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Business Commentary The Y2K bug turned out to be a non-event, Eric Reguly says

The International Y2K Co-operation Centre reported that the tiny West African country of Gambia came close to disaster as the new millennium arrived. The power went out and some. Air and sea transportation and the government and financial sectors got crippled. But it turned out that the reports were wrong -- the new year in Gambia was pretty much like any other day. You could almost hear the groans of disappointment from the Y2K doomsayers.

Elsewhere, Russia's nuclear missiles did not fire randomly, planes did not fall from the sky and bank accounts did not freeze. Even fat, doltish Ontario Hydro, with its scores of generating plants and computer systems, most in various stages of decay, managed to keep the juice flowing.

There were Y2K glitches, of course, but the vast majority of them were insignificant or comical. Courthouse computers in Venice and Naples listed prisoners due to be released on Jan. 10 as having completed their terms on Jan. 10, 1900. A Chinese novelist who wrote stories about the millennium bug lost much of his work when his computer crashed during the rollover to 2000. In Australia, ticketing machines stopped functioning on some buses. In China's Jiangsu province, taxi meters stopped working at midnight Friday. In Cambodia, two men killed each other fighting over superstitions that the millennium bug would prove deadly unless they ate a custard, rice and lard cake wrapped in banana leaf.

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All of which makes you wonder whether the brains of the Y2K doomsayers themselves were wrapped in custard, rice, lard and banana leaves. Or were they really cynical geniuses trying to make a buck through scaremongering? Scaremongering, in fact, has proved to be a sure-fire money maker throughout history. During the Persian Gulf war in 1991, the paranoid of New York lined up to buy army-surplus gas masks and other survival gear in the belief that Iraqi terrorists would blanket the city in a poison-gas fog. Thousands of backyards in the United States and Canada were dug up for bomb shelters during the Cold War. During the Middle Ages, rich and poor alike feared they would burn in hell unless they paid the popes to forgive their sins. And so on.

The paranoia industry was alive and well at the end of the 20th century. Led by Canada's own Peter de Jager as well as Ed Yardeni, Deutsche Bank's chief economist in New York, we were told that the computer bug, gone unchecked, would, at best, plunge the economy into a debilitating recession. At worst, it would send us back to the Stone Age. The two, virtually unknown before the Y2K bug became part of the lexicon of the nail-biters, became more famous as Y2K paranoia swept the planet. Mr. Yardeni berated companies for not spending fortunes to make sure their computers recognized "00" as the year 2000 instead of 1900. He applauded Canada's decision to put 25,000 soldiers on alert to deal with any computer crisis. He was everywhere and became his own brand.

By some estimates, companies, governments and agencies around the world spent $300-billion (U.S.) to make computers Y2K-compliant. About half of the amount was spent in the United States, while Canada's bill was thought to be close to $20-billion. The spending assured that the crisis was avoided. And guess what? The doomsayers can now claim victory. Thanks to their relentless warnings, the world did not melt down. If it had, they would have said "I told you so." Because it didn't, they can say it was because of them.

The question they'll avoid, of course, is this: How is it that the countries that spent hardly anything to fix their computers managed to survive the millennium? Italy openly bragged that it emerged unscathed even though it spent far less than its European neighbors on massaging its computers. Russia's atomic energy ministry complained that the crisis, such as it was, was concocted by the software industry. Cuba and Thailand, two other countries that spent little on bug eradication, dismissed the whole affair as get-rich plots by software-toting foreigners.

Maybe they were right. Paul Strassman, the former chief information officer of the Pentagon, Xerox and General Foods, told the Los Angeles Times: "I think we have been had. The United States has been ransomed. The psychology of Y2K funding was basically confronting management with extreme demands for which there was no rationale whatsoever." David Starr, the chief public relations man at 3Com, said Y2K was a problem but that the expenditures were "out of proportion by orders of magnitude."

The massive Y2K expenditures weren't totally wasted. Some companies used the bug as an excuse to upgrade their entire computer systems, giving them a competitive edge. The absence of lifestyle-threatening disruptions means that the Luddites among us probably have greater confidence in computers. But the real winners were the so-called computer experts who got rich selling Y2K-busting software and services that were not needed. What crisis will they invent next? Readers can leave phone messages at (416) 585-5399, or send E-mail to ereguly@globeandmail.ca

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