Is The New Economy Dead?

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Heartland America is where the new and old economies are melding, and the ultimate winners will be those companies that can do it best. K Mart and fellow Midwest giants Sears and Target have been leading the online parade of bricks-and-mortar retailers. K Mart, which is expanding its BlueLight.com line from 150,000 to 500,000 items, jump-started the site by offering free Internet access to customers.

In Detroit the Big Three automakers are building a global parts exchange on the Internet. They also envision a Web-based system that lets buyers send custom orders to factories, which would then deliver vehicles direct to customers without going through dealers. Meanwhile, DaimlerChrysler offers Internet access as an option on the 2001 Mercedes-Benz, the first automaker to put the Web on wheels.

To see how far a company can go in transferring its brand to the Internet, take a look at General Electric. Every GE business has an e-commerce strategy, and most include self-help sites that show users how to repair and maintain GE products. Builders and architects can use Web-based programs to design kitchens and lighting systems with GE wares. Want prompt delivery of that new refrigerator? Punch in your order at a Home Depot, and GE will deliver the appliance straight from its warehouse. GE even offers insurance, loans and mutual funds online through a financial website.

The New Economy has created faster growth with less inflation than anyone would have thought possible only five years ago. Even the 3.5% growth that many economists forecast for next year as the result of a slowdown is substantial by 1980s standards. In the same way, the 2001 inflation forecast of 3.5%--in contrast to 3.1% for this year--looks deliciously low in a 1980s context.

Yet none of that makes U.S. prosperity bulletproof. "The fact that the New Economy is here doesn't mean that you can't have a new recession," warns Standard & Poor's economist Wyss. "All it means is that we can grow faster than in the '70s and '80s." Quite so. And since the new and the old economies have become virtually synonymous, we are all better able to withstand whatever risks may lie ahead.