Begging To Differ About The `New Economy'
The U.S. is headed for a recession. The evidence is undeniable. Yes, we live in a new age, with technology providing efficiencies never before believed possible ("The new economy: What it really means," News: Analysis & Commentary, Nov. 17). But that technology does not replace consumption--it only lowers the cost of production.
The early signs of a reduction in consumption are showing up in the wholesale layoffs now occurring in basic industries in the U.S. Those layoffs will compound this consumption strike. General Motors' plant closings, the extinction of Woolworth's, Citicorp's layoffs from consolidating its global back office, and Eastman Kodak's need to take out $1 billion in costs through labor cuts all point to a fundamental change in our world.
The most frightening example of this is the Levi Strauss plan to remove one-third of its workforce with plant closings. And this is in the face of a changing office environment where casual clothing is more acceptable. And don't forget that this is a privately owned enterprise that doesn't have to satisfy the fickle demands of Wall Street analysts expecting earnings targets to be met or exceeded.
Jeffrey S. Spray
Your article ignored the biggest criticism of the New Economy gurus: their insistence on easing monetary restraints. Ever since the Fed raised interest rates in 1994, supporters of the New Economy have demanded monetary expansion to raise growth and create jobs. But if the Fed had heeded this advice, we would have had a few months of 3%-plus growth, followed by rising prices and wages and eventually recession. This, incidentally, is exactly what happened in the nearly new economy of 1990.
In fact, the "natural" rate of unemployment is itself a function of economic stability. The steady, moderate growth of recent years that was engineered by the Fed is responsible for falling inflation and falling unemployment. If New Economy advocates want to brag that their predictions have come true, that's fine. But more important, Alan Greenspan can brag that he ignored their advice.
Daniel J. Ryan
Stephen B. Shepard's article was a good one, but I feel that he (and most old and new economists) missed out on one important driving factor: workers' experience. The massive dismissal of older and experienced workers at big companies over the past several years has led to those workers' becoming self-employed or else employed in smaller companies that are not required to file the kinds of reports that economists rely on.
These more experienced workers have been through many business problems and know how to handle them. That's something younger workers have yet to learn. As a result, older workers are more productive, because they can deal with problems quickly and move on, instead of wondering what to do and putting together teams to study situations.
Ronald E. Litton