A 'New Economy?' Prove it

Posted: Thursday, January 25, 2001

NEW YORK (AP) -- The New Economy, not even a teen-ager yet, is beginning to look frayed and strained, and the most dour of the calamity crowd are claiming it is seriously ill and in need of intensive care.

Here it is, still new to this world, and nobody has even clearly defined its characteristics, the traits of personality that have had such an impact on modern society.

''I wake up each morning in the same bed, watch the garbage get picked up in the same way, and watch TV to get the early news,'' so that couldn't be it, says William Dunkelberg, who seeks to elucidate what makes it new.

''I'm looking for that 'new economy' that is nothing like the old one,'' he says. ''Yes, there's a chip in everything these days, but that's not a new economy, it's just a more efficient one,'' he says.

The more specific you try to be about what makes the New Economy new, the more elusive it becomes, suggests Dunkelberg, an academic economist at Temple University who probes more deeply than most into such things.

Whatever it is, he says, we can be sure of two things. One, it changes how we do things, but less what we do, including what we buy. ''Are there really new products, or just better ones?'' he asks.

Secondly, he says, the chip and the computer are at the core of it all, observing that that high-tech growth has accounted for about one-third of our gross domestic product in recent years.

If that is so, he continues, then maybe we can find some clues in job growth.

Yes, he agrees, electronics has been growing twice as fast as nonfarm private-sector employment. ''But the real hot growth areas have been segments like amusement and moving pictures and entertainment.''

He agrees, on the other hand, that labor-intensive Internet services require lots of people to install, maintain and customize the software that runs on all the new computers. But if higher employment and changes in jobs skills are defining characteristics, they are hardly new ones.

He looks elsewhere others might not -- to immigration as perhaps a vital element in changes that produced the New Economy. Immigration reached historic proportions in the late 1990s, he points out, and it was different from earlier immigrations.

For one thing, he explains, it created new, insular environments so large as to produce ethnic economies within the larger economy that affect education, culture and communication. He calls it fractionalization, a definite change but hardly defining.

Back to the chip. If it is indeed the chip that defines New, he observes, ''then most of our economy is or will be 'new.' '' But much of what we call new has origins way, way back in history.

That is, ''appliances, cars, communications devices, heating and cooling systems, security systems, lighting systems -- all have chips at their core,'' he explains. More efficient and creative, but not new.

Still, the definition of New seems to be in the chip. In the speed at which the chip works, lowering costs, raising productivity, improving quality, increasing the availability of information and the effectiveness of management.

But Dunkelberg, while agreeing that the speeding up of discovery and progress has been stunning, ''it is not new -- it's been happening for centuries.''

So what's his conclusion? ''There is no New Economy that is entirely different from the old.''

The Internet, he says, reduces the cost of what business always did, and the chip makes it possible to do it better, more efficiently and with higher quality. And communications technologies make it possible to do it world wide.

The so-called New Economy is different, to be sure. It has changed the face of the labor market. And there is clearly a higher return to education in the boom, ''but again, that has always been the case.''

And on it goes. What we see as new seems to be a consequence of our limited appreciation of history. In truth, what is new may be only the ''New Economy.''

End Adv PMs Thursday, January 25.

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