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The bursting of the stock market bubble,
corporate scandals, and lingering recession have dashed
the hope that the 1990s were the start of a new era of unlimited
prosperity. But as far-fetched as this possibility was,
the pessimism that followed has been similarly excessive,
obscuring a dramatic economic transformation that has taken
place over the last twenty-five years. In The New Economy,
Roger Alcaly shows how this transformation came about, where
are in its development, and why it is likely to produce
one of those rare long waves of superior productivity growth
and innovation-driven prosperity -- why, in short, it is
appropriate to call today's economy revolutionary, or "new."
As was true of our other major economic
transformations, this one was propelled by powerful new
technologies and complementary new business practices. Lean
and flexible operating methods have evolved in response
to advances in information processing and communications,
growing global competition, and important financial innovations
such as the development of junk-bond market and the spread
of hostile corporate takeovers. Just as with the revolution
based on electric power and mass production in the first
part of the twentieth century, it took more than twenty
years for these changes to boost productivity growth materially.
And the emerging new economy of the 1990s, like that of
the 1920s, stimulated expectations unrealistically, producing
frenzied speculation, financial manipulation, underhanded
dealing, and eventually collapse, disillusionment, and economic
slowdown. But, Roger Alcaly argues, the resilience of the
economy in the face of its troubles provides further evidence
of its underlying strength and of the likelihood, once corrections
run their course, that evolving technologies and business
practices will continue to fuel robust growth.
Roger Alcaly is a principal of Mount
Lucas Management Corporation, an investment firm that manages
a group of hedge funds, and a frequent contributor to The
New York Review of Books. He lives in New York City.
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