III. The Evidence: Benefits and Challenges of the New Economy Introduction The dramatic growth of the Internet and electronic commerce since the mid-1990s has been matched by and fueled by the hype. Some see the fall of stock markets in advanced economies – especially the United States and particularly in the stocks of technology companies – as a sign that the New Economy was an illusion. As a result the urgency to emulate the experience that changed underlying economic performance in the US and some other economies such as Finland and Australia has subsided in some places.
But, in the New Economy (and throughout the established “old economy” activities as well) entrepreneurs are creating new markets. Established companies are restructuring with new strategies of production, marketing, and sales. Consumers are interacting with businesses in new ways and across more borders. Delaying reforms that will enable these transformations in an economy comes at a price. Delay should not be an accident of inertia or ignorance, but rather a conscious policy choice for which policymakers take responsibility.
This section provides three analytical perspectives on the benefits and challenges of policy reform to achieve the growth-oriented New Economy paradigm, in an effort to help policymakers sort the confusing mix of opportunity and exaggeration. These are: The key role of information in transforming activities. Analysis of evidence from advanced economies on the relative importance of use and diffusion of information technology into society to enhance productivity and growth, including an overview of the dot-com bust.
Econometric modeling of the aggregate benefits to be anticipated from diffusion of information technology and the policies that underpin that for both individual economies and the global economy. Supplementing this more macro view is Section IV, which analyzes and distills “mini” case studies of companies, governments, and civil society within APEC of the benefits and challenges of New Economy opportunities. Information and Transformation; Dot-Com Bust, But Not the New Economy Declines in technology stocks around the world are a vindication for those who see little or nothing new in the New Economy.
However, this reversal of fortune is driven, appropriately, by the fundamentals of any market, old or new: Data revealed weakness in demand, falling growth, and absence of profits (in the case of dot-coms) or unrealized (and unreasonable) expectations in the case of everyone else. That is, the business cycle (and its reflection in macroeconomic aspects such as inflation, output, and employment ups and downs) has not - 23-