Globalization and IT fuel for the U.S. growth engine: concerned that the economy is not growing fast enough? Noted economist Robert Shiller points out that economic growth, while 'always slow,' is nonetheless spectacular.

• Author: Heffes, Ellen M.
• Position: Economy

The National Bureau of Economic Research declared in July the U.S. economic recession that began in March 2001 had ended that November, just eight months later. NBER--described by The Wall Street Journal as the private, nonprofit economic research group considered the official arbiter of recession timing --took another eight months to report this news, as it had debated internally whether there can be an economic recovery while unemployment numbers climb. Was its decision good news to those still reeling in economic declines along with a still-contracting labor market?

Noted economist Robert J. Shiller believes American businesses expect too much. "This is the process of economic growth," says Shiller. "We've seen a GDP growth of approximately 3-1/2 percent per year over all of this last century--compare 2000 with 1900, when people were riding horses, using oil lamps and living on farms," he argues. "We've had spectacular economic growth, and I think in the coming decade we might do approximately the same--which is wonderful. But it's not more wonderful.

"We have to understand economic growth has always been a slow process. We don't want to get ahead of the curve--that's what happened in the 1990s," adds the Stanley B. Resor Professor of Economics at Yale University and author of the 1996 best-seller Irrational Exuberance.

Shiller says today's economic condition was spurred by bubbles in the world's stock markets, which soared in 1999, peaked in 2000 and then dropped. "There was too much excess, too much enthusiasm and over-investment," he says. It was a period of experimentation, where many new ideas were tried. The aftermath resulted in excess capacity, and while all the ideas were not discredited, emerging from the period of overconfidence has ushered in an era of reluctance. "A lot of plans have been on hold, and that contributes to the slow period the world economy has been in."

The tendency in the '90s to think "revolutionary-type" thinking, he explains, is the same process that brought Communism--that we are going to smash the old and come out with all-together new things. But, he insists, "We're not smashing the old--we are building on it." And, to Shiller, the "New Economy" wasn't so new, since he says every decade enters a new economy. "For centuries the economy has been continually changing, and the cumulative transformation has been enormous," he says, with information technology and globalization the drivers.

How, then, is the dollar's value in the global economy impacted by connectivity? Shiller says the U.S. dollar was something of a bubble itself, and its drop in value both helps and hurts companies, and means different things for different groups. For exporters, it might be great now, but the future is uncertain. The dollar's strength a few years ago, he says, was due to a...