The New Paradigm - Federal Reserve Bank of Dallas

10
Exhibit 5
America’s Shifting Source of Growth
Data on GDP at the detailed industry level are not available.
Employment data, however, reveal a clear shift away from yesterday’s
commodity-based economic growth and toward knowledge-
and network-based expansion. More than 40 percent of
employment growth in the ’90s came from New Economy industries—double
that of the 1970s.
Percent of total employment growth
45
40
35
30
25
20
15
10
1980
Network economy
1990
1997
Knowledge economy
Prototyping each part of a car once took weeks and cost $20,000 on
average. Using an advanced 3-D object printer, Ford has cut the time to
just hours and the cost to less than $20.
The Information Age’s invention, innovation and enterprise
forged the New Economy. Many of the nation’s highgrowth
industries wouldn’t exist without the microprocessor.
High technology now drives the economy. It accounted
for more than 40 percent of job growth in the 1990s—double
the rate of the 1970s. (See Exhibit 5.)
At the end of the ’90s, high tech, telecommunications
and health care—the prime beneficiaries of the microprocessor
revolution—made up more than half the market
capitalization of America’s 500 largest companies. Three
decades ago, high tech still hadn’t come out of the geeks’
garages, and manufacturing and energy accounted for
about half the market capitalization. (See Exhibit 6.) While
the Dow quadrupled, technology stocks jumped 13-fold in
the 1990s, another sign of invention and innovation’s
growing importance in the economy.
The microprocessor arrived a generation ago, then
began revitalizing American industry in the early 1980s.
Few understood how much the world was changing until
the 1990s, when the Information Age achieved a kind of
critical mass. It takes time for an invention to spread
through the economy, for spillovers to emerge and for
new products to reach the marketplace. Now that it’s all
coming together, America has new reason to stop seeing
itself through a lens of downsizing, inequality and falling
living standards. In the 1990s, thanks largely to the microprocessor
and its spillovers, America witnessed a resurgence
of economic growth, new jobs and productivity.
1999 ANNUAL REPORT Federal Reserve Bank of Dallas