I commend you on your informative articles addressing the opportunities and challenges of the "The 21st century economy" (Cover Story, Aug. 24-31). There are interesting parallels between events of the 1920s and what is happening in the semiconductor industry in the late 1990s. The automobile industry drove the financial engine in the first half of the 20th century. Now, the technology advances of the personal computer, networked computers, and the Internet are driving the economic engine of the second half of the century in the U.S.
The fact that during a financial crisis, pumping money into the system--rather than taking it out as the central bankers did in 1929--can avoid depression is something all financial planners worldwide need to comprehend. There will always be recessions, because that's part of the free-enterprise system, but learning from history can prevent the repeat of a major depression.
William I. Dollar
Santa Cruz, Calif.
There is a simple reason--which everyone is overlooking--for why we have reached a "new economy." For 40-plus years, we have plugged our resources into the cold war. Not only did we plunge dollar after dollar into a useless cause (well, economically useless) with no return on investment, but we also occupied many of our valuable scientists. It's no coincidence that we've had a huge technological boom a few years after the end of the cold war. The 1990s are about transforming our military resources into capitalistic ones. Obviously, with less money spent on the military, we have had better productivity, income, and living standards.
Sizable chunks of your special feature are off-base. The Pollyanna-ish gushing about the economic and social progress we will attain through biotechnology and globalization is premised on several things not going wrong--no Asian meltdown and no stock market decline, to name a few you list in a bright box.
Funny thing is, the rest of the issue acknowledges that the global economy is in the throes of these very plagues, with stories titled "There is no wishing this [Asia] crisis away," "The markets: Don't cry, it's only deflation," etc.
Plus, you announce that "the defining issues of the Industrial Age--the rise of trusts, the battle to end child labor and codify workers' rights, the regulatory protections spawned by the consumer movement--have faded." Yet the globalization orchestrated through pacts such as NAFTA and the Multilateral Agreement on Investments and institutions such as the World Trade Organization is undermining these citizen safeguards. It is precisely the threat to these achievements of the democratic process that has fueled the worldwide backlash against globalization.
Public Citizen's Global Trade Watch
Your special issue paints an all-too-real picture of the turbulence that we can expect to face. As we move into the millennium, we are entering an era of constant change. There will be no time-outs, no substitutions. Within five years, we will look back at the 1990s as "the good old days."
In such an environment, gaining and sustaining marketplace advantage will be increasingly difficult. Consumer demands, new technologies, and even the principles of an information-based economy will work against long-term marketplace dominance as we have known it in the past. In the 21st century economy, becoming--and remaining--the winner in your markets will require an ever-increasing ability to make the right decisions and to execute those decisions more effectively than your competitors. As Darwin once said, it is not the strongest species that survive nor the most intelligent, but the most responsive to change. Building corporate nimbleness will be the competitive advantage of the 21st century.
In this period of smug complacency, you celebrate current American success. But you make two judgments I think are wrong: The space program and nuclear power are not failed enterprises.
People everywhere want the benefits of a modern economy, but earth has insufficient conventional resources for this purpose. Combustion technologies (oil, coal, etc.) cannot provide enough energy, and they are destroying the global life-support system. Only thermonuclear electric power may provide enough energy at an acceptable environmental cost. The future environmental problem will be disposing of excess heat.
As I see it, the explosive growth in the 21st century will result from human exploration and colonization of our solar system. The effects of space travel will be analogous to Columbus' "discovery" of America. There is no reason why food and basic materials cannot be economically produced outside earth. Doing so is economically justified, since it removes the environmental side effects of production. (But pollution by chemical rocket fuels needs fixing.)
I knew in 1950 that we would go to the moon. Now I know we will go much further. The remaining question is, who will do this if not Americans?
Walter L. Battaglia
I was disappointed that your article did not include any discussion of the factors that encourage innovation in employees. How organizations are designed, people are developed, communicated to, paid, rewarded, and recognized, has significant impact on innovation and productivity. Many of today's technically updated managers are still using outdated techniques to motivate employees, despite available data to the contrary.
Richard W. Park
"Why the pace has to pick up" was an excellent exposition of the role that research and development must play in keeping our expansion rolling. The treatment of the role of the federal government in national research and development was also right on target, highlighting both the problems and accomplishments achieved. Still, it should have added more detail as to how and why that government effort, spearheaded by the Defense Dept. agency, Defense Advanced Research Project Agency, was so successful.
About 30 years ago, DARPA foresaw the overwhelming potential for information systems and initiated major R&D efforts into technologies for very high-speed processing and for a revolutionary concept of computer communication networking. Its highly talented people developed a vision for the future and then spent half their time traveling around the country, establishing contracts with university and industry researchers. They then proceeded to define and fund an incredible research and development effort. DARPA essentially ran a virtual R&D lab across the whole country.
These efforts were of such a magnitude that no one company could have realistically funded them. The results were essentially given away to American industry, resulting in a rapid and effective dissemination of technology. Throughout this effort, DARPA and other branches of the U.S. government absolutely insisted that architectural standards for computer networking be developed and adhered to so that all network participants could easily communicate and share information. What is more, the DARPA effort was paid for not by industry or university dollars, but by the American taxpayer, and that effort-more than anything else-is responsible for the Information Age of the 1990s.
Gino J. Coviello
Palm Coast, Fla.
Let me present an opposite opinion from that expressed in "Alan Greenspan: An unlikely guru." I think it is possible that Greenspan, rather than accepting the New Economy is still fighting the last war (on inflation)--except that his hands have been tied from almost-certain tightening by the impact of the strong dollar on collapsing currencies abroad. That still hasn't stopped him from pursuing a tight monetary policy, which has nearly inverted the yield curve.
What some see as important are not actual interest rates but relative ones. The dramatic fall in long-term rates without even a modest easing in short-term ones has in effect been the same as a massive tightening. Based on his public comments, Greenspan doesn't seem to understand what commodity prices and long-term rates are screaming at him: that inflation is not the bogey man waiting in the closet anymore. Rather, it is a worldwide spiraling deflation produced in part by overcapacity and not enough growth of consumers worldwide.
Deflation could prove as damaging as Greenspan's worst fears about inflation. It's not as perfect a world as he imagines. We have seen only the benefits of disinflation so far, not the detriments of deflation. No one knows what will happen or if it could have been averted, but for Mr. Greenspan not to consider the problem in its entirety and remain with his head stuck in the inflationary sand is worrisome. It's not that the economy is different this time, it's just that we haven't seen major deflation in our lifetimes, and we all think it's something new.
What [the Fed Chairman] may not grasp in time is that long-term falling interest rates are not going to spur growth (much less inflation) because there is no outlet for production. Nor will lower rates push up overvalued stocks for long, much less stop their decline.
An easing sooner rather than later in short-term rates could help, though, to make the dollar less attractive to a foreign, bubble-producing asset inflow, strengthen other currencies in free fall, and rescue export businesses so many jobs depend upon. Maybe there isn't a way out, but some of these "visionaries" had better come up with something to at least deflect the deflationary tsunami that is possibly headed our way instead of pushing it along.