Because these sectors are driven by technological advances, changes occur quickly and downturns could be severe. In such a cycle, companies might curtail new product development, suspend factory construction or expansion, and cut jobs, with the effects of these actions reverberating throughout the economy. This relatively modest expansion scenario is down from the earlier boom periods that grew at about 4.3 percent annually. Wharton derives its conclusions from a projected slower growth in population and projected slower productivity improvements for the next two decades compared to the last 30 years. Others, including Business Week , expect growth rates in the three percent range as they assume continuing improvements in productivity as a result of reengineering and the increasingly efficient use of information technology.
Most groups expect inflation and interest rates to remain low.
Of course, few companies of any size are unaffected by foreign competition and changes in the global marketplace. Companies throughout the world are gravitating to manufacturing sites where production costs, principally labor costs, provide a competitive advantage. The GATT treaty and the North American Free Trade Agreement have reduced trade barriers and encouraged even more international trade. The recent crises in Asia and Russia provide ready evidence of our own economy's vulnerability to events beyond domestic control. Information and communications technologies have effectively made a small world smaller.