywhere, but where did you get that horrific web site address, I couldn't get that right once in a million years.

To Jolly-prez. You say the captalist controlled parts of the economy are in better shape than those with less competition and more regulation. Humm, I see you think you will have a lot of gas for your car in January.

To Arthur Washington, capitalism will win when the earth is dead.

To Jor-el, I agree, worker control at the workplace is what we do not have and where we need to go.

To Freeman, another word for a poor person is "worker."

Hallyx, Thanks for the support :-).

-- Brian McNeill (brian.mcneill@cwix.com), June 29, 1999.

I cannot agree with the original premise. Since the capitalist countries seem far and away the most prepared for Y2K, your premise seems incorrect. Since China will probably be in about the worst shape, perhaps we could say that a communism (especially a brand that practices software piracy) is much more of a problem than capitalism. Certainly, too, I will take remedial action if I benefit from it (as a business owner/shareholder)...and may just ignore that difficult action if I gain little or nothing from it (as just another worker).

-- Mad Monk (madmonk@hawaiian.net), June 29, 1999.

Tough times for the leftists. Unless you are safely tenured at one of the traditional "radical" schools like U Mass at Amherst, it's hard to find anyone to listen. Oh, and I cannot say I am surprised to find Hallyx a sympathetic soul. Marxism, social democracy, etc., appeals to those who view the world from somewhere in the ether.

Ironically, Marx was a brilliant critique of capitalism. He just failed to produce a workable alternative. I agree that it is unfair to use the former Soviet Union or China to critique Marxism. There is enough in Marx's work itself to run it through the shredder. (Although the pre-1848 Marx is pretty readable.) If you really want to discuss Labor Theory and Surplus Value... it may take a new thread.

But I digress... capitalism outproduces every other economic system thus far devised. It just doesn't distribute the way many of us might like. Capitalism also suffers from the usual flaws like external costs and external benefits, market imperfections, collusion, etc. Businesses are often the worst enemy of the free market.

Despite this, capitalism is dynamic (Schumpeter's creative destruction.) Capitalism produces technology at a dizzying rate, and technology is a destabilizing element. The biggest companies 20 years ago are not the biggest companies today. Unlike the industrial era of Marx, technology has liberated many workers and vastly increased the standard of living. It's hard to compare our knowledge- based workers with the factory workers in 1850s England. These new workers of the world have no need to unite... they are doing quite well, thank you.

Now, since we get to see what happens with Y2K in just six short months, let's try this. Let's compare the Y2K failures in the public sector versus the failures in the private sector. My money says the private sector comes out way ahead. Why? The command-and-control internal economy of the government is grossly inefficient compared to the private sector. Here's a further bet, for those keeping score. Businesses in highly competitive industries will have fewer problems than protected monopolies or oligopolies.

Any takers?

Regards,

-- Mr. Decker (kcdecker@worldnet.att.net), June 30, 1999.

Decker,

I'll take your bet. A hundred lesser companies will fail from combined Y2k effects (including technical failures, recession/depression, liquidity lockup, supply disruption, and collapsing markets) before a single government department, private monopoly, or any large private employer is "allowed to fail". All of these will be given (or take) all the resources necessary to survive.

Although we have a sort of "residual" capitalism operating globally, the relentless push towards a unified monopoly government, unified monopoly monetary system, and raging corporate monopoly giantism will kill the reality and promise of capitalism for the vast majority of the Earth's inhabitants. It probably already has. Oh, they'll probably call the resulting system capitalism alright and teach everyone that that's what capitalism is, but what's in a name anyway?

-- Nathan (nospam@all.com), June 30, 1999.

Good point, Nathan. I remember the Chrysler bailout and the "too big to fail" logic. There are far more small firms than government agencies. Let's agree to a balanced weighting system where we can compare government with the private sector. While gov't agencies rarely "fail" per se, I think we will be reading about gov't Y2K problems far more often than private sector problems... even though the private sector is far larger. How about a buck and beer?

Regards,

-- Mr. Decker (kcdecker@worldnet.att.net), June 30, 1999.

Decker,

You're on. Please keep in mind that the government and multi-national corps are "so important" that's all we hear about if there are more than a few Y2k effects. The others will be relegated to the bottom of page 13 of the Ladies Home Journal.

-- Nathan (nospam@all.com), July 01, 1999.