The New Economy refers to the ongoing development of the American economic system. It evolved from the notions of the classical economy via the transition from a manufacturing-based economy to a service-based economy, and has been driven by new technology and innovations. This popular use of the term emerged during the
dot-com bubble
The dot-com bubble (dot-com boom, tech bubble, or the Internet bubble) was a stock market bubble in the late 1990s, a period of massive growth in the use and adoption of the Internet.
Between 1995 and its peak in March 2000, the Nasdaq Compo ...
of the late 1990s, where high growth, low inflation, and high employment of this period led to optimistic predictions and flawed business plans.
Origins
A 1983 cover article in ''
Time
Time is the continued sequence of existence and events that occurs in an apparently irreversible succession from the past, through the present, into the future. It is a component quantity of various measurements used to sequence events, to ...
'', "The New Economy", described the transition from heavy industry to a new technology based economy. By 1997, ''
Newsweek
''Newsweek'' is an American weekly online news magazine co-owned 50 percent each by Dev Pragad, its president and CEO, and Johnathan Davis, who has no operational role at ''Newsweek''. Founded as a weekly print magazine in 1933, it was widely ...
'' was referring to the "new economy" in many of its articles.
After a nearly 25-year period of unprecedented growth, the United States experienced a much discussed economic slowdown beginning in 1972. However, around 1995, U.S. economic growth accelerated, driven by faster
productivity
Productivity is the efficiency of production of goods or services expressed by some measure. Measurements of productivity are often expressed as a ratio of an aggregate output to a single input or an aggregate input used in a production proces ...
growth. From 1972 to 1995, the growth rate of output per hour, a measure of labor productivity, had only averaged around one-percent per year. But by the mid 1990s, growth became much faster: 2.65 percent from 1995–99. America also experienced increased employment and decreasing inflation. The economist
Robert J. Gordon referred to this as a
Goldilocks economy—-the result of five positive "shocks"—–"the two traditional shocks (food-energy and imports) and the three new shocks (computers, medical care, and measurement)"
Other economists pointed to the ripening benefits of the computer age, being realized after a delay much like that associated with the delayed benefits of electricity shortly after the turn of the twentieth century. Gordon contended in 2000, that the benefits of computers were marginal or even negative for the majority of firms, with their benefits being consolidated in the computer hardware and durable goods manufacturing sectors, which only represent a relatively small segment of the economy. His method relied on applying considerably sized gains in the
business cycle
Business cycles are intervals of Economic expansion, expansion followed by recession in economic activity. These changes have implications for the welfare of the broad population as well as for private institutions. Typically business cycles are ...
to explain aggregate productivity growth.
According to the generally unaccepted
Kondratiev wave
In economics, Kondratiev waves (also called supercycles, great surges, long waves, K-waves or the long economic cycle) are hypothesized cycle-like phenomena in the modern world economy. The phenomenon is closely connected with the technology li ...
theory of economy growth, the "new economy" is a current Kondratiev wave which will end after a 50-year period in the 2040s. Its innovative basis includes
Internet
The Internet (or internet) is the global system of interconnected computer networks that uses the Internet protocol suite (TCP/IP) to communicate between networks and devices. It is a '' network of networks'' that consists of private, pub ...
,
nanotechnologies
Nanotechnology, also shortened to nanotech, is the use of matter on an atomic, molecular, and supramolecular scale for industrial purposes. The earliest, widespread description of nanotechnology referred to the particular technological goal o ...
,
telematics
Telematics is an interdisciplinary field encompassing telecommunications, vehicular technologies (road transport, road safety, etc.), electrical engineering (sensors, instrumentation, wireless communications, etc.), and computer science (multimedia ...
and
bionics.
On the way of the "New economy": conceptions of Russia’s innovational evolution / “The State and The Society”
By Ashot Grigoryan. International conference, Moscow, 2005, p. 82–85.
Dot-coms
In the financial markets, the term has been associated with the Dot-com bubble
The dot-com bubble (dot-com boom, tech bubble, or the Internet bubble) was a stock market bubble in the late 1990s, a period of massive growth in the use and adoption of the Internet.
Between 1995 and its peak in March 2000, the Nasdaq Compo ...
. This included the emergence of the NASDAQ as a rival to the New York Stock Exchange
The New York Stock Exchange (NYSE, nicknamed "The Big Board") is an American stock exchange in the Financial District of Lower Manhattan in New York City. It is by far the world's largest stock exchange by market capitalization of its listed ...
, a high rate of IPO
An initial public offering (IPO) or stock launch is a public offering in which shares of a company are sold to institutional investors and usually also to retail (individual) investors. An IPO is typically underwritten by one or more investment ...
s, the rise of Dot-com stocks over established firms, and the prevalent use of tools such as stock option
In finance, an option is a contract which conveys to its owner, the ''holder'', the right, but not the obligation, to buy or sell a specific quantity of an underlying asset or instrument at a specified strike price on or before a specified dat ...
s. In the wider economy the term has been associated with practices such as outsourcing, business process outsourcing
Outsourcing is an agreement in which one company hires another company to be responsible for a planned or existing activity which otherwise is or could be carried out internally, i.e. in-house, and sometimes involves transferring employees and ...
and business process re-engineering
Business process re-engineering (BPR) is a business management strategy originally pioneered in the early 1990s, focusing on the analysis and design of workflows and business processes within an organization. BPR aims to help organizations fundam ...
.
At the same time, there was a lot of investment in companies in the technology sector. Stock shares rose dramatically. A lot of start-ups were created and the stock value was very high where floated. Newspapers and business leaders were starting to talk of new business model
A business model describes how an organization creates, delivers, and captures value,''Business Model Generation'', Alexander Osterwalder, Yves Pigneur, Alan Smith, and 470 practitioners from 45 countries, self-published, 2010 in economic, soci ...
s. Some even claimed that the old laws of economics
Economics () is the social science that studies the Production (economics), production, distribution (economics), distribution, and Consumption (economics), consumption of goods and services.
Economics focuses on the behaviour and intera ...
did not apply anymore and that new laws had taken their place. They also claimed that improvements in computer hardware and software would dramatically change the future, and that information is the most important value in the new economy.
Some, such as Joseph Stiglitz and Blake Belding, have suggested that a lot of investment in information technology
Information technology (IT) is the use of computers to create, process, store, retrieve, and exchange all kinds of Data (computing), data . and information. IT forms part of information and communications technology (ICT). An information te ...
, especially in software and unused fibre optics
An optical fiber, or optical fibre in Commonwealth English, is a flexible, transparent fiber made by drawing glass (silica) or plastic to a diameter slightly thicker than that of a human hair. Optical fibers are used most often as a means t ...
, was useless. However, this may be too harsh a judgment, given that U.S. investment in information technology has remained relatively strong since 2002. While there may have been some overinvestment, productivity research shows that much of the investment has been useful in raising output.
The recession of 2001
The early 2000s recession was a decline in economic activity which mainly occurred in developed countries. The recession affected the European Union during 2000 and 2001 and the United States from March to November 2001. The UK, Canada and Au ...
disproved many of the more extreme predictions made during the boom years, and gave credence to Gordon's minimization of computers' contributions. However, subsequent research strongly suggests that productivity growth has been stimulated by heavy investment in information and communication technology.
New kinds of companies
* Online retailer
Online shopping is a form of electronic commerce which allows consumers to directly buy goods or services from a seller over the Internet using a web browser or a mobile app. Consumers find a product of interest by visiting the website of the r ...
s
* Crowdfunding web sites
* Mass customization
In marketing, manufacturing, call centre operations, and management, mass customization makes use of flexible computer-aided systems to produce custom output. Such systems combine the low unit costs of mass production processes with the flexibili ...
manufacturers – 3D printing, design-your-own web sites for sneakers, clothing
* Social media
Social media are interactive media technologies that facilitate the creation and sharing of information, ideas, interests, and other forms of expression through virtual communities and networks. While challenges to the definition of ''social medi ...
* Sharing economy companies
** Bicycle sharing system
A bicycle-sharing system, bike share program, public bicycle scheme, or public bike share (PBS) scheme, is a shared transport service where bicycles are available for shared use by individuals at low cost.
The programmes themselves include bo ...
** Carsharing and short-term rental companies such as Zipcar
Zipcar is an American car-sharing company and a subsidiary of Avis Budget Group. Zipcar provides vehicle reservations to its members, billable by the minute, hour or day; members may have to pay a monthly or annual membership fee in addition ...
** Ridesharing companies
A ridesharing company (also known as a transportation network company, ride-hailing service; the vehicles are called app-taxis or e-taxis) is a company that, via websites and mobile apps, matches passengers with drivers of vehicles for hire th ...
such as Lyft
Lyft, Inc. offers mobility as a service, ride-hailing, vehicles for hire, motorized scooters, a bicycle-sharing system, rental cars, and food delivery in the United States and select cities in Canada. Lyft sets fares, which vary using a dyn ...
, Uber
Uber Technologies, Inc. (Uber), based in San Francisco, provides mobility as a service, ride-hailing (allowing users to book a car and driver to transport them in a way similar to a taxi), food delivery (Uber Eats and Postmates), packa ...
, Haxi
Haxi (stylized as HAXI) is a vehicle for hire company that enables users to share transport on short and mid range distances. The name is a portmanteau of "hack" and "taxi". Registered users can be drivers, passengers, or both. Drivers active mor ...
, and Bridj
** Garden sharing Garden sharing or urban horticulture sharing is a local food and urban farming arrangement where a landowner allows a gardener access to land, typically a front or back yard, in order to grow food.
This may be an informal, one-to-one relationship, ...
** Peer-to-peer lending of money
** Short term property rental companies such as Airbnb
Airbnb, Inc. ( ), based in San Francisco, California, operates an online marketplace focused on short-term homestays and experiences. The company acts as a broker and charges a commission from each booking. The company was founded in 2008 b ...
* Online media companies, such as Netflix
Netflix, Inc. is an American subscription video on-demand over-the-top streaming service and production company based in Los Gatos, California. Founded in 1997 by Reed Hastings and Marc Randolph in Scotts Valley, California, it offers a fil ...
* Online dating service
Online dating, also known as Internet dating, Virtual dating, or Mobile app dating, is a relatively recent method used by people with a goal of searching for and interacting with potential romantic or sexual partners, via the internet. An onlin ...
s
* Online advertising
Online advertising, also known as online marketing, Internet advertising, digital advertising or web advertising, is a form of marketing and advertising which uses the Internet to promote products and services to audiences and platform users. ...
, from free classifieds like craigslist
Craigslist (stylized as craigslist) is an American classified advertisements website with sections devoted to jobs, housing, for sale, items wanted, services, community service, gigs, résumés, and discussion forums.
Craig Newmark began the ...
to paid-placement like Google AdWords
Google Ads (formerly Google AdWords) is an online advertising platform developed by Google, where advertisers bid to display brief advertisements, service offerings, product listings, or videos to web users. It can place ads both in the result ...
See also
* Asset-based economy
* Long tail
* Knowledge economy
* Information revolution
The term information revolution describes current economic, social and technological trends beyond the Industrial Revolution.
Many competing terms have been proposed that focus on different aspects of this societal development.
The British polymat ...
* Deindustrialization
* Post-industrial economy
A post-industrial economy is a period of growth within an industrialized economy or nation in which the relative importance of manufacturing reduces and that of services, information, and research grows.
Such economies are often marked by a declin ...
References
Further reading
* Georg Erber & Harald Hagemann
"The New Economy in a Growth Crisis"
* ''After the New Economy,'' by Doug Henwood (2003)
* ''The New Economy in a Transatlantic Perspective: Spaces of Innovation'', ed. Kurt Hübner, Routledge Studies in Governance and Change in the Global Era, Routledge, 2005.]
* Richard Sennett
Richard Sennett (born 1 January 1943) is the Centennial Professor of Sociology at the London School of Economics and former University Professor of the Humanities at New York University. He is currently a Senior Fellow of the Center on Capitalis ...
: '' The Culture of the New Capitalism'', Yale University Press, 2006.
* "The Roaring Nineties – A new history of the world's most prosperous decade," Joseph E. Stiglitz
Joseph Eugene Stiglitz (; born February 9, 1943) is an American New Keynesian economist, a public policy analyst, and a full professor at Columbia University. He is a recipient of the Nobel Memorial Prize in Economic Sciences (2001) and the ...
, 2003.
* Michel Volle, ''e–conomie'', Economica, 2000,
* Laffey, D. (2006). The Rise and Fall of the Dot Com Enterprises. In: Burke, A., ed. Modern Perspectives on Entrepreneurship. Ireland: Senate Hall Academic Publishing, ch. 6.
* Porter, M. (2001). Strategy and the Internet. Harvard Business Review; Mar 2001, Vol. 79, Issue 3, pp. 62–78.
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Capitalist systems
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