Like the automobile, computers herald a new era

December 6, 2000

Free Market Foundation

In the debate over whether the world has truly entered a new economic era, historians are pointing to parallels dating back to 1915. “I think that computers are reaching the point that automobiles reached around 1920, and are only now poised to explode,” comments economist Larry Schweikart, author of “The
Entrepreneurial Adventure.”

In 1915, nearly 300 US companies made cars and auto parts, and the entire industry was on the verge of a shakeout that eventually left only three big auto manufacturers until foreigners entered the U.S. market — a scenario with possible parallels to today’s computer industry.

The automobile spawned related industries such as road-building, petroleum exploration, and gasoline refining and marketing — in much the way computers are fostering related industries today.

Auto manufacturing was being made more efficient so more cars could be made available to more people — similar to the efficiencies being made available to all industries today by high-tech companies.

However, even the rapid growth of the automobile and electricity industries did not forestall a cycle of boom and bust that saw a recession about every five years.

But the current U.S. expansion has already lasted nine years – a record. If the short-lived recession in 1991 is discounted, the expansion has lasted about 18 years. Some economists see this as proof that the U.S. has entered a new economic era.

Source: NCPA Policy Digest/Joseph Guinto, “Just How New Is ‘New’ Economy? We’ve Seen It All Before in 1915,” Investor’s Business Daily, May 5, 2000.

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