Chris Farrell: Remember the dot-com boom of the 1990s? It seemed as if every entrepreneur with a good idea and a PC could challenge established companies for customers. Brick-and-mortar companies jumped on the e-commerce bandwagon. The demand for digital workers soared. Long-time computer professionals hopped from job to job, pulling down more money with every employer. Newly minted college graduates juggled multiple job offers. But when the Y2K problem emerged in the latter part of the '90s business and government quickly realized there still weren't enough IT workers on hand to find and repair the computer glitch. The quick fix? Hire computer professionals overseas. And that temporary solution permanently changed the global economy.

Paul Saffo: Y2K was huge in getting the ball rolling on offshoring.

Farrell: Paul Saffo is director of the Institute for the Future, a high-tech think tank in Silicon Valley.

Saffo: But once they went overseas, they discovered it's not just a matter of cost. These programmers overseas are often better than the best you can get in the United States.

Farrell: Ireland, the Philippines, and Israel were among the more popular destinations for offshoring Y2K programming fixes. But India became the offshore capital. It had plenty of high-tech companies staffed with well-educated English speaking digital workers. Thanks to India's steep import barriers in the 1980s, no one could afford new computer systems. So Indian tech workers were the world's leading experts in the older software languages that needed upgrading. Suhas Patil is chairman emeritus of semiconductor maker Cirrus Logic.

Suhas Patil: And they were listening to their customers and what their needs were, and as the recognition came that systems had to be upgraded to not have the problem based on the Y2K issues, that's how they got their break.

Farrell: And made the most of the opportunity. AnnaLee Saxenian is Dean of the School of Information Management and Systems at the University of California, Berkeley.

AnnaLee Saxenian: I think the importance of Y2K was overwhelmingly about establishing Indian companies' reputation among US customers and helping begin a set of customer supplier relationships that have simply taken off in the last four years.

Farrell: Of course, Y2K contracts ended in 2000. Yet many Indian companies took advantage of their now sterling programming reputations to negotiate for more sophisticated work. Research. Software development. Accounting services. Long-distance medical advice. Rafiq Dossani is a senior research scholar at Stanford University.

Rafiq Dossani: India is now growing at 70-80 per cent a year in offshored services ... services which are maintaining an accounting system, maintaining an HR system, doing claims processing, that's growing easily at 70 per cent, maybe even higher.

Farrell: Offshore also came onshore during Y2K. The town of Mountain View lies at the heart of California's Silicon Valley. Housed in one of the many nondescript low-rise office buildings that crowd the region's business avenues is the Indus Entrepreneur, or TIE. It is a networking base for the Indian high-tech Diaspora.

Shankar Muniyappa: Y2K was a big opening as early as 98.

Farrell: Shankar Muniyappa is director of information systems for TIE. He came to America for Y2K-and stayed.

Muniyappa: Myself and many of us believe still believe this is the place where you need to be if you want to be middle of innovation.

Farrell: Some 30,000 Indian IT professionals now live and work in the Valley. Rafiq Dossani of Stanford University:

Dossani: At least 25 per cent of the start ups have Indian employees at fairly senior levels working for them. And ... there's a whole infrastructure therefore being built around them because it's a substantial number now, so you see shopping malls you see business services and so on catering to this particular immigrant community.

Farrell: That community is adding vitality to the American economy. Still, many American high-tech workers are threatened by the offshoring of white collar jobs. The numbers are murky, but according to Mark Zandi of Economy.com 370,000 non-manufacturing jobs moved overseas over the past fours years-with most of the information technology jobs going to India. Salaries are down too. Still, the big factor behind the loss of 1.5 million jobs lost since Y2K is improved business efficiency or productivity - not offshoring. And Y2K also played an important role in boosting business efficiency.

Economists initially looked at Y2K as a productivity killer.

Imagine a town threatened by a rising river. Every able-bodied person in town is put to work stacking sandbags. It's necessary work to save the town - but it's unproductive work. Nothing gets built. No food gets grown.

With the Y2K bug, programmers, chief information officers, project managers, and other digital workers were getting paid to do unproductive work - stacking sandbags of silicon. No innovative investments. No new productivity enhancing software.

But economists were wrong. Y2K wasn't a flood. Instead, think of it as clearing a path choked with underbrush. Once the trail is open, it is much easier to zip from point A to point B. Y2K gave companies an excuse to clean up their software and hardware underbrush - a critical factor in today's improved business productivity. Paul Saffo:

Saffo: A lot of companies said well, gosh, if we're going to have to spend all this money to fix our software let's also see what else we can do at the same time, so it was an invitation to replace a whole bunch of stuff. ... So it forced people to ask hard questions about how they were using things and in the best instances people really did become more efficient.

Farrell: The result? Companies used the new systems they installed to cut costs and work smarter - and hire fewer workers.

[Voice of Leonard Nimoy: "Do you have hard copies of all your important documents ... such as bank statements."]

That's Leonard Nimoy, Mr. Spock from Star Trek. He's narrating the Y2K Family Survival Guide video - one of thousands of products peddled by prophets of doom. Y2K did bring home how reliant we all are on computers. Many of us still don't back up critical data at home. The same isn't true for business and government. Many learned from Y2K just how vulnerable information systems are to a malicious attack or unforeseen disaster. Case in point: Y2K actually helped some businesses survive 9/11.

[News broadcast of President George W. Bush: "I've directed the full resources of intelligence and law enforcement communities to find those responsible and bring them to justice."]

The attack on the World Trade Center stopped trading on the New York Stock Exchange. Against the odds, that citadel of capitalism opened six days later.

John Koskinen: The reason the markets, securities markets, were able to open the Monday after the Tuesday of 9-11 was they still had the test scripts that had been developed in 1998 and 99.

Farrell: John Koskinen credits preparations for Y2K. He was President Clinton's Y2K czar.

Koskinen: ... they were able to in effect take all of those Y2K scripts and make sure that all the transactions with all of the major players would close. Without that they never would have been able to do it in the time frame with the confidence they had.

Farrell: A record 2.4 billion shares traded on the New York Stock Exchange the day it reopened.

Y2K was a unique economic event. Earlier jolts to the economy, like the 1973 oil price hike and the 2001 attack of 9/11, were shocks. But the Year 2000 arrived right on schedule. The surprise was how little immediate impact the much-feared transition had on the economy. Yet we're still living and working with the economic impact of Y2K five years later.

For Marketplace and American RadioWorks, I'm Chris Farrell.

The Presidential election campaign is in the home stretch. Neither the President nor Senator Kerry has secured a decisive advantage.

Iraq is now the central issue of debate, as one would expect, since the war is going badly, and the economy is reasonably robust. The debate is finally beginning to focus on substantive differences between the candidates after a summer in which they mainly exchanged personal attacks on their respective Vietnam records. Their strategies are now clear: Bush will challenge Kerry's steadiness and consistency; Kerry will challenge the necessity of the campaign in Iraq and the competence of the administration's efforts there. But while their diagnoses of the situation differ, their proposals for dealing with what is clearly a mess are not so clearly differentiated. Both propose to seek additional help from members of the international community; both emphasize the need to train and arm Iraqi security forces; and both are hopeful that elections will enhance the legitimacy of Iraqi leaders, fortify their efforts to dry up the insurgency, and allow American forces to be reduced and eventually withdrawn.

Historically, wars have been unkind to presidents on whose watch they occurred. The Korean War reduced Harry Truman's popularity so dramatically by 1952 that he gave up his quest for a second full term. The Vietnam War drove Lyndon Johnson from office, despite impressive domestic achievements. Victory in the Gulf War of 1991 sent George H.W. Bush's approval ratings soaring, but within a year he was defeated by an obscure Arkansas governor.

Yet President Bush still clings to a narrow lead in the polls. Why?

Senator Kerry has argued that the Iraqi campaign is a "war of choice." Perhaps so. But Osama bin Laden issued a fatwa declaring war on the United States nearly a decade ago. Whatever the outcome in Iraq, war with Islamic extremists will continue. And American voters remain nearly evenly divided as to whether John Kerry has the steadfast character and consistent judgment they want in a wartime leader.

Uneasiness about the financial and human costs of the war is growing. Casualty figures in Iraq are high compared to the numbers killed or wounded in post-cold war American interventions in Somalia, Haiti, Bosnia, and Kosovo. Yet, those earlier conflicts involved humanitarian interventions in which Americans perceived little strategic stake. However, military personnel killed in Iraq - now more than 1000 - still number less than a third of the civilians who perished in New York and Washington on 9/11. And ours is a volunteer military that is highly motivated.

When confronted by an attack, Americans have consistently taken the fight to the enemy, engaging them in combat as far from our shores as possible. The president has portrayed the campaign in Iraq as an integral feature of the war on terrorism. To at least a number of voters, the absence of any terrorist attacks in the United States since 9/11 provides evidence that his approach, while not without significant costs, is working.

Victory at the polls may be a dubious prize. Whoever is sworn in on January 20, 2005 will face daunting choices. American options in Iraq range from the "potentially disastrous" to the "extremely distasteful." We cannot simply walk away. And a host of other dilemmas - e.g. nuclear crises in Iran and North Korea, a Middle East peace process that has gotten off track, strains in the trans-Atlantic relations, a multilateral trade round that has lost momentum - demand urgent attention. Beyond this, the next president will be hampered by a gigantic fiscal deficit and a military that is stretched thin. In short, he will have few easy choices. It makes one wonder why politicians yearn for this job.

President Bush has claimed a renewed mandate, and has begun to reshuffle his national security team. Condi Rice will move to State; Steve Hadley will move up at the NSC. Rich Armitage and Jim Kelly, who have borne much of the day-to-day responsibility for U.S. policy in Asia, are leaving along with Colin Powell. What might we expect of the Bush administration in its second term?

Generally speaking, continuity rather than change is likely to be the watchword in foreign policy. Above all, the Middle East and South Asia are likely to remain the principal preoccupations of American concerns. In Iraq, Washington will seek to acquit its commitments - to hold elections, train Iraqi security forces, and accelerate reconstruction projects - with whatever measure of dignity and honor it can muster in the face of excruciatingly difficult choices. With Yassar Arafat's death, American engagement in Israeli-Palestinian issues is destined to increase. And Iran's bid for nuclear weapons will continue to challenge the United States and Europe.

Thus Asia will not have pride of place on the Bush agenda. Yet it will continue to command Washington's attention. Why? Because it is in Asia that the interests of the great powers intersect most directly. Asia is the world's most dynamic economic area, and it is becoming more tightly integrated. Washington cannot afford to neglect South and Southeast Asia, for in these areas Islam presents a relatively moderate face. And North Korea, of course, poses a direct and growing challenge to the administration's nonproliferation policy.

Fortuitously, the United States is better positioned in Asia than in most other regions. Our military presence remains sizable and retains mobility and flexibility. Our economy continues to generate solid demand for Asian exports and is a robust source of direct investment. While criticism of American policy is widespread in the region, it is not expressed with the virulence that is seen in Europe and the Middle East. Above all, Washington has cultivated the Asian great powers assiduously, and has managed to improve relations with Tokyo, Beijing, Moscow, and New Delhi - a substantial accomplishment. It remains to be seen whether it can work in concert with others to ameliorate the sources of discord on the Korean Peninsula and over the Taiwan Straits.

The United States, to be sure, confronts some daunting challenges in Asia. If the U.S.-Japan alliance is in excellent condition, defense cooperation with Seoul remains troubled by the sharp divergence in U.S. and Korean perspectives on North Korean aims and strategy. Nor have we found a solid basis for pursuing with Pyeongyang's neighbors a coordinated approach to the six-nation talks. Regional economic cooperation is taking shape along pan-Asian rather than trans-Pacific lines. Developments in the Middle East threaten to "Arabize Islam" in Southeast Asia. And the "Johnny One Note" quality of American diplomacy - i.e. its preoccupation with international terrorism - often plays poorly against Beijing's more broadly based effort to provide regional leadership.

Nor is America unconstrained in its policy efforts in the region. Our military forces are stretched thin globally, impelling some downsizing of deployments in Asia. Huge fiscal deficits loom, and with growing bills falling due in both Iraq and Afghanistan, resources available for policy initiatives elsewhere are likely to be tight. The president has succeeded in pushing negotiations with North Korea into a multilateral framework, yet Washington is being pressed by its negotiating partners to adopt a more conciliatory posture. The democratization of Asian nations, while welcome, does not automatically facilitate U.S. diplomatic objectives. Recent elections in South Korea and Taiwan were decisively shaped by a new generation of voters. Governments in Seoul and Taipei are increasingly accountable, yet viewed from the United States, they are not extraordinarily sensitive to Washington's views, let alone deferential to its lead.

With these considerations in mind, one should expect President Bush and his foreign policy team to continue cultivating close ties with the Asian powers. Whether Washington can effectively utilize those relationships to roll back North Korea's nuclear program and avert crises in the Taiwan Straits will depend heavily on its relationships with the governments in Seoul and Taipei. And at the moment South Korea appears determined to expand economic ties with the North virtually without reference to Pyeongyang's nuclear activities. Taipei remains preoccupied with efforts to assert its own identity while counting on American protection.

In the end, of course, foreign policy rarely sees carefully laid plans bear fruit. Someone once asked a new British prime minister, Harold MacMillan, what would drive foreign policy in his government. He answered without hesitation, "Events, dear boy, events." I expect the same may be true for Mr. Bush.

After an intensive selection process, the Korean Studies Program (KSP) at the Asia-Pacific Research Center (APARC), Stanford Institute for International Studies at Stanford University has selected the first class of its Pantech Fellowships for Mid-Career Professionals. Philip W. Yun and John Feffer will be in residence during the 2004-2005 academic year and collaborate with the faculty and fellows at KSP and APARC. The fellowship was made possible by generous gift from Pantech Group.

Philip Yun received his law degree from Columbia University and was a Fulbright Scholar at the Yonsei University Graduate School of International Studies. Yun has had a remarkable career working both in the private and the public sector. While holding high-level positions at the U.S. Department of State, Yun worked closely with the Secretary of Defense, Dr. William Perry, to develop broad expertise on international negotiations, strategic planning and problem solving. He has practiced law both in Korea and in the U.S., worked in private equity investment, and provided comments and opinions for the media on North Korean issues. While in residence, he will work on developing an outline of a comprehensive roadmap that will lead to a secure and prosperous Northeast Asia that would include North Korea.

John Feffer is an accomplished writer and editor who has written on numerous topics such as the politics of food, Asia, Eastern Europe, Russia, foreign policy, economics, and nationalism. As a frequent traveler to North Korea (and to South Korea), he has a rare knowledge of and balanced perspective toward North Korea. His most recent publication is "North Korea/South Korea: U.S. Policy at a Time of Crisis". He is a former associate editor of World Policy Journal and has worked for the American Friends Service Committee, most recently as an international affairs representative in East Asia. He serves on the advisory committees of the think tank Foreign Policy in Focus and the Alliance of Scholars Concerned about Korea. While in residence, he will concentrate on examining food policy on the Korean peninsula.

KSP and APARC look forward to their joining us in the fall.