When the U.S. economy boomed and the stock market went mad, everyone from taxi drivers to tax consultants talked confidently about the New Economy. Now we are in a very uncertain time of acute, short-term problems combined with long-term potential. Our summer double issue, "America's Future: The Boom, The Bust, Now What?", is chock-full of insights to help navigate this tricky period.
BusinessWeek has long argued that, properly defined, the U.S. has a New Economy--an economy capable of faster growth without inflationary overheating. Why? Because of productivity gains made possible by technology, globalization, deregulation, and capital markets that rewarded innovation.
That, of course, did not mean the business cycle was dead or that the stock market would boom endlessly. We stressed that the New Economy would be prone to deep, technology-driven downturns. We're going through that right now. Here's the good news: The current slowdown does not mean the end of strong productivity gains and higher sustainable growth.
On the human capital side, the boom of the late 1990s lifted pay for workers on all levels of the income ladder and offered immigrants unprecedented opportunity. Despite scores of layoff announcements, unemployment still is low, and the economy has thus far avoided a full-blown recession. A return to strong demand for skilled labor is a likely scenario.
Why were so many people surprised when the slump began? Managers in the New Economy had excellent real-time data but failed, in many cases, to exercise hard-nosed judgments. One key lesson: get beyond aggregate numbers and closer to the consumer's underlying needs. That counts even more for multinationals in global markets; developing nations are likely to keep growing twice as fast as industrialized ones for at least a decade. Oh, yes--earnings matter. So do proper valuations.
A team of more than 40 reporters and editors contributed to "America's Future," led by Assistant Managing Editor Joyce Barnathan and Chief Economist William Wolman. Senior Art Director Steven Taylor supervised our top-notch group of art directors and photo editors, who designed the handsome pages that grace this edition.
The New Economy will endure through this business cycle. Attitudes that took hold during the boom, though tempered, still resonate with Americans: confidence in the U.S. economy and stock market and an abiding faith in technology.
The boom. The bust. Time to move on to a more sustainable recovery. By Stephen B. Shepard, Editor-in-Chief