The Economist was pretty bland this week, neither gung ho nor doomladen
about the US economy. I thought this rather curious.
But then during my afternoon dogwalk I struck gold tucked away in a
biographical item ("Deaths in the valley") concerning Marty Pichinson, a
bankruptcy specialist, who had a very busy year last year but was expecting
to relax somewhat this year. Here are some brief extracts:
<<<<
By the start of this year, the worst seemed to be over, and Mr Pichinson
began to retool the company he founded, called Sherwood Partners, for less
grisly work. Those plans are now back on ice. “It's picking up again,” he
says. “All hell has broken loose.”
Of the ten biggest bankruptcies in American history, five have happened
this year. The latest to go down is also the biggest so far: WorldCom. Yet
the sheer size of its collapse may be obscuring another important story
unfolding among hundreds of smaller firms. The high-tech start-up bust was
meant to be over, but there may be much worse to come.
. . .
The gathering second wave of tech start-up failures has begun to ripple
through different industries, such as software, hardware, and telecoms
services and equipment. “I thought things were stabilising six to nine
months ago,” comments Bruce Claflin, the boss of 3Com, a telecoms-equipment
firm. “But there's more to come.”
Typically, such firms have sucked up hundreds of millions of dollars apiece
in funding, rather than the tens of millions that dotcom entrepreneurs
blew. They are also less obviously worthless, says Mr Pichinson. The most
common reason for failure, he says, will not be a daft business model or an
absence of customers, but too much competition. Amid the relentless
commoditisation of technology, he adds, “we have too much of everything.”
>>>>
But then, about to leave the Economist's Web site after copying the above,
I noticed that it has posted an update this morning since official US
figures have been released. Not to make it too tedious, I'll top and tail
this -- it retains its overall balance.
<<<<
New data suggest that America’s recession last year was worse, and its
recovery this year is weaker than previously thought. Is there now a risk
of another downturn?
This was definitely not what the doctor ordered. With world
stockmarkets—and political America—still reeling from a long list of
corporate scandals which have destroyed some of the country’s biggest
companies, there seemed at least one comfort: America’s economic recovery
seemed strong. Now that reassurance, too, has been brushed aside. Figures
issued by the government on July 31st showed that the economy grew much
more slowly than expected in the second quarter of this year—by only 1.1%
at an annual rate. Almost as alarming are the revisions made by government
statisticians to earlier figures. It now turns out that last year’s
recession was significantly worse than previously estimated, and growth in
the first three months of 2002 a bit less impressive than earlier
statistics had indicated.
. . .
Mr Bush has already presided over the disappearance of the huge budget
surpluses projected when he first took office. For a time it looked as if
he might narrowly escape being politically damaged by the economy, with the
mildest recession on record and a swift and steady recovery. At the very
least, the latest figures suggest that he can no longer count on either of
these.
>>>>
Keith Hudson
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Keith Hudson,6 Upper Camden Place, Bath BA1 5HX, England
Tel:01225 312622/444881; Fax:01225 447727; E-mail: [EMAIL PROTECTED]
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