The buoyancy surrounding the technology and biotechnology markets that marked the bull market of the 1990s has disappeared. While many investors waited for a rebound, as of mid 2002 the stock market continues its inexorable slide. By early July 2002, the NASDAQ, rocked by yet another financial accounting scandal, reached its lowest level in 5 years. A crisis of confidence now haunts Wall Street as investors, stung by a series of revelations regarding corporate fraud, corruption and accounting incompetence, find reasons to keep their money out of the market. The sunny optimism that fueled the 'bubble' of the late 1990s has been replaced by a mood of dour distrust. Of course, all of this is a matter of endless chatter on the financial news channels. On television news, in particular, there has developed an attitude of urgency whenever a 'problem' presents itself. This is largely because of the way television and politicians have mutually manipulated one another over the last quarter century.
But to find solutions requires naming the problem. Was the 'new economy' but a myth, concocted as a marketing strategy to encourage reckless investment from the average American who wanted in on the bonanza the big boys were hauling away? Or is the recurring story of fraudulent accounting a product of too much good times and not enough government regulation? The frames of discourse that are set by the financial news media create these sorts of focal oppositions, looping through them over and over again at the expense of seeking greater depth of analysis. Hence, show will frame their topic with the caption, 'corporate crimewave?' While this appeals to popular sentiments about punishing the rascals who done wrong, it tends also to absolve the capitalist system, by making 'human nature' the focus rather than how our system is structured.
It is important here to lay out the relationship between capital and investing -- the relationship between capital and the stock market. What we hope to establish here is that Capital has, over the years, become more and more dependent on how it is treated by the stock markets. The stock market has become just as key to the constitution of Capital as any of the material preconditions for that business to operate and profit, known euphemistically on CNBC as 'the fundamentals.' Along with the bull market around technology in the mid 1990s there emerged the television financial news media --a product as well of the development of cable television. Where the television networks (CBS, NBC and ABC) had largely neglected daily coverage of the stock markets, cable television and the logic of niche audience markets opened new possibilities for financial news. To appeal to wider markets than the print financial media do, television did what it is best at -- reducing story-concepts into relations between visual signifiers. In this sense, television news tends to be reductive.
But television news also has the advantage of speed. Speed to market; speed to the audience. Television is able to do what the traditional print media cannot -- they can report in close to real time. The imperatives of reporting in real time intensifies the closer we become to a 'crisis.' Combine this push towards immediacy with the structural tendency to reduce stories into effective visual signs, and we have a medium that changes the very nature of that which it reports upon. But it is the way that it has changed the relationship between Capital and Wall Street stock markets that interests us.
The television financial news channels fostered a new kind of co-dependency between their reporters and market analysts. Analysts were marched on every hour to offer stock picks or to present some bit of analysis regarding their industry segment. Celebrity analysts emerged, not just because of television, but it certainly didn't hurt. And it was certainly of interest to the television news folks to grow the market for their shows -- to grow their ratings.
The stakes ratcheted up as expectations grew. CEO's and corporate officials appeared on air to toot their company horns. The earnings' seasons became a blur, a steady tension on which to build the stories, which companies could meet the analysts' earnings estimates, who had presented the best stories regarding their company's growth potential? It was in the circuitry between Capital, the media and the stock analysts that there developed an interest in whether or not we were now in a 'new economy.' Did new technologies change all the assumptions about the relationships of productivity and inflation? Had deregulation truly changed the playing fields of business making efficiency and customer service pay off as far as the eye could see on the horizon? Here's how the logic of the 'new economy' market was presented. When technology increases productivity, it enables firms to expand output without a corresponding increase in the amount of labor necessary. Post-liberal economics reasons that this means that the usual pressures on inflation that go with boomtime production will be less likely to materialize. Without the threat of inflation looming, the Fed is less likely to increase interest rates and low interest rates mean that Capital is relatively inexpensive and less risky to acquire.
In the years from 2000-2002 a new set of conditions, some rooted in the contradictions of capital and others in unique historical events, appeared. The attack on the World Trade Towers on September 11th changed the conditions: the psychology of investing. What it really did was amplify the sense of risk that was already nibbling away at market confidence.
1) The crash of the technology market
The Nasdaq went from its highs of 5000 to its current lows of 1350 in just over two years. And while the NYSE and the S&P did not slip as precipitously, each has lost considerable value. A continuous stream of bad earnings reports in the technology sector suggested that we reached a technology plateau in which corporations were willing to freeze or reduce technology expenditures. Asking "At what point does the next advance in computer technology actually lead to increased productivity?" The corporate world seems to be biding their time, putting off new spending. The consumer market continued to flourish as new technologies replace old ones: wireless /wired, digital/analog, DVD/video cassette, MP3/CD, etc. While the consumer market alone cannot support the highflying technology market, its growth still suggests that new technologies continue to spread. The belief that technology enhances one's lifestyle if not one's equity investments remains.
2) The collapse of dot.com's
Many start-ups that instantly flourished receiving both venture and investment capital disappeared as quickly. Cities like San Francisco and Seattle reported a glut of vacant office space. Advertisers likewise remained uncertain that the web could effectively deliver its message. The Internet was unable to match the seamless incorporation of advertising of television and radio.
3) The financial collapse of Enron, WorldCom, Global Crossing, and Arthur Andersen
These corporations seemed to implode, surrounded by financial scandals. Television provided a steady stream of sound bytes on the evening news that mixed financially strapped workers who had lost both their jobs and their retirement savings, investors who helplessly watched the value of their shares dissipate into ether, and apologetic financial officers who absconded with bonuses. CBS even did a news story on the mansions of the executives of these corporations. Despite these collapses the structure of capital and a belief in a free market economy remained intact. Just a few bad apples.
The destruction of the World Trade Center, a monument of globalization shook the investment community. Perhaps, more importantly it reinvigorated the nation-state. After a plethora of theories announced the disappearance or the weakening of the nation-state, its role suddenly as protector was revived. The attack on the WTC was not interpreted as an attack on capital but on the nation. And as long as Al Queda remains a perceived threat, in a 1984 scenario it will serve to legitimize the executives of threatened states. For example, despite uncertainty about recession, a weakening dollar, a growing deficit, and links to the Enron scandal, George W. Bush's popularity ratings soar.
Advertising responded to these factors in three ways. First, for a period after 9/11 patriotic ads flourished. However, this theme tended to be short-lived and was associated primarily with commodity advertising, i.e. "Let's get America rolling again. 0% financing." Second, the range of firms doing advertising has narrowed as companies disappeared off the investment screen. Consequently, there are less new economy commercial outside of news and financial channels. Third, a number of campaigns emphasize thoughtful and cautionary investment strategies and effective technological support necessary to be successful in this financially uncertain period. However, despite these subtle shifts the stream of commercials that celebrate technological progress may have slowed, remains. Undaunted by these economic and political setbacks capital maintains a façade of technological and scientific progress, a belief in multiculturalism, and the support of universal humanism.