The doomsayers were wrong - the new economy works

The new FTSE 100 index, which underwent its quarterly readjustment yesterday, confirms it: the collapse of internet stocks in the spring was not an earthquake, but a hiccup. The new economy is here to stay.

The new FTSE 100 index, which underwent its quarterly readjustment yesterday, confirms it: the collapse of internet stocks in the spring was not an earthquake, but a hiccup. The new economy is here to stay.

New entries to the blue-chip index, based on market capitalisation, include companies such as Spirent, little known outside the City, which makes components for internet infrastructure. Companies that have fallen off the list are huge, old-economy companies such as Corus (formerly British Steel), the brewing and leisure group Scottish & Newcastle, and Rolls-Royce. In short: how are the mighty falling.

Certainly, there have been moments when the successes of the dot.com start-ups seemed quite unreal. As prices of e-stocks soared ever upwards, doomsayers argued that this was simply a modern version of 17th-century tulip fever - the bubble to end all bubbles. In short, the end of the e-commerce world was nigh.

The e-stocks were, indeed, wildly overpriced, suffering from what Alan Greenspan, chairman of the US Federal Reserve, famously called "irrational exuberance". At the beginning of this year, anybody with a half-baked dot.com proposal, however absurd, could find investors who were ready to throw shedloads of cash at the idea.That was doomed to end, and rightly so.

Overall, however, enthusiasm about e-commerce was not just a case of emperor's clothes. Marks & Spencer yesterday became just the latest struggling giant to acknowledge the permanent change in the landscape, announcing an expansion of e-commerce to get back on an even keel.

E-business will become increasingly important, in ways that we can scarcely guess at - just as nobody could have guessed, when electricity was first invented, all the ways in which it would come to dominate our lives.

For the moment, there is a tendency still to concentrate on the ways in which e-commerce directly affects our lives as customers: business-to-consumer (B2C) operations such as the booksellers Amazon, or over-the-net deliveries from Tesco. The truly historic impact is, however, likely to be business-to-business (B2B), where e-commerce (stock replenishment, sourcing of components, and much more) will have a huge - and as yet uncharted - impact on every aspect of business practice.

E-commerce has not yet come of age; it has barely begun to walk. It will, however, grow and grow in the months and years to come. Those who fail to acknowledge that truth will certainly be left behind.