FREE ESSAY ON LIFESTYLE CHANGE - 1990 / 2000

LIFESTYLE CHANGE - 1990 / 2000

Peter Calabrese
Economics 101
Dr. Maglione
March 22, 2000
How has your life changed since 1991? Have you noticed: an increase of material goods
around your house, a new car in your driveway, or a little bit bigger gut due to eating
more prime rib and filet mignon. If you have answered yes to any of these questions you
are among the millions that have benefited from the economic boom. The economic boom
refers to the period of economic expansion that started in March of 1991 and is still
happening to this day. The following report will analyze various aspects of the economic
boom including: what contributed to the boom and the areas of the economy which are
positively and negatively affected. It will also review how long it is projected to last
and possibilities that could send our economy into a recession or even depression. 
"The Economic Boom" as previously stated refers to the period of economic expansion that
started in March of 1991 and has been proceeding for the past 108 months. These 108
months have been the longest period of economic growth ever in American history. The
stock market is growing faster than it ever has before. Unemployment is at an all time
low and what's even more impressive is that inflation is staying down. As of February
2000 over 100,000 people were earning over a million dollars a year. 
It seems as though everything is contributing to the "Boom". Suddenly there is an
increase in entrepreneurs, these entrepreneurs create jobs for people. The stock market
is reaching record heights and with unemployment at a low people have money to invest in
companies. Stocks now account for 54% if household financial assets. 40 million investors
have entered the market since the Boom began. 
The end of the cold war is another of the more important events leading to the 'Boom."
With the collapse of the Soviet Union, America has been able to reduce its emphasis from
national security to economic growth. Now instead of making wartime supplies with
increased tax revenue the government can set it sites on balancing the budget. 
To further increase American production and sales European and Asian countries began
dropping trade barriers. Finally and perhaps of most importance is the new technology.
Technology is paving the way toward the future. Everything from online stock trading to
car companies such as Ford ordering supplies. Online buying or e-commerce has cut cost
and the time that it takes to ship a product. Free markets incorporated states that
purchasers are saving anywhere from 2% to 5% by letting suppliers bid for business online
Gartner group estimates that technology investments will rise from 3.5% of revenue which
it is now to an average of 5.8%. The internet also allows instant analysis of goods
farmers can find where they will get the highest prices for their crops, and after these
crops have been delivered they can log onto the net to see how their product compares to
others of the same type. Finally the net is also used to collect information from
customers. This information can then be used to design a more desirable superior product.

For the most part the main part of the economy that is positively affected by the "Boom"
is technology and anyone that has anything to do with technology. From technology stocks
to business that process orders online technology is making the market turn. 
However certain parts of the economy seem to be going belly up. Low price imports from
developing countries are wiping out thousands of American jobs in the steel and textile
industries. As a matter of fact even in this time of economic wealth 44 million Americans
are still without health insurance. Finally the gap between poor and rich is enormous,
The bottom fifth of US households receives less than 4% of the national income with the
top fifth is responsible of obtaining more than half of the income. 
How long will the "Boom" last? No one can really tell for sure, but predictions can be
made as to why it will either bust or continue. In a recent interview with President
Clinton he states the reasons that he believes the boom will last. First the president
states that the hard times American industry had been through in previous decades paved
the way for business restructuring and, higher competitiveness and increased output
because of new leaps and bounds in technology. Furthermore he states that groundwork laid
by previous administrations for open markets allowed increased trade with foreign
countries in Europe and Asia. The economy is so strong now that it is able to absorb high
price such as oil shocks. Finally when asked about questionable lending President Clinton
states "My observation is that even though some lending may be questionable most will
contribute to the long term growth of the economy"
As much as Clinton tries to provide a positive attitude for speculators there are strong
reasons to believe that the boom will cease. Economists say that because this boom is
driven by technology there is a higher chance that the boom will end. This is because
this new technology has an initial high startup cost. When these systems are finally set
up though there is a relatively low cost of operating. Once these systems are up and
running business are more susceptible to fixed costs and falling revenue. Secondly the
market is growing only on technology stock, while other areas are experiencing little to
no growth. Most money is invested in Technology stock, so if this one part of the market
fails most people who have money invested stand to loose these assets. Finally if the
market slows and downsizing is needed 3% of workers are employed by temp services who can
easily be laid off.