The New Economy: What It Is, How It Happened, and Why It Is Likely to Last [Hardcover]

Roger Alcaly (Author)

Book Description

Publication Date: June 25, 2003

How doing business is undergoing a major historic transformation--and why we’ve only begun our productivity upswing

America’s economic troubles have had a dramatic impact on how investors view markets and the businesses that drive them. And for now they have overshadowed a profound and ongoing revolution--still taking place after twenty-five years--in the way the economy operates. Just as in past economic revolutions, today’s "new economy" emerged from the combination of powerful new technologies--in this case, information and communications technologies--and the methods companies adopted in order to use those technologies effectively. The bubble in technology stocks, its collapse, and the recession that followed are part of a larger pattern of dramatic transformation of markets and businesses. And unlike the bureaucratic companies of the past, today’s leading firms are lean, flexible, entrepreneurial, and more productive—and the new ways in which they operate are still evolving. These trends are likely to continue for some time, and their effects are only beginning to be understood.

In The New Economy, Roger Alcaly describes how the economy has changed in response to new pressures and opportunities--created by new technologies, global competition, and innovations in world financial markets; he shows how the impact of these changes is real and substantial, and suggests why their biggest impact on the economy may be yet to come.

Editorial Reviews

From Publishers Weekly

The term "new economy" is shorthand for a wide range of changes in business and financial practices resulting from innovations in computers and communication. Before the Internet crash of 2000, many people argued the new economy was already here and would forever banish unpleasant things like recessions, inflation, stock market declines, boring jobs, bad customer service and authoritarian governments. New York Review of Books contributor Alcaly considers previous cycles of technological change and economic reaction, such as the invention of steam power and later electric power, the development of the internal combustion engine and adoption of mass production techniques in automobiles and steel. He argues that such changes do create new economies that are qualitatively better than the economies they replace, but more slowly and erratically than people expect at the time and with bigger problems along the way. Comparing innovations in semiconductors, software and communications technology with those of earlier periods suggests the traumas of the last few years, including the Internet boom and crash, are predictable growing pains. We will experience many of the advantages technophiles promised, says Alcaly, but it will take longer than the optimistic ones expected. This is thought-provoking stuff, but Alcaly doesn't defend this thesis systematically. Instead, the book's seven chapters are independent essays on different, narrow aspects of the question, some of which (like a history of the Federal Reserve and a chapter on junk bonds) are only tangentially related. Alcaly presents a wealth of interesting material, but doesn't integrate it into a satisfying whole.
Copyright 2003 Reed Business Information, Inc.

From Booklist

Alcaly, a hedge-fund manager and economist, presents the idea that the American economy is now in the early stages of superior productivity growth and prosperity, driven by pervasive new information and communications technologies and complementary changes in business practices. The last decades of the twentieth century marked the beginning of a period of innovation and revitalization whose impact is likely to be felt for at least another generation or longer. The economy has changed in response to new pressures and opportunities created by the new technologies, global competition, and innovations in world financial markets, including the development of the junk-bond market and the spread of hostile corporate takeovers. The author describes excesses, such as wild speculation, shady dealings, and unjustified pay, as the dark underside of important economic transformations, but these have not undermined the long-term prospects of the new economy. He believes such excesses are not likely to impede growth unless we sustain external calamities or there are inappropriate reactions by policy makers and investors. Mary Whaley
Copyright © American Library Association. All rights reserved

See all Editorial Reviews

Product Details

• Hardcover: 336 pages
• Publisher: Farrar, Straus and Giroux; 1st edition (June 25, 2003)
• Language: English
• ISBN-10: 0374288933
• ISBN-13: 978-0374288938
• Product Dimensions: 9.1 x 6.1 x 1.2 inches
• Shipping Weight: 1.3 pounds (View shipping rates and policies)
• Average Customer Review: 3.5 out of 5 stars  See all reviews (2 customer reviews)
• Amazon Best Sellers Rank: #3,446,050 in Books (See Top 100 in Books)

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4 of 4 people found the following review helpful:

5.0 out of 5 stars Excellent analysis of the New Economy, November 1, 2003

By 

Gaetan Lion - See all my reviews
(TOP 1000 REVIEWER)    (REAL NAME)   

This review is from: The New Economy: What It Is, How It Happened, and Why It Is Likely to Last (Hardcover)

Roger Alcaly, an economist, makes a strong case that information technology, like electricity before it, will support economic growth for decades. Making a parallel with electricity, he notes that for decades, industrialists would electrify only parts of their plants, but only to supplement the older steam engines. It wasn't until the 1920s (40 years after the discovery of electricity), when new immigration laws slowed the arrival of cheap labor, that U.S. industry plugged fully into the new electric technology and reaped the resulting prodcutivity gains.

Alcaly suggests that a similar lag is holding up the computer revolution. He argues that the full impact of the New Economy won't be felt until vast sectors upgrade their basic processes, transmitting data over the Internet between suppliers and customers.

In his broad survey of an economy in transition, Alcaly ranges from the equity markets to manufacturing and the Federal Reserve. He makes a solid case that a New Economy is upon us, even if its power is hard to measure and predict.

5 of 6 people found the following review helpful:

2.0 out of 5 stars FROTHY CHEER-LEADING FOR THE POST-INDUSTRIAL STATE, May 17, 2005

By 

David N. Buckley (Danbury, CT USA) - See all my reviews
(REAL NAME)   

This review is from: The New Economy: And What It Means for America's Future (Paperback)

      It was common in the latter stages of the Great Bull Market of the Nineties to hear talk, especially among Wall Street types, about a "new economy". What exactly the phrase meant was unclear, but all were agreed, (including the Chief Gnome himself, Alan Greenspan), that it was "a good thing." Since those heady millennial days however, the economy has soured somewhat, and with gas prices rocketing past the $50-per-barrel mark, and jobs disappearing into the all-consuming global Black Hole affectionately called "Out-Sourcing", one hears considerably less talk these days about the glitzy "new" high-tech economy that was going to make us all rich.

But ... not everyone has given up.

Roger Alcaly, a hedge-fund manager in New York City, remains bullish!

He believes that there really IS a "new" economy, and he provides a three-step argument to prove his position.

First, he says, the existence of the "new" economy is revealed by the recent remarkable growth in productivity.

Second: he claims that this sudden surge is a (belated) result of the IT-revolution.
[IT = "Information Technology"; i.e., personal computers and the Internet].

And third: because the new economy is the product of a technological breakthrough leading to higher productivity, it is part-and-parcel of a capitalist pattern of technologically-driven growth which can be traced back at least as far as the First Industrial Revolution (1750 and after). This is why Alcaly babbles on so much (albeit unconvincingly) about Schumpetrian periods of "creative destruction."

Unfortunately, Alcaly's tri-partite thesis isn't tenable, and he himself gradually and grudgingly admits this before we've even finished the First Chapter!

First, about the recent surge in productivity growth: Alcaly admits "it's still too soon to know for sure whether a lasting new trend has been established, or how powerful it will be ..." (p. 34).

This leaves us, and him, on pretty thin ice. I mean, if the productivity growth is a mirage, where's our "new economy"?
[In fact, the productivity growth is largely the result of a new accounting procedure introduced by the Commerce Dept.'s Bureau of Economic Analyis! See page 40, and following.]

Second, the alleged connection between technology and growth (now or in the past) is not entirely self-evident. In fact, as Alcaly admits, "technological breakthroughs cannot be identified unambiguously, and some scholars reject the view that there have been a number of relatively discrete bursts of critically important innovations over the last two centuries." (p. 30) In other words, economic historians have long since dropped the simplistic notion that new gadgets "cause" economic growth. And Alcaly's own attempt to tie technological change to the business cycle (pp. 25-35) also comes a cropper! (Think about that! He provides TEN pages of evidence to DISPROVE his own position!)

So, before we've even come to the end of his FIRST chapter, Mr Alcaly's entire case for a "new economy" has collapsed! So much for the superior knowledge of Wall Streeters! (Now might be a good time to check your retirement portfolio!)

------------
That said, there really IS a new economy. We may characterize it as we will, but what it clearly is NOT, is a manufacturing economy. The "old" economy (Made In America) has long since disappeared, and will never return to these shores. In its place we have the Post-Industrial Economy. We don't make anything anymore; we flip burgers. We don't even earn enough to buy what we import; we have to borrow ... $2 billion per day ... from foreigners!

This "new" economy, unlike the old, is dedicated exclusively to improving the lot of the rich as it ignores the growing ranks of the poor. Because Economists have always been cheer-leaders for the Haves, we should perhaps not be surprised that Mr Alcaly finds this "new economy" so heady. But he might find it less exciting were he to acquaint himself with its real human costs. Ms Ehrenreich's Nickel and Dimed [ISBN: 0805063897] would be a good place to start.