One estimate of Y2K impact on a community
[This scenario comes from Steve Davis, the Montgomery County, MD, budget
manager who has been instrumental in making his county one of the most Y2K-prepared
in the U.S. You can read his original paper at http://www.erols.com/steve451/economy.htm.
This version has an introduction by Capers
Jones, a respected Y2K commentator and Chairman of Software Productivity
Research, Inc. Davis' scenario focuses on the economic impact of Y2K. It
doesn't delve into how that will reverberate into people's lives, generating
collective human behaviors that create (or resolve) further problems. But
it does give a relatively sober (and sobering) picture that will speak to
business people and government officials. For more sophisticated and devastating
scenarios, see the y2k part of Douglass
Carmichael's site; it includes analysis of some of the dynamics which
will produce good or bad outcomes. For a quick version of the sort of scenarios
he works with, click
here. For a more hopeful transformational community scenario see Robert
Theobald's vision. -- Tom Atlee]
ANALYSIS OF THE IMPACT
Capers Jones: The potential for significant business failures and related
job
losses is quite real in my view. The recent UPS strike is a perfect example
of
this interconnectedness of the economy and how one business's problem can
ripple through the economy and impact many others downstream. However, I
believe that we must think about the economic impact at a more personal
level
to be able to visualize it. Also, describing the Y2k impact in terms of
the
local economy would help community and business leaders realize the
significance of this impending event.
EXAMPLE
Let's think in terms of a medium or small size town or county. The residents
and community leaders may know about the year 2000 problem but are not too
concerned about it. Like most folks, they are sure that "those smart
computer
people" will take care of it. Like most of the public-at-large, they
approach
the Year 2000 unaware and unprepared for any possible disruptions. Down
at the
local plant, the primary job center for the community, concern is almost
totally absent. Manufacturing businesses falsely see themselves as less
at-
risk than other businesses that are more visibly automated.
Now lets us look at a few examples of how the potential year 2000 problems
might unfold in this community. Could it be yours?
1998 - Many larger businesses are spending huge amounts to fix the problem
while smaller firms are unaware or unconcerned. Year 2000 repairs are
outsourced sending money to other jurisdictions. Company profits, and as
a
result, corporate income taxes, drop. Less product development, R&D,
and
marketing take place as resources are directed to fix the problem.
Early 1999 - small and medium size companies become more aware of the problem
but have a hard time finding and affording what are now scarce and expensive
year 2000 repairs. Many call for more action by government.
September 9, 1999 - Some business and government systems that stored 9/9/99
as
a date representing end-of-file, delete, or infinity crash or produce corrupt
data. Public concern begins to mount.
Late 1999 - Medium and small businesses, including the plant, experience
failures of their human resource and financial systems when they are
discovered to be unable to process year 2000 dates. As a result, some
paychecks and Christmas bonus checks are not issued. Families are left unable
to make last minute purchases. Payroll clerks work overtime on Christmas
to
hand write checks and calculate tax withholdings. Public outrage becomes
apparent.
December 1999 - Impact is being felt at the local level. The local grocer
is
left with 200 frozen turkeys and other items on the shelves. Other retailers
have seasonal items left unsold. Banks have problems with direct deposit
and
ATMs. Some cash-strapped families suffer through holidays waiting for
paychecks. The economy begins to drag.
December 31, 1999 - Some systems that stored 12/31/99 as a date representing
infinity now read it as the end date. Some systems produce corrupt data,
others treat records as inactive. More business problems develop.
January 1, 2000 - many computer systems (large and small) crash as clocks
do
not roll over correctly or do not come up at all. Many problems with
infrastructure occur as computer chips embedded in control systems fail
to
work properly. The local power company experiences system problems, outages,
brownouts, and power surges which wreak havoc on residents and businesses.
The
local phone company finds that their billing system bills for the last 100
years (since 1900) and are unusable.
January 3, 2000 - The first business day in 2000 sees sporadic problems
and
failures with systems in many businesses, financial institutions, medical
facilities, schools, and the local government. Some companies billing and
accounts payable system fail. Bill collection halts temporarily creating
cash
flow problems for many. Organizations rush to fix computer systems but find
that solution providers are fully booked and/or prices quoted are astronomical
due to huge demand for services.
January 4, 2000 - News that many IT vendors have gone out of business due
to
claims that their systems are non-compliant sends shock waves through Wall
Street. The Dow plummets 1,500 points. Many take capital loss as a result.
Investors suffer huge losses, retirement portfolios lose value. Taxable
income
drops. Mass sell-off results in public panic.
Mid-January - The supply chain is impacted due to many factors including
system problems experienced by both suppliers and consumers in ordering,
shipping, and payments for goods. As problems mount, many businesses lay
off
workers, some file for bankruptcy. Public anger soars.
Late January 2000 - Many businesses suffer from deprivation of services
as
impact spreads. Business failures climb as even those that do not rely as
heavily on automation and can more easily institute manual measures suffer
due
to marginal cash flow & loss of essential services. Business failures
will
cause many lost jobs. Lawyers spring into action; litigation based on breach
of contract and product liability is brought by customers and stockholders.
February 2000 - Loss of jobs result in higher unemployment claims and lower
income tax revenues for federal and local governments. Demand for local
government medical and welfare services grow as many can not afford private
services. Citizens are angry about continuing problems. Politicians
unfavorable ratings dominate the polls.
February 29, 2000 - Systems that did not realize 2000 was a leap year fail
or
produce corrupt data. Ripple effect mounts, businesses without year 2000
problems receive corrupt data from non-compliant business partners. More
business problems and business failures occur.
March 2000 - While many businesses and services are back on-line, problems
continue. As a result, there is less demand for business products and
services, less money in the economy hurting retail sales and resulting in
lower sales tax, lower property values resulting in loss of homeowner equity
and lower property and capital gains taxes, significant downturn in the
equity
markets.
Mid-2000 - Effects continue to be felt. Lower levels of government services
due to loss income and property tax revenues. Low consumer confidence.
Possible runs on banks.
Late-2000 - Clean-up efforts continue, economy starts to recover. Most
incumbents lose elections. Many larger businesses consolidate picking up
business and workers from firms that failed. Lower tax revenues continue
to
plague government.
December 31, 2000 - Just as many prepare to celebrate the new millenium,
computers that fail to recognize the fact that there were 366 days in 2000
crash.
CONCLUSION
This obviously paints a grim picture. The implications of this situation
are
quite profound. To mitigate this problem, every person, government, business
and non-profit organization must overcome their denial and anger, and move
on
to productive problem solving.
ALTERNATIVE CONCLUSION (Ascribed to Steve Davis)
With this grim picture, what's a
concerned citizen to do? Let me suggest
that each person reading this article
take the time now to contact his/her
business, government and community
leaders, to find out what they are to
doing about the Year 2000 Problem and
to suggest that they take action. There
is still time to mitigate this crisis,
but time really is running out. Getting
involved is one important way to be a
part of the solution.