Campaign Finance Reform and the Future of the Democratic Party by Jerrold E. Schneider

Author:Jerrold E. Schneider [Schneider, Jerrold E.]
Language: eng
Format: epub
Tags: Political Science, Political Process, General
ISBN: 9780415933216
Google: jk0m76PCon0C
Goodreads: 7579721
Publisher: Routledge
Published: 2002-01-15T06:53:19+00:00

A New Economy

Perhaps government policies aimed at accelerating productivity growth are needed less for another reason. The recent explosion of new technologies—satellites, the Internet, computers, biotechnology, robots, microelectronics, new materials, and others—have led some analysts to hope a new higher rate of growth in productivity has taken hold since 1995, or soon will take hold. No doubt information technologies (IT) are transforming the way many businesses operate, and have the potential to increase their efficiency. Whether these changes will lead to a higher rate of growth in productivity in the future remains to be seen. Perhaps a shift to a faster rate of growth in productivity is already taking place. For thousands of years, the lack of increases in productivity kept all nations mired in poverty. Then the modern era brought rapidly rising productivity and much higher living standards. So a shift occurred between all of recorded history prior to 1700 and the period from 1700 to the present, a shift from negligible rates of growth in productivity to relatively fast rates. Since a shift in the long-term rate has occurred in the past, another such shift may be happening again. New technologies may raise the productivity growth rate above the normal trend rate of the past hundred years to a new and higher normal rate. The issue is whether there is good evidence that such a shift is actually happening.

Some analyses suggest the new economy has in fact arrived. They point to record low inflation combined with very low unemployment, and what appears to be a step-level increase in the rate of productivity growth, from approximately the 1 percent level to a 2.2 percent level since 1996.58 However, productivity increased in other periods and then fell back in 1975 to 1978 and 1983 to 1986. The increase since 1996 needs to extend over more years before it is possible to call it a new trend. Moreover, low inflation and low unemployment can be explained by other factors beside higher productivity: cheap commodities, downward pressures on labor costs, a strong dollar, increased spending from increases in stock valuations.

Third, and most important of all, a study by Gordon shows virtually all of the improvement in productivity occurred in computer manufacturing. Productivity in this sector was 42 percent a year from the end of 1995 through the beginning of 1999. Manufacturing productivity, which traditionally has provided most productivity gains, grew more slowly—the opposite of what one might expect if a shift to a higher rate of productivity has occurred. Overall, except for computer manufacturing, productivity has been poor in manufacturing and poor overall, according to Gordon, and these trends do not fit with a new economy view. Gordon sees a half point increase in the underlying rate of growth in GDP.59 But it is not clear whether this increase will last. The rate of productivity gains in computer manufacturing is taken to be unsustainable. Most important, if one takes out computer manufacturing, the rest of the economy shows a continuation of the poor productivity growth rates that have been the object of so much concern since 1973.

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