At the same time, ICT has also enabled firms to produce many old-economy goods and services, such as automobiles, steel and financial services, more efficiently. Since the mid-1990s, the U.S. economy has witnessed an astounding increase in productivity growth that has brought higher standards of living, employment and real incomes to most Americans. Although GDP growth slowed toward the end of 2000, there is no sign that the forces causing the rise in productivity growth have diminished. This suggests that the recent slowdown will prove to be a temporary, cyclical phenomenon and not the beginning of a return to a slower long-run growth path. A more fundamental question, however, is whether the U.S. economy can sustain a high pace of trend economic growth over many years, even decades.
Many economists think so, but there are skeptics.
One skeptic is Robert Gordon, a professor of economics at Northwestern University. Gordon argues that much of the recent acceleration in U.S. productivity is due to cyclical forces, suggesting that productivity growth will fall as economic activity slows to a more modest pace. Electricity, the internal combustion engine, and significant advances in chemicals, medicine and communication were much more important for sustained economic development, Gordon contends, than the transistor, the microchip or the Internet. Average labor productivity growth in the United States has increased at an average rate of 2.8 percent since 1996. Productivity is now growing at about the same rate as it did during the halcyon productivity boom of 1919 to 1973, which scholars attribute to the industrial revolution of the late 19th century.