DEFINITION of 'New Economy'

New economy is a buzzword describing new, high-growth industries that are on the cutting edge of technology and are the driving force of economic growth. The new economy is commonly believed to have started in the late 1990s, as high tech tools, particularly the internet and increasingly powerful computers, made their way into the consumer and business marketplace. The new economy was seen as a shift from a manufacturing and commodity based economy to one that used technology to create new products and services at a rate that the traditional manufacturing economy could not match. 

BREAKING DOWN 'New Economy'

The idea that a new economy had arrived was part of the hysteria surrounding the tech-bubble of the late 1990s and early 2000s. Without fully considering the fundamentals, investors and financial institutions bid up technology sector stock prices to unprecedented highs. The new economy was variously heralded as the knowledge economy, the data economy, the ecommerce economy and so on. The excitement around the tech sector did more harm than good, however, and the rate at which these firms were pushed to become the next Microsoft likely destroyed many potentially good business ideas in the pursuit of great ones. Although the tech bubble has long since burst, many of the remaining firms like Google, Amazon and Facebook remain very innovative and at the forefront of technology.

Are We in the New Economy?

The question ever since the bursting of the tech bubble is, of course, whether or not the new economy is here or still on the horizon. Since the tech boom of the 90s, we've seen the growth of many new and exciting subsectors in tech. These include the sharing economy, the streaming economy, the gig economy, cloud computing, big data and artificial intelligence. The companies involved in tech, particularly Google, Facebook and Apple, have overtaken most companies in the world in terms of market cap. More and more of the traditional manufacturing economy is being automated using innovations coming out of the tech sector. Of course, we still buy and sell products, but the service economy - again enabled by technology - is becoming an ever growing part of the global economy. 

So we are definitely living in an economy that is qualitatively different from the one in the 1980s. Less people are employed in direct manufacturing, we are more anxious of being replaced by a machine than outsourced and data has become a currency of its own. Now that the new economy is here, we're not as confident that it was the one we wanted after all. 

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