Is The New Economy Wearing Out?

2 Pages 543 Words

In reviewing this article, an interesting view on the past economic boom was portrayed. Mr. Baker presents an idea that the “boom” that we all thought we were in, was in fact, gradual growth that was no different than any in the past several decades. Many of us were under the impression that with technology powering our economy forward, the situation was nothing short of post WWII economic growth. However, upon further study, as suggested by the author, our economic “boom” was more of a “pop”

First, let us establish when the “Boom” was, from the fourth quarter of 1995, to the same of 2000. What was it that powered this? In the post war era, manufacturing was near peak capacity from wartime efforts in the U.S. Combine this with the war-ridden economies of the world looking to be rebuilt, and there is substantial opportunity available. Mr. Baker points out that this time was referred to as the postwar golden age for growth rate, which during this era, reached close to 3%.

In the late 1990’s, we had a rate of 2.8% growth rate, which has now been revised to 2.5%. This has been widely publicized that our technology has pushed this growth. Undoubted, the numbers speak for themselves. With a 131% increase in nominal spending, over this time span, consumers hungered for and drove this technological charge. In fact, during this “Boom”, information equipment and software accounted for 19% of GDP growth. As Mr. Baker points out, this is quite a driving force, and clearly the largest cause for growth.

However, consider the drawbacks to technology. The turnaround time on technology staying current is minimal. As soon as new equipment or software is released, it is already closing in on being obsolete. Research and development of computers and software, upgrades almost constantly. What does this have to do with our situation? Consider if you will, that some of the technology purchased, was in fact to replace warn-out o...