That '90s boom? It seemed so real at the time

HOLD it a minute here – did the 1990s really happen?

This isn't a question about whether they happened in a chronological sense, as they obviously did. Otherwise nothing would have separated the 1980s from the 2000s, and George W. Bush would have had to run against his own father for the GOP presidential nomination.

Or something like that.

No, this is about whether they happened in a cultural/financial/mutual-fund kind of way. Remember The Fabulous Decade? The Age of Excess? The era when corporations made so much money they might as well have been printing it in the basement?

Well, it turns out they weren't even bothering to print it. They just wrote it down in their books! What a great business model! Let's try that at home. It's easy. Every time you write a check, just add it to your balance, instead of subtracting it. And when that nice lady from the bank calls, tell her that premium cable isn't an expense – it's an investment in your long-term entertainment future.

True, this is an exaggeration of the accounting techniques allegedly used by WorldCom that boosted its bottom line by over $3 billion. But it's still close. Which brings us back to this: Were the '90s about affluence, or smoke and mirrors?

Strictly speaking, WorldCom's fuzzy math doesn't apply to the 1990s, because it was not until the first quarter of 2001 that its financial officials began booking some operating expenses as capital expenditures.

But the boomtown mentality of the '90s arguably continued on into the first years of the new century. And in cultural memory, the beginning and end of defining decades can itself be fuzzy: much of what we now recall about the '60s (elephant bell-bottoms, Starsky and Hutch, the fall of Saigon) in fact occurred in the early and mid-'70s.

WorldCom's creative restatements were also apparently driven by the desire to keep its stock price up, no matter what – a very '90s imperative. And in any case it was just the latest in a string of corporate missteps and restatements that have recently come to light. In the six-month period after the economy peaked in the fourth quarter of 2000, firms announced write-offs and special charges of some $50 billion – more than in any similar period in US history.

"Profits are being restated every day by somebody, it seems," says Cynthia Latta, chief economist at DRI-WEFA Inc., Lexington, Mass. consulting firm. "WorldCom was just the biggest."

Looking back, Ms. Latta says the revisions of earnings do indicate that the glorious days of the late 1990s economy may not have been quite as shiny as they appeared, at least as far as corporate profits are concerned.

"Some of us were suspicious that things were that good anyway – unbelievably good. So it is not a huge surprise that things were not really so good," she says.

Back at the peak in 2000, earnings of the firms that make up the Standard & Poor's 500 reached $50 per share. A year later the comparable figure was $25.

For 2002 earnings will recover a bit, to around $36, according to an S&P estimate. Despite WorldCom, Enron, Arthur Andersen, and the demise of the Pets.com sock puppet, the economic recovery is likely to continue, say economists.

"The economy is still intact," says David Blitzer, chief economist of Standard & Poor's.

In an economy as large as that of the United States, it seems, even world-class billion-dollar flame-outs are drops in the bucket, to mix a few metaphors. Blitzer figures that the recovery will go on even if WorldCom is followed by another corporate disaster, as it followed Enron.

There "may be another WorldCom out there," he says.

The real lesson of the WorldCom experience may be that during times of stock market exuberance, irrational or otherwise, there may be individual pickpockets who for their own purposes use the general atmosphere to conceal their fleecing of the crowd.

Thus David Blitzer of Standard & Poor's approves of what President Bush has said so far about the affair. Speaking Thursday at the opening of an eight-nation economic summit in Kananaskis, Alberta, Bush called the WorldCom revelations "outrageous" and vowed "to hold people accountable for misleading not only shareholders but employees as well."

While the media's portrayal of a glorious new 1990s economy may have been overstated, it contained some elements of truth, say other economists.

Productivity rose sharply, going up at a 2.2 percent annual rate in the '90s business cycle. Unemployment unarguably dropped. Personal incomes rose across the board.

"A lot of what we saw then was fictitious," says Dean Baker, an economist with the Center for Economic and Policy Research in Washington. "But some of it was real."

• Staff writer David R. Francis contributed to this report.