As one can see, there are many striking parallels between the Gilded Age (the era from the 1880s to the 1890s) and the Silicon Age (the era from the 1980s to the 1990s).
The preconditions for these two massive economic booms share a similar birth path laid in laissez-faire policy, no regulation, deregulation, and innovative booms. Before the 1880s, there was no real conflict between the welfare of the American people and that of its business units. That happy relationship lasted only until the 1880s. Big business or trusts appeared in the United States during that decade. Once they were established, they grew faster and to a larger size than elsewhere.
One reason was the absence of any countervailing force in America. A new country made up almost entirely of immigrants who needed jobs, big business was welcomed, and a favorable economic policy provided a catalyst for their birth. These economic conditions gave rise to innovators, monopolists, and most importantly, rugged individuals who changed the landscape of the world’s economy forever. Their huge personalities went hand in hand with the vast size of their empires.
The problems that big business raised provoked a powerful public response that immediately moved into the realm of political economy and provided for a change in the leniency of laissez-faire. In the closing years of the nineteenth century, the United States became the only major industrial power to enact legislation explicitly designed to curb the power of large corporations. Congress passed the Interstate Commerce Act in 1887, the Sherman Antitrust Act in 1890, and the Federal Trade Commission and Clayton Acts in 1914. The Sherman Antitrust Act remains the most stringent in the world. The 1980s, and more importantly, Ronald Reagan’s election victory, was the catalyst for the Silicon Age. Reagan and his re-clothed trickle-down economics or Reaganomics” brought laissez-faire to a maximum point.
Not only did he repeal or lay off enforcement of these antitrust and anti-business laws, but he went as far as dropping the government’s antitrust cases. The stagnant equity markets began to take flight, and the greatest bull market continues 15 years later. Coupled with major tax cuts and financial market innovations, an era of technological revolution appeared. This era would witness innovations and titans the likes of which we have never seen before.
What we call the New Economy is truly the dawn of a new age, a Silicon Age. The numbers have been impressive: a 70% increase in real profits since 1990, inflation below 2%, 4.5% unemployment, plus rising real wages, even for the lowest paid workers. The 1990s have all the ingredients in place for a further surge of innovation that could rival the Gilded Ages. Over the next decade or so, the New Economy, so far propelled mainly by information technology, may turn out to be only the initial stage of a much broader flowering of technological, business, and financial creativity. The economy seems to be undergoing a wholesale rejuvenation.
Businesses, financial service firms, and universities are reinventing themselves. Even politicians and policymakers are starting to grasp the new technological and economic realities. (Business Week). The New Economy or Silicon Age of the 21st Century Economy will still resemble the economies of old in market behavior though.
Each innovative surge creates economic and social ills, from recessions to stock-market crashes to widespread job losses, and this one won’t be different. But that’s the price a nation must pay to achieve the benefits of dynamic change.
