(written for The London Review of Books, 09.02, but never published)

I can't remember precisely the first time I used the Internet. I know roughly when and where it was, but I can't remember a discrete event. It would have been in the University of Warwick's computer department sometime in late 1993, because it was then and there I was given my first email address. Not that I had anyone to email other than the fellow members of my department, who I saw most nights in the bar anyway. But still - and here speaks my inner nerd - getting that address seemed at the time an important and epochal event. The system was cumbersome and text-based, there were no web browsers as we know them today, and getting access to the wider resources of the Internet was arcane and unreliable to say the least. But the experience of being able to sit down at a computer and navigate an information space that stretched right around the world was an intoxicating one.

Here was a technology - broadly, that of the packet-switching open-access information network - that could permeate national boundaries, puncture ideologies, allow shifts and reconfigurations in capital to take place on a hitherto unimaginable scale and and with almost inconceivable rapidity. This was extremely exciting. It meant that the future was going to be different, not just more of the same. In what way different? Well that was up for grabs. Though being philosophers, one thing seemed certain - in the face of the kind of 'network thinking' of which the Internet was the first really tangible example, the hierarchical patterns that underpinned Western thought, under fire for decades now, were about to be utterly obliterated. The network model was going to change everything. This was true intellectual excitement; this is what was truly intoxicating. At Warwick, I became part of a coterie of perhaps twenty or thirty people who felt that they were in possession of a secret that, one way or another, was going to change the world.

Six months later, down in London looking for journalistic to pay my way while I tried to write the masterwork that would lay out my brave new vision, I found the world wasn't particularly interested in being changed. No one wanted my rather portentous and hubristic features on technology, the word on the street was that the Internet was the new CB radio. Undeterred I got found a home with mute, then and now the only magazine serving the UK tech underground. And then came Wired.

My fellow mutes and I had greeted the arrival of Wired UK with something approaching scorn. To an outsider, the magazine's stance seemed deliberately designed to alienate, and alienate it did - not just potential readers, but employees and business partners too. Set up in association with The Guardian, the arrangement between the two companies had collapsed after several months and now Wired UK was in need of both a new office and an entire new staff. It wasn't long before John Browning and John Battelle, the two journalists in charge of trying to keep the torpedoed ship afloat, discovered mute. Out of the blue, we were being headhunted. Did any of us want to come onboard? That Wired's 'philosophy' was very different to my own, that it was unremittingly positive about the changes to be wrought by network thinking while I was at best cynical, didn't seem to matter. At least they were trying to write about the technological changes that were clearly coming, whether anyone wanted them or not. It seemed like time to put my money where my mouth was - and time, also, to stop living on the dole. I jumped. It looked like History, and here I was, being offered a walk-on part.

I now know it was indeed History, because these days the bookshops are full of books saying so. Of these, Thomas Frank's One Market Under God and John Cassidy's Dot.con provide contrasting and nicely complementary citiques of the 'New Economy' boom, the bull market that lasted, with the odd minor interruption (though the 'Black Monday' of 1987 can only be called minor in retrospect) from 12th August 1982 until 'Black Friday' - April 14th 2000 - ended a dismal week in which US$2 trillion was wiped off the markets.

In his search for the causes of the technology boom, Cassidy takes a step back to consider the cultural events that severed the link between technological progress and nuclear apocalypse. Perhaps the most complete expression of this connection was made by Theodore Kaczynski's one-time college roommate, Thomas Pynchon, in his 1973 novel Gravity's Rainbow, a book that cemented the feeling already well-positioned in popular culture by Dr. Strangelove, that the V2 rocket was the vehicle that carried technological fascism out of Nazi Germany and into North America. One there it was to forge a lasting link with political PR (in its incarnation as the Saturn V rocket, the major factor in the americans winning the space race), the information revolution (the Saturn V again, this time as a workhorse for launching satellites), and the nuclear industry (the ICBM).

Rocket science, however, remained in one crucial particular stubbornly 'anti-American'; it was a government controlled technology. It didn't make its way into the hands of the public in the way, say, that the internal combustion engine or the gun had done. And nor would it ever, in spite of the techno yearning for jetcars and rocket packs expressed in the pulp fictions of the 'fifties and 'sixties. But there was a longing here, a desiring absence waiting to be filled, and filled it would be, not by the missile technicians and nuclear engineers but by their offspring, the communications systems designed to survive its apocalyptic effects. The Internet.

The creation of a packet switching communications network by US military scientists is now well documented. It's a more subtle and interesting history than is often thought, and Cassidy provides a good if brief version of. But the tech is only one factor in the story. The other key components are cultural and financial, and it is on these that Frank and Cassidy concentrate.

On the cultural stuff, Cassidy is weak. Like many financial journalists before him, he relies for social psychology on Charles Kindleberger's Manias, Panics and Crashes: A History of Financial Crises and Charles Mackay's Extraordinary Popular Delusions and the Madness of Crowds. Written in the 1840s, the latter volume languished in obscurity for over a century before enjoying something of a revival. By the time the 'nineties came around people were regarding it as a minor classic, and it was often mentioned in the pages of Wired.

Thomas Frank places this revival in a broader context. It was the 'conformophobic' culture of the 1960s and 1970s, Frank says, that provided Mackay's book with a new and eager audience. Rather than sanction any egalitarian fantasies, however, 'with its tales of Dutch tulip mania and other memorable financial bubbles, [it] served to provide the sanction of ages for Wall Street's disdainful take on the public mind. The introduction to the 1980 edition, for example, comments with tory scorn on the absurdity of various fads and popular dances of the seventies and even blames a "panicked" public for the banking collapse of the 1930s.'

Frank identifies this attitude as one important plank in a rehabilitation of the financial sector that took place in the 1980s despite the best efforts of films like Wall Street and books such as American Psycho and Bonfire of the Vanities to remind us not to start to trust the quiet, lizardy guys in the expensive suits. Far from stopping this rehabilitation, as many thought at the time it would, the 1987 stock market crash actually completed it, as the introduction of new technologies and procedures designed (in theory) to prevent the recurrance of the various financial scandals of the decade - notably junk bonds, leveraged buy-outs and insider trading - laid a fresh veneer of propriety and security across the surface of the industry.

Frank argues that this rehabilitation depended on a key cultural inversion, exemplified in the 1992 book Populism and Elitism by Jeffrey Bell, a former aide to Ronald Reagan. For Bell, real populism was pretty much the opposite of what everyone had always thought it to be. It had nothing to do with relative wealth, civil rights, and the agenda of the actual Populists of the 1890s, but was instead a kind of moral abstraction that had to do with 'people's ability to make decisions about their lives.' Elitism, on the other hand, wasn't anything to do with those people who amassed vast fortunes by controlling government or enterprise, but was entirely about believing in 'the decision-making ability of one or more elites, acting on behalf of other people.' After the inversion, then, Ronald Reagan was the genuine populist and his deregulatory, tax-cutting program all about having faith in the public's ability to manage their own affairs, while Michael Dukakis and all who believed in any kind of regulation - including, tidily, a big chunk of the academic community - were the elitists.

For Frank, the greatest failure of the Clinton years was the failure to prove this thinking wrong. Nourished by the feel-good factor of American 'success' in the Gulf (the payment for which helped kick start the decade's boom) it was allowed to flourish, handing over the traditional instruments of leftwing populism to the right. Real populists were now by definition not concerned with the gap between rich and poor, since they knew that people were truly equal, regardless of money. It was those who tried to regulate against poverty that were the elitists; PC snobs who dared to suggest how people should or shouldn't live their lives. But as their devotion to Charles Mackay revealed, what these new populists really believed in was the efficacy of their techniques for manipulating a credulous and cash-rich populace.

Here Frank's thesis meshes perfectly with with Adam Curtis's excellent documentary series on the Freud dynasty, 'The Century of the Self', shown on BBC last March. Frank and Curtis concur in their accounts of how, over the course of the last one hundred years, Freud's unpicking and labelling of the structures of desire latent in post-industrial humanity fed a consumer advertising industry that by the 1990s had grown in power and range until it had change the very nature of political debate. It's a version of late twentieth century history whose most extravagant poet was perhaps Philip K. Dick, with whose nightmare fantasies of consumerist control Hollywood likes occasionally and uncomfortably to flirt (most recently in the film Minority Report, which sees Steven Spielburg and Tom Cruise take a rare and carefully hemmed in peek at the flip-side impact of their respective careers). From this point of view, the sixties are no longer the decade of liberation they're painted as by the popular media, but as the point at which capital learned how to commodify rebellion and harness its biggest threat - the exuberance, idealism, and questioning stance of youth - firmly to its scheme.

It's intriguing to try to work out whether or not Thomas Frank and John Cassidy could ever stand shoulder to shoulder, form a united front. You get the feeling that even though their conclusions are the same, Cassidy would find Frank too emotive, flakey even, despite the quality of his journalistic rhetoric. His own version of events is far more analytic and traditional - though that doesn't mean his writing is remotely stodgy and academic, because it is not.

Cassidy's account of the New Economy boom follows closely the guidelines laid down by his mentor, J.K. Galbraith, in his classic The Great Crash, 1929. Indeed, Galbraith himself provides a glowing encomium for Cassidy's book: there it is, for all to see, above the title on the cover. In The Great Crash, Galbraith notes that the time between financial bubbles is about equivalent to the time it takes people to forget the experience of the last one, usually about fifty years (a period which seems bound to shrink as our increasingly information rich society paradoxically reduces our capacity to remember, bombarded as we are with so many alternate versions, revisions and replays of every event).

That process of forgetting began in the wake of the 1929 crash with the drawing up of one of the principles designed to protect the future against the recurrance of a similar phenomenon. In the 1930s economist John Burr Williams invented a formula that was to become the standard for share valuations for the following 60 years. Called the Dividend Discount Model, it combined a company's current share dividend and the rate of growth of its earnings with the interest rate it faced in financing investments to produce a guideline for the intrinsic value of its stock. Because this function is a little unwieldy, a sort of short-hand version is utilitised for day to day heuristics. This is the Price-to-Earnings ratio, which is obtained by simply dividing a company's stock price by its earnings per share. Fast growing companies have high PE ratios, slower growing ones have low ones; during the past century the average PE ratio for US firms has been about 14. During the 1990s, PE ratios for the top-performing stocks often reached triple figures, something absolutely unheard of.

How did this happen? And how, more importantly, did Wall Street analysts and commentators continue to justify it, well past the point when this was clearly an act verging on insanity? Sticking with his financial facts, Cassidy identifies the first reason as the abandonment of the Dividend Discount Model, at least as far as tech stocks were concerned. In 1994, when the Californian Internet Service Provider Netcom served up its first shares to markets and received the extraordinary a valuation of US$85 million with neither profits nor dividends to back it up, Wall Street cracked an eye. Up until that point no one who was anyone had been taking online commerce particularly seriously, but now everyone wanted to know how this extraordinary valuation had been achieved. Answer: the stock had been priced on the basis of a new formula, value per subscriber. 'Netcom certainly had subscribers,' Cassidy informs us, '- about 41,500 of them - and they had to be worth something. At US$13 a share, each one of them was valued at about US$2100 - more than twice the value that the stock market was attributing to cable television subscribers. This was despite the fact that Internet service providers charged about US$20 a month, while cable companies charged upwards of US$30 a month. There was no obvious reason why Internet users should be valued so highly, but even at this early stage Internet stock valuation wasn't based on reason.'

Within six months Netcom's stock price had doubled and two more ISPs had IPO-ed. One of them, a Virginia company called PSINet that had lost more than US$10m the previous year, was valued at US$431m. Cassidy quotes Eric Schmidt, a senior exec at Sun Microsystems at the time. 'This is a rocket has been launched,' he said. 'There's no one who can stop it.' Information technology had finally found its very own V2.

But for the rocket to fly, fuel was required; a lot of it. Fortunately it was there, primed and ready for use, in the shape of a particular kind of Individual Retirement Account, the 401(k) plan. Developed by one R. Theodore Benna, a Baptist benefits consultant from Pennsylvania who discovered a loophole in clause 401(k) of the federal tax code in the early 1980s, the plan allowed employees to contribute a portion of their pay-checks on a pretax basis to a savings account. Not surprisingly, the plan proved extremely popular: by the end of 2000 more than 40 million Americans had one, the accounts they'd created swollen with an astonishing US$1.7 trillion in assets. In the hands of a population fully half of which (according to a 1998 Congressional study) wagered cash in one form or another and whose fastest growing city was Las Vegas, this was bored money, idle money, money that was looking for some place to play. It didn't take long for Wall Street to realise that the New Economy was that place. Not just a playground, but a whole untamed frontier.

It was like pouring petrol on a flame. The boomers who hadn't dropped out at Woodstock, who instead had cut their hair, taken jobs, started families and savings accounts and investment plans, they wanted a revolution too. Management theory gurus like Tom Peters took a pinch of the new non-hierarchical 'network thinking', a pinch of sixties radicalism, a hefty whack of new frontiers, and gave it to them: by the mid-nineties, they had everyone believing that business was the new rock and roll, the new way to rebel. And this time around there was to be none of that messy dope-smoking and social empowerment nonsense; this time you didn't have to inhale. All you had to do was swop your suit for a pair of chinos and outsource all non-essential aspects of your business; the market would do the rest. With key 'sixties figures like Tim Leary (who announced that computers were the new LSD) and ex-Grateful Dead songwriter John Perry Barlow (now one of the key boosters on board at Wired) around to chant the chant, who could disagree? By the time the millennium came knocking even Joey Ramone (yes, that Joey Ramone, of punk rock fame) had his own stock market newsletter.

Better even than having aging rockers on (the) board, the kids were doing it too. The kids in question divided broadly into two camps. In one were directionless Gen X-ers like Mike Daisey, a wannabe West coast comedian who stumbled into working for Amazon in the mid-1990s in much the same way that I stumbled into working for Wired. Here we were, spiritual brothers six thousand miles apart, working in on our classic dot.com desks: Ikea doors set over trestles in cluttered, revamped warehouses (his in Seattle, mine in Southwark), trying to resist the promise of the future (and its complementary share-options) being dangled before us by the evangelists of this new religion (and evangelists is what the boosters called themselves; they even had it written on their business cards), trying to save our souls by pouring our doubts, our reservations, our liberal guilt into literary texts (in my case a novel, in Daisey's the series of unsent emails to Jeff Bezos, Amazon founder and CEO).

In the other camp were those who bought into the dream without reservation. Kids like Brent Hoberman and Martha Lane Fox of Lastminute.com, whose story Rory Cellan-Jones includes in Dot.bomb - The Rise and Fall of Dot.com Britain, his largely uncritical account of the bubble's impact on this side of the pond. Or like Ernst Malmsten and Kajsa Leander, a pair of Swedes who embarked upon an ill-conceived and extraordinarily mis-managed attempt to set up an international fashion and sportswear retailer on the back of a unshakeable belief in the management theory that Frank so despises. So convinced was Malmsten by the new corporate doctrines that even after blowing US$135m of other people's money and watching his company sluice down the drain, he still fails to devote a single page of the ghost-written saga of boo.com, Boo Hoo, to questioning the principles he cleaved to, let alone a single word about the boring old morality of trying to erect a 'cool' global brand on the backs of the exploited workers in export processing zones whose plight Naomi Klein did such a good job of bringing (finally) to the attention of the lifestyle-glutted Western media.

When the shake-out came, it came hard and fast. I remember John Battelle being not quite his usual focussed self around the time of the Wired IPO; when I asked why, I was taken aside and informed that if the IPO went through, he'd be worth US$70m. The IPO didn't go through, of course: Wired was far too bricks-and-mortar to make it onto the Nasdaq; it was a publishing company not a dot.com, it had a real product, assets, a balance sheet, things against which value could actually be judged. Afterwards Wired retrenched and closed its UK operation - on the eve of the eventual arrival of 'dot.com Britain', ironically enough. I lost my job; John Battelle resigned and went onto found The Industry Standard, both the most accomplished of the New Economy magazines and the contemporary equivalent of The Railway Standard, one of the dozens of publications launched to service the railway mania in 1840s England, another speculative bubble that failed to deliver. Within two and a half years The Industry Standard had gone the same way as its predecessor, and Battelle had gone from nearly being worth US$70m to losing US$50m.

So what are we left with? The dot.com boom didn't liberate us from the confines of tradition and geography as the techno utopians had said it would, nor it didn't create new business models that would usher in a new era of prosperity of super-efficient capitalism and wealth for all. While it did undermine the power of the nation-state, as many had predicted, this power didn't just disappear from the human dynamic; it got appropriated by the corporate world, which knew just what to do with it. What it did, among other things, was this: it transferred enormous quantities of money from the pensions and savings accounts of middle America into the bank accounts of the weathy and widened the gap between the country's rich and poor to a level not seen for decades. Worse, as journalist Barbara Ehrenreich discovered when she spent a year trying to survive in the American low-wage job market, something she found impossible to do without taking two full time jobs, it also dismantled labour laws and enabled the 'out-sourcing' of millions of American workers to 'lives of casual employment without healthcare or the most elementary of workplace rights.' Add Frank's cultural analysis to this mix and it looks like only the true and lasting effect of the New Economy is the breaking of the social contract that had bound mid-century America and the subsumption of its democratic process beneath mirrored layers of almost impenetrable propaganda, spectacle and hype.

Which is pretty much exactly what most of my band of fellow travellers at Warwick thought was going to happen. As far as they were concerned, William Gibson had it right. Technology wasn't going to make things better; on the contrary, it was going to usher in a more brutal and naked era in which power would be less accountable and more polarised, in which surveillance would be ubiquitous and personalised, in which we'd be fobbed off with phoney consumer choices while being manoeuvered ever further from decision-making processes - a picture that describes pretty accurately the world we live in today. And though information technology, chiefly in the form of email and mobile phones, has undoubtedly had an impact on our daily lives, as I write the talk is all of atomics once again: whether Saddam can build a warhead, the face-off between Indian and Pakistan, the bailing out of Energis, whether or not reactors are a viable alternative to fossil fuels. It seems we've come full circle - a twenty year detour into the technologies of self-empowerment has ended with the realisation that it's still oil and nuclear power that hold us in their thrall.

books reviewed:

DOT.CON - THE GREATEST STORY EVER SOLD by John Cassidy (Allen Lane The Penguin Press, 372pp, £9.99, 2002, 0-713-99598-X)
ONE MARKET UNDER GOD by Thomas Frank (Vintage, 434pp, £7.99, 2002, 0-099-42224-7) (NB this was first published in UK by Secker & Warburg in 2001)
BOO HOO by Ernst Malmsten, Erik Portanger, Charles Drazin (Arrow, 406pp, £7.99, 2002, 0-09-941837-1) (NB this was first published by Business Books in 2001)
NICKEL AND DIMED by Barbara Ehrenreich (Granta Books, 221pp, £8.99, 2002, 1-86207-521-2)
DOT.BOMB - THE RISE AND FALL OF DOT.COM BRITAIN by Rory Clellan-Jones (Aurum Press, 250pp, £10.99, 2001, 1-85410-790-9)