The New Economy was an evolution of developed countries from an industrial/manufacturing-based wealth producing economy into a service sector asset based economy from globalization and currency manipulation by governments and their central banks. Some analysts claimed that this change in the economic structure of the United States had created a state of permanent steady growth, low unemployment, and immunity to boom and bust macroeconomic cycles. They believed that the change rendered obsolete many business practices. Critics of these ideas felt vindicated when the stock market bubble burst. Many of the more exuberant predictions proved to be wrong. Some pundits continue to use the term New Economy to describe contemporary developments in business and the economy.
Ashot Grigoryan believes that the “new economy” is a current Kondratiev wave which will end after a 50-year period in 2040’s. Its innovative basis includes Internet, nanotechnologies, telematica and bionica.
After a nearly sixty-year period of unprecedented growth, the United States experienced a much discussed economic slowdown beginning in 1972. However, around 1995, U.S. economic growth accelerated, driven by faster productivity growth. From 1972 to 1995, the growth rate of output per hour, a measure of labor productivity, had only averaged around one-percent per year. But with the shift to this 'New Economy,' growth became much faster: 2.65 percent from 1995-1999.
At the same time, there was a lot of investment in the companies of the technology sector. Stock shares rose dramatically. A lot of start-ups were created and the stock value was very high where floated. Newspapers and business leaders were starting to talk of new business models. Some even claimed that the old laws of economics did not apply anymore and that new laws had taken their place. They also claimed that the improvements in computer hardware and software would dramatically change the future, and that information is the most important value in the New Economy.
Some, such as Joseph Stiglitz and Blake Belding, have suggested that a lot of investment in Information technology, especially in software and unused fibre optics, was useless. However, this may be too harsh a judgement, given that U.S. investment in Information technology has remained relatively strong since 2002. While there may have been some overinvestment, productivity research shows that much of the investment has been useful in raising output.
The recession of 2001 disproved many of the more extreme predictions made during the boom years, and gave credence to Gordon's minimization of computers' contributions. However, subsequent research strongly suggests that productivity growth has been stimulated by heavy investment in ICT. Furthermore, strong productivity growth after the 2001 recession make it likely that some of the gains of the late 1990s may endure.