The New Economy Essay -- essays research papers

THE NEW ECONOMYIt works in America. Will it go global?It seems nigh too good to be true. With the information applied science sector leading the way, the U.S. has enjoyed almost 4% harvest since 1994. Unemployment has fallen from 6% to about 4%, and puffiness just keeps getting lower and lower. Leaving out food and energy, consumer inflation in 1999 was only 1.9%, the smallest increase in 34 years. This spectacular boom was non built on smoke and mirrors. Rather, it reflects awillingness to undertake massive risky investments in innovative information technology,combined with a decade of retooling U.S. financial markets, governments, andcorporations to cut down costs and increase flexibility and efficiency. The result is the so-called stark naked Economy faster gain and lower inflation. Most corporate executives and policymakers in Europe and Asia, at once skeptical about the U.S. performance, have taken this lesson to heart. There are still widespreadmisgivings about the U.S . model of free-market capitalism. But driven by a need forfaster growth, combined with a fear of being left behind, the rest of the world is starting to embrace the benefits of a technology-driven expansion. But a global New Economy will not happen overnight. True, spending on technology, the most visible part of the New Economy, while not yet up to U.S. levels, is on the rise everywhere. Semiconductor sales were up 17% worldwide in 1999, while the number of Internet users in Western Europe and the Asia-Pacific region is expect to more than double over the next five years (chart). Even in a developing country such as India, the software diligence is growing at a rate of 50% to 60% annually. OLD VIRTUES. But the worldwide proliferation of mobile phones and Web accounts by itself will not act as about a more vibrant global economy. What are also needed are dramatic changes in core institutions that will translate technology into faster productivity growth. That means financial mar kets better able to fund innovation, more flexibility in corporations and repulse markets, a faster pace of deregulation, and increase competition (table). The New Economy is built on old virtues thrift, investment, and letting market forces operate, says Treasury Secretary Lawrence H. Summers. There are signs that the process of change has started. With growth picking up in Europe, and Asia emerging fro... ...dents accounted for two-thirds of the growth in science and engineering doctorates at U.S. universities. Most of them planned to stay and work in the country. kindred many other aspects of the New Economy, opening up the doors to foreign workers wont come easily in many countries. But the genie is out of the bottle--now that the U.S. has shown that faster growth is possible, no country will be able to resist it. In the end, the benefits will be well worth the pain. The Road to the New EconomyHeres what countries must(prenominal) do to get a high-productivity, low-inflation economy BOOST INVESTMENT SPENDING on information technology as a share of GDP structure CORPORATIONS to cut costs, improve flexibility, and makebetter use of technology OPEN FINANCIAL MARKETS to direct capital to the best uses DEVELOP VENTURE CAPITAL and initial public offering markets to aid innovative companies ENCOURAGE AN ENTREPRENEURIAL CULTURE and make it easier to startnew businesses INCREASE THE PACE OF DEREGULATION especially in telecom and labormarkets ADJUST MONETARY POLICY to the realities of the New Economy by waiting for inflation to appear before raising interest rates