Magazine article American Banker

Underlying Strengths of the Expansion

Magazine article American Banker

Underlying Strengths of the Expansion

Article excerpt

The current economic expansion, now 19 quarters old, has been driven by several underlying strengths. Over the course of 1995, these issues have been discussed here in some detail.

As the year winds down, a review of some key points seems appropriate, since these forces are still at work and should continue to drive the economy in 1996 and beyond.

The first is the technological revolution.

The advance of technology is inducing capital spending and contributing to productivity improvements. That, in turn, contributes importantly to profitability. Indeed, advancing technology is permeating our economy and society, creating new jobs, new businesses, new industries and new lifestyles.

This phenomenon is providing support to the current expansion, should sustain it, is likely to limit the severity and duration of the next recession, whenever that takes place, and should help drive the succeeding expansion.

A second major force under way is the reemergence of entrepreneurship in the American economy and society.

In the 1990s, American businesses shifted their focus to favor stockholder returns and shareholder value as against earlier concentration on size and share of market. That new focus has induced reengineering in American business - better and more profitable ways of producing and delivering goods and services.

There have been associated costs, including job eliminations. But many of the people who lost their jobs have, themselves, become entrepreneurial and have established going businesses. In fact, many new businesses have been created in this expansion.

One reflection has been the record number and dollar amount of initial public offerings over the past three years. Another manifestation of renewed entrepreneurship has been the advent of bonus payments and incentive compensation to workers throughout the chain of command right down to the factory floor level and the equivalent in services. …

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