by Rushworth M. Kidder

I write this column with some trepidation. After all, the markets have been rising, spring is coming, and I’m an implacable optimist — dangerous conditions for writing about the current economic crisis. But here’s a thought: Is it possible that this recession could end rather quickly?

I know, I know: There’s plenty of economic theory to refute this thesis. These days the dismal science even finds support from politics, sociology, and demographics — not to mention the three laws of thermodynamics, which have been translated colloquially as You can’t win, You can’t even break even, and Things will get worse before they get better.

But “spring is the mischief in me,” as Robert Frost once wrote in his poem about mending stone walls. The neighbor with whom the poet’s been working isn’t interested in anything new, so he tries to “put a notion” in his head. Here’s my notion: We’ve never had a recession where our information technologies have been as fast paced or broad based as they are today. That same speed may get us out of this mess quicker than we imagine.

I was musing on this the other day while driving to the airport in Portland, Maine. Not long after I began making these trips regularly some 25 years ago, an enterprising financial firm took up lodging in a hollow along the road known as Stroudwater, bought a massive stock ticker, and mounted it so cars coming down the hill could see it at some distance. In those days, it was a useful bit of technology: With cell phones and PCs still in their infancy, how else could I have known what the market was doing at, say, 10:37 on a Tuesday morning?

Perhaps a decade ago the ticker disappeared. I never knew whether prosperity or calamity drove its owners out of Stroudwater. Either way, it was no longer needed. Even in those early days, anyone wanting to follow the markets had far more sophisticated ways to do so. Since then, computer technology has roared ahead according to something called Moore’s Law (and its similar brethren), which predicts that the speed of microprocessors, the size of memory, the ease of access to networks, and nearly every other relevant measure concerning computers will double every two years. Result? Our technologies are exponentially ahead of where they were during prior recessions. And since economists extrapolate future trends based on previous experience, consider for a moment what they have as benchmarks for today’s crisis:

• The recession of 1960-61. In those days, people typically kept stock certificates in safe-deposit boxes. Buying and selling stocks took seven days, allowing time for mailing or hand-delivering certificates to brokers. In 1960, the first stock market quotation system, later known by its trade-name Quotron, was installed in investment offices.
• The recession of 1973-74. During that period of market collapse and stagflation, investment managers had much better information as Quotrons and their competitors expanded. But a typical office in that period may have had one or two terminals per floor, which portfolio managers checked perhaps once a day.
• The recession of 1980-82. Following the revolution in Iran and the spike in oil prices, markets shuddered. By then Quotrons were on individual desktops — by 1984 there were 72,000 of them in use. The effect, says a friend of mine who was a portfolio manager during those days, was “mesmerizing,” leading to an upsurge in rapid-fire, short-term trading as the old buy-and-hold mentality tailed off.
• The recession of 1990-91. By then, financial information had become so cheap and accessible that individuals were finding ways to be their own investors. Why? In part because IBM had introduced the first PC in 1981. Almost overnight, the once-dominant Quotron became a money-losing relic.
• The recession of 2001. The last benchmark today’s economists can study found the public still playing catch-up with the new technologies. To check the markets in 2001, I recall I had to be at a computer plugged into a modem. By 2005, though my laptop was wireless, I still needed a location with Wi-Fi service.
• The recession of 2008-? Now, on my Blackberry, I can know within seconds what’s happening to the Dow — or the DAX, the Hang Seng, or the Nikkei — wherever I am, whatever the time.

The question is, What will that knowledge do to me? Will it make me (and millions like me) more startled by volatility, less willing to trust, more fearful about spending? If so, it will lengthen the recession. Or will it make me more confident in the long-term future, less flappable over extremes, more willing to buy and hold? If so, it could shorten the cycle.

Intellectually, I’m persuaded that knowledge tends to create confidence rather than fear. Economically, it seems clear that nations prosper in proportion as money circulates, with faster and more fearless circulation usually creating more prosperity. Morally, it’s evident that public outrage over Wall Street’s ethical lapses is demanding speedy responses from regulators and legislators. And historically, one trend is sure: Over the last 200 years, as knowledge has expanded, recessions have shortened. Okay, the Great Depression in the twentieth century went on for 10 years. But of the seven recessions in the nineteenth century, only two were as short as three years. The others ranged from five to seven years, and one dragged on for 23 years.

Somehow, I don’t think that’s us. I suspect speed may be an ally this time. But maybe that’s just a poetic notion.

©2009 Institute for Global Ethics

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