Wednesday, August 18, 1999 Published at 18:27 GMT 19:27 UK
Business: The Economy
The 'new economy' - too good to be true?
Jobs are plentiful in the 'new economy'
Many analysts are now talking about a new paradigm in economics or the new economy - with low inflation, low unemployment and healthy economic growth. BBC economics reporter Chris Giles looks at the evidence.
The term new economy has been coined to describe the fact that America and many other industrialised countries are enjoying a long phase of economic growth, low unemployment and no signs of inflation.
For those who believe in the new economy it's been achieved because computer technology and global competition has allowed companies to offer more for less money - in the process boosting economic growth with low inflation.
Have we heard this sort of talk before?
A term like "new economy" is something that comes around every time economic figures look very good. In 1994 there was talk, most of it admittedly coming from the then Chancellor, Ken Clarke, of a goldilocks economy - "not too hot and not too cold"!
And in the late 1980s all talk was on the "economic miracle" just before the recession of the early 1990s.
Is something different happening this time?
The UK has enjoyed good economic growth since 1992, unemployment has fallen below the trough seen in the 1980s boom and inflation, stable at 1.3%, is close to its lowest level for over 35 years.
That's not to say there are no economic problems.
The north-south divide in terms of unemployment and prosperity has opened up again and neither manufacturing industry nor agriculture would think this is a time to be proclaiming an economic miracle.
On top of this is the rather uncomfortable fact that if you go back a bit further to the 1950s and early 1960s unemployment was lower and in most industrialised countries economic growth equally as quick.
Why are things looking so good?
Apart from the new economy idea, which shouldn't be dismissed there are a couple of more mundane reasons.
This meant that the economy could grow and unemployment could fall without sparking inflation.
Another reason is economic policy has perhaps improved to the extent it is having a marked impression on our lives. Expectations of inflation have fallen which has helped bring down wage claims and become self-fulfilling.
Will the good times continue?
The only truthful answer to this is no one knows. Many of the ideas behind the "new economy" are a reaction to extremely good economic news. If this changes so will the theories.
Productivity, even in America has been growing very slowly in this economic cycle but if the very recent pick up continues, economies could grow further without inflation.
But there are signs of problems on the horizon. The recent doubling of oil prices mean the trough in commodity prices might be over, house prices rises might spark off a consumer boom when already the savings ration is at a 10 year low, and if the pound finally falls import prices would rise sharply.
And anyone who thinks the economy won't hit new constraints at some time in the future, perhaps skill shortages or wage inflation, is surely living in cloud cuckoo land.
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