America's economy remains on the brink of a double dip recession, the dollar is weak, and Wall Street seems unable to recover. An apocalyptic scenario in the making? Hardly. The US economy, it should be remembered, finished 2002 with an annual growth rate of 2.5%--above the long-run trend estimated for the Euro area by many experts, including the European Central Bank.
The point is that, despite the excesses of 1999-2000, the economic difficulties of the last two years, and the tendency to think of the technology boom of the 1990's as mere hype, the US underwent deep structural changes in its economy during that decade. Productivity growth almost doubled, increasing from just above 1% in the period 1990-95 to over 2% in 1995-2000. Moreover, we see no sign of a slowdown: in 2001-02 productivity growth averaged almost 3%.
New information technologies account for perhaps 80% of the acceleration in US productivity. Moreover, because much of the recent technological progress seen in the US largely remains to be exploited, the acceleration of productivity is not a temporary phenomenon, but a lasting one. Looking ahead, this is of crucial importance, because the long-term economic well being of any country depends on steady productivity growth.
Since the new information technologies are easily available in all advanced countries, one would think that productivity would have accelerated everywhere, not just in the US. But this did not happen. While productivity was accelerating in the US, it was slowing down markedly in the largest EU economies. What accounts for this divergence? Why aren't the large EU economies benefiting from IT, despite its diffusion on the "Old" continent as well?