Too Much of a Good ThingAs many exp

Too Much of a Good Thing
As many experts have pointed out, the overinvestment in information technology in the 1990s echoes the overinvestment in railroads in the 1860s. In both cases, companies and individuals, dazzled by the seem- ingly unlimited commercial possibilities of the technologies, threw large quantities of money away on half-baked businesses and products. Even worse, the flood of capital led to enormous overcapacity, devastating entire industries.
We can only hope that the analogy ends there. The mid-nineteenth- century boom in railroads (and the closely related technologies of the steam engine and the telegraph) helped produce not only widespread industrial overcapacity but a surge in productivity. The combination set the stage for two solid decades of deflation. Although worldwide economic production continued to grow strongly between the mid-1870s and the mid-1890s, prices collapsed – in England, the dominant economic power
of the time, price levels dropped 40%. In turn, business profits evaporated. Companies watched the value of their products erode while they were in the very process of making them. As the first worldwide depression took hold, economic malaise covered much of the globe. “Optimism about a future of indefinite progress gave way to uncertainty and a sense of agony,” wrote historian D.S. Landes.
It’s a very different world today, of course, and it would be dangerous
to assume that history will repeat itself. But with companies struggling to boost profits and the entire world economy flirting with deflation, it would also be dangerous to assume it ca