American new economy

 

 

Yang    Lu

 

 

 

 

 

〖ABSTRACT〗：

The new economy emerged in American is not an accident. There are some proper reasons that improve the development, for example, information technology, new companies and the powerful government. American new economy appears new characteristics; it becomes more technological and global. The outstanding characteristic is the higher productivity and investment, low inflation and low unemployment“ONE HIGH and TOW LOW”. The new economy improved the development of society. Information technology was used in every aspect of lives, especially in social service, living and education. For American, the new economy keeps America be the leadership of the world. For other countries, the new economy makes an opportunity that they can use the advanced technology to develop their own economy. The new economy is the common wealth of human.

 

 

 

 

 

〖Keywords〗：Information Technology (IT)   New Economy   “Gazelle”  

 

 

 

〖Introduction〗：

The America economy has been increasing since 90’s in 20^th century, and it has created a miracle in the history of American economy development. The economy is called the “New Economy”, which is keeping a long time, longer than any increasing development periods before. The new economy is an intellective and technical economy that is improved mainly by Information Technology (IT), and of course it is a continuing developing economy, which faces the whole world. Because of America’s development and boosting, America has gained a great accomplishment, and it also influences economy all over the world. The information technology was introduced to people, who use it in all parts of lives; the world becomes smaller, people become smarter, development becomes faster and countries become wealthier.

 

The discussion in this paper is organized into four major sections. The first section discusses the reasons of new economy; the second section enumerates some characteristics simply; the third section discusses some aspects have changed during new economy’s period; at the end, offers the importance of new economy. Through the whole paper, you will understand what American new economy is and some general information about it.

 

 

 

The reasons

 

 

1. The new economy is based on information revolution and technology investment.

High science and information technology are broadly used in American industries these years. It is the fundamental power of new economy. Nowadays, the information technology has been an important sector of American domestic industry and thrived swiftly. And other industries are accelerated to develop. These two factors keep American economy increasing. For example, American auto industry failed behind Japanese auto industry because of the poor technology in the 1980’s. Then the high technology was introduced and used to rebuild technology of auto, which made American auto industry develop again and overtook Japanese auto industry. In other industries, the high technology also played a very important role.

 

The research and application of information technology improved the productivity growth rapidly. Between 1977and 1995, output per hour (i.e., productivity) in the nonfarm sector rose an average of only 1.3 percent per year, contributing to a decline in real wages in many industries. However, from 1996 through the end of 1999, productivity grew an average of 2.6 percent each year, about twice the rate experienced during the previous fifteen years╃. 

 

The application of IT makes the researching; producing, sale and the storage of production have revolutionary changes. On the one hand, the economy development changed from consuming resources into information and technology; on the other, we can collect production and market’s information quickly and accurately, which alleviate the blindness of producing, control the increasing of storage and reduce the probability of economical crisis by overproduction.    

 

 

2. A lot of enterprises were rearranged and “gazelles” has appeared.

Turbulence is the norm, in other words, companies will need to be in a never-ending state of transformation, perpetually creating fundamental change╄. Adapting to the needs of the development of market, a large scale of corporations was rearranged. The headlines of the business press tell the story. AlliedSignal merges with Honeywell, WorldCom buys MCI, Compaq buys Digital. MIT’s Lester Thurow suggests that, “sooner or later, firms will either be global players or they will be nice players.” There is table1 about companies incorporating in 1999. A lot of incorporated companies collected a large quantity of capital and labor, which became fundamental materials improved to develop companies. They used proper capital to earn more money, and continue to compete and develop during the new economy. These companies made a great contribution to the American new economy.

 

Meanwhile, “Gazells”, small rapidly growing companies that capture new markets, are driving the new economy. The “gazelles” have their traits. For example, agility, the companies are able to adapt to market quickly and properly; small, they are able to collect enough capital easily, if they find market has changed they can change; technical, they always make use of high technology and do some fashionable industry. Between 1993 and 1996, 70 percent of new job growth came from small, fast-growing firms (20 percent growth per year), and the small-firm sector is expected to supply about 60 percent of all new jobs through 2005╅.     

 

 

3. The effective Adjustability of Economical Structure and Policy Control are the safeguard of the new economy.

The government has adjusted the macro economy, which improved to increase the new economy. In order to control the inflation and stimulate the development, the government was cooperated with the Federal Reserve Board and took the effective macro economical policies.

 

After Bill Clinton became the president of American, he and his governors constituted a series of effective macro economical policies. Clinton brought forward “rebuilding the finance”, which includes balancing the budge，increasing income and reducing payout. In order to increase the financial income, the government invested in the high technology and captured higher taxes from the rich. Meanwhile, the government sharply reduced the financial budge of payout, cut down the payout of military expenditure and the number of the federative officers. Then American financial deficit had fallen down from $2904 billion dollars of 1992 to $226 billion dollars of 1997╆.

 

Otherwise, Alan Greenspan, the chairman of the Federal Reserve Board, implemented moderate but flexible monetary policy. From 1994, the Federal Reserve Board started to manage the moderate monetary policy to ascertain the practical interest rate, and kept the level of the rate moderate, which did not play stimulated role in economy. This kept the economy increasing under the low inflation. High technological methods make the Federal Reserve Board know the latest interest rate trends accurately on time and predict the future in American economy, so government can forwardly make a monetary adjustment. For example, in order to lessen the pressure of inflation, the government made seven times adjustment for interest rate from February 1994 to February 1995; in order to keep economy increasing, the government decreased the interest rate by 0.25 percent two times on 29^th September 1998 and 15^th October 1998╇. The adjustment kept the economy increasing and escaped from the impact of interest rate.       

 

 

4. The trade policy is extending the export.

The economical diplomatism started from President Bill Clinton. The Clinton government is a government that intervened deeply in the country’s trade development. They wanted to build a more opened and unrestricted international trade system and extend the export, which is the key to improve economy development. Meanwhile, the government should intervene with the external trade and punish the foreign competitors who damaged American industry, in order to protect the internal high technological industries. Hence, economical security is the most important factor in American external policy. The government should clean off the barrier between investment and trade; keep American be the leader in the world economy by multilateral and bilateral negotiations.

 

In 1993, President Clinton publicized the strategy of export and pointed the six main export industries, including semiconductor, computer, telecommunication, environment protecting, consulting software. The purpose of the strategy was to enforce the industries’ ability of external competition. The government lessened the export constraint of high technological industries, supplied trade financing and consultation, paid more attention to more powerful and advantage industries such as environmental technology, services and information consultation industries. Between 1929 and 1970, U.S. combined imports and exports averaged only 9.5 percent of GDP; today, they exceed 25 percent of GDP╈. The government also energetically participated in the foundation of WTO and the negotiated with APEC. All of these indicate that American government made a great effort for extending export.                                                

 

 

 

The characteristics

 

 

1. The outstanding characteristic is the higher productivity and investment, low inflation and low unemployment“ONE HIGH and TOW LOW”.

 

IT improves American to come into a new economical period, the economy development lasts a long term till now. Furthermore, in this period, faster productivity growth has translated into lower unemployment and inflation and greatly improved real wages. It has been a key factor behind the strength of the stock market, the rapid inflow of foreign capital and the strong dollar.

 

Some people want use classical theory and model to interpret it, but they cannot. Some people do not think it is a new economy. The new economy has its new characteristics and American economy has a great accomplishment. In table2, you will see main indexes’ new changes in the new economy. For example, real GDP growth, real GDP per capital growth, average unemployment, average core inflation and current account balance.

 

 

2. Globalization

Information and communication technologies have allowed us to create an instant world that recognizes no limits to geography, time or information-processing, communications or decision-making capacities, or economic or political boundaries for that matter╉.

 

Globalization is one of the most important influences on the nation, business, workplaces, communities, and lives at the end of the twentieth century. The American century will be changed by the world century. And American new economy makes business and communities in a global environment, the standards and the groups are both the ‘world class.’ ‘World class’ orders us to make the efficiency, effect, quality and service is the highest level of the world. Globalization supplies a larger and better stage for us, while with higher demands.

 

 

3. The new economy is an entrepreneurial economy.

Entrepreneurs are the main force behind information revolutionary changes because they start the companies that create new technologies and they harness new technologies to improve performance across the economy. Meanwhile, young and fast-growing “gazelle” companies, such as Cisco, Amazon, Sun, Qualcomm and Yahoo have been the pioneers behind many new products and industries╊. For example, from the introduction of its personal computer in 1982, IBM seemed destined for long-term domination of PC market. But IBM would be eclipsed by a new company, Compaq, founded in 1982 by a partnership of three computer industry managers╋. The new company raised $87 million from the venture capital and stock markets enabling it to quickly compete on a large scale. Compaq’s innovative computer allowed it to earn $111 million in first-year salesa U.S. business record. Compaq eclipsed IBM in personal computer sales in 1993, and became the world’s largest PC maker in 1995. These firms represents just 4 percent of all U.S. companies, but create 60 percent of all new jobs.

 

 

 

The main aspects of society are changing and developing during the new economy.

 

 

1. Governance.

Governance in the twenty-first century must become flexible and adaptable, market-oriented, consumer-friendly, reinvented with technology, innovative, performance-driven, and accountable.

First, the government should do more work for service. At this point, a lot of companies have a series of perfect service systems, so the government could learn from them about how to organize work and improve customer service. The government has a quantity of work to do to improve the new economy. This needs the government to rearrange and innovate during the whole development period.

 

Second, the government should make a proper strategy to invest the infrastructure, which can improve support businesses and the quality of life. In the 21^st century, every social sector needs more high technical facilities, which needs the government’s assistant; for people, not only children but also adult need to gain higher education and skills, if they do not get more information about modern times’ knowledge such as IT, they will be eliminated by the new economy. 

 

 

2. High skilled workers.

In the new economy, brawn is of secondary importance. Nowadays only 20 percent of our workers spend their day making things. The 80 percent work in other jobs that require them to move things, progress or generate information, engage in research and design, or provide services to people. Even workers engaged in manufacturing are becoming ‘knowledge workers’ because they must understand systems, technology, and sophisticated matters of supplies and markets far more than their assembly line predecessors.

 

In the new economy with low unemployment, companies pay much attention to attracting and retaining talent. Moreover, highly skilled workers are more important than workers with less education. As a result, a key ingredient in determining a company’s success is its ability to attract and develop knowledge workers. On the one hand, the high skilled workers must have adequate experiences that help them do their work very well and can help others; on the other hand, the companies will look the education level of the workforce. Companies hope to employ high educated works as many as possible.

 

Another claim is that the new economy demands different skills from its workers. As the economy churns, it puts a higher premium on creativity and the capacity for innovation. A well-known formulation of this argument comes from Robert Reich (1991), who argues that the economic well-being of Americans depends on individual skills, rather than the profitability of corporations. In particular, to ensure that people do well requires the right kind of investment in training. The skills of “symbolic analysts” (as opposed to routine producers or providers of in-person services) are most in demand in the new economy. The rise of new industries has meant the rise of new jobs, while new technology and new ways of organizing work have transformed many existing jobs. Both trends have changed the occupational mix in America. In particular, managerial, professional, and technical jobs have increased as a share of total employment. These workers include, among others, managers, engineers and scientists, health professionals, lawyers, educators, accountants, bankers, consultants, and engineering technicians.

 

 

3. Education.

People who live in American can be supplied for an excellent studying environment. Education plays a very important role in American new economy. Not only the universities’ administrators but also policymakers are always pay attention to American education. So they are changing some ways and policies about how to educate and how to work a university.     

In my opinion education can be divided into two parts, one is the fundamental education, which refers to the education from elementary school education to high school education; and the other is higher education, which includes all types of education from undergraduate education. Generally speaking the higher education is more important. Now in American, a lot of occupation should be done by a well higher-educated person, such as finance, professional and business services, telecommunications, information processing, high technology and computing. The universities’ administrators have remodeled the way that how a student studies and what a student studies depending on the new economy. They change the specialized disciplinary content into the symbolic skills, change the established expertise into the research skills, and change the mere “self-expression” into the communication skills. Some pop majors as MBA offers outstanding students from all over the world.

And policymakers make some effective adjustment to operate universities. Northeastern University, formerly the nation’s largest private university, successfully managed a 16 percent decline in student enrollments (from 33,032 in 1987 to 27,619 in 1993), and closed a $40 million dollar structural deficit, by cutting 600 faculty and stuff positions, merging academic programs and, in some case, eliminating entire academic departments.

 

Otherwise, workforce and welfare policies should be better connected to economic development and employer-targeted policies, such as policies that address the employment needs of particular regions, labor markets, and industries or sectors. And they should be better aligned with policies that govern access to and financing of postsecondary education. Public policy should continue to encourage, seed, and experiment with new local institutions that can improve local labor market functioning by strengthening connections among employers, labor, government, educational institutions, and community-based organizations.

 

Education is our work, we should cooperate with correlative factors (administrators and policymakers) to make education adapt to the new challenges and the new economy.

 

 

4. The standard of living.

The new economy has improved economy development, economy improved society development. Meanwhile, the level of living has advanced, there into, real wage is the most important and obvious exponent. Real wage is very important for worker, strongly linked to living standard. Table3 shows the growth of real wages between 1978-1995 and 1995-2000, using three wage series (total compensation, average hourly earnings and the ECI) and two price deflators (the Consumer Price Index U-RS [CPI] and the chain price index for personal consumption expenditure [PCE]).

 

 

 

The new economy plays an important role.

 

 

American new economy has changed all aspects of our daily lives likes the industry revolution of the eighteenth and nineteenth centuries that transformed first British and then other countries. For example, information technologiescomputing, communications, and the digital convergence of bothfacilities the transmission of quick, cheap information throughout any organization. IT reduces transaction costs. It enables organizations to decentralize operations, reduce hierarchies, empty warehouses by using just-in-time inventories, and contact with multiple suppliers. It enables organizations to become larger or smaller by removing barriers to entry