03.20.2014 16:47

The Mirage of the 'New Economy'

Ballyhooed Internet businesses cannot change the economy, but letting bubbles pop and giving households the power to consumer more can
By Andy Xie
 

The current Internet boom, centered around social networking, e-commerce and online gaming, has not produced a significant productivity boost for the economy and likely will not in the future. The boom is mostly about redistributing existing demand from offline to online. As most hot businesses have gained market share with cheap financing and without profit, it is doubtful that the demand re-slicing is entirely due to a more efficient channel of distribution. Cheap financing, i.e., a liquidity bubble, may have been the main engine for the Internet boom.

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