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  Transcripts

Special Event

Greenspan Addresses Outlook for New Economy

Aired March 6, 2000 - 11:35 a.m. ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

TERRY KEENAN, CNN ANCHOR: OK, if you can just hold that thought, we were going to go back to Boston and the Boston College conference, where Alan Greenspan is speaking right now. Let's listen in.

(JOINED IN PROGRESS)

REP. EDWARD MARKEY (D), MASSACHUSETTS: Now, as luck would have it, we have a special surprise today. Today is Alan Greenspan's birthday. And...

(APPLAUSE)

Let us all join together, all 1,800 of us in singing Happy Birthday, Mr. Chairman.

(singing): Happy birthday to you. Happy birthday to you. Happy birthday, Mr. Chairman. Happy birthday to you.

(APPLAUSE)

Mr. Chairman, before you blow out those candles, I wanted all of us to be able to make a wish as well.

(LAUGHTER)

Thank you, Mr. Chairman. Our great chairman: Alan Greenspan.

(APPLAUSE)

ALAN GREENSPAN, FEDERAL RESERVE CHAIRMAN: If I had known all of this was about to happen, I would have been on my way to San Francisco.

(APPLAUSE)

Ed, thank you very much for those very thoughtful remarks. It's certainly been a real pleasure to appear here and be invited by Father Leahy. I also brought along a Boston College football jersey, which I intend to wear at the FOMC meeting. So...

(LAUGHTER)

(APPLAUSE)

If it becomes public, I probably will be in very serious trouble, because thereafter Lord knows what I'll be required to wear.

(LAUGHTER)

In any event, thank you all for most this thoughtful afternoon. I really am sort of taken back by this birthday cake and greetings and, Ed Markey, even sung in tune, which is very difficult for a congressman.

(LAUGHTER)

Just let me say that I'm really most appreciative for this reception and hope that I may get invited back at another time, hopefully again on my birthday.

(LAUGHTER)

In the last few years, it has certainly become increasingly clear that this business cycle differs in a very profound way from the many other cycles that have characterized post-World War II America. Not only has the expansion achieved record length, but it has done so with economic growth far stronger than anyone really expected. Most remarkably, inflation has remained largely subdued in the face of labor markets tighter than any we have experienced in a generation.

A key factor behind this extremely-favorable performance has been the resurgence in productivity growth. Since 1995, output per hour in the non-financial corporate sector has increased at an average annual rate of 3 1/2 percent, nearly double the average pace over the preceding quarter century. Indeed, the rate of growth appears to have been rising throughout the period.

My remarks today will focus both on what is evidently the source of this spectacular performance, the revolution in information technology, and on its implications for key government policies.

When historians look back at the latter half of the 1990s a decade or two hence, I suspect that they will conclude that we are now living through a pivotal period in American economic history. New technologies that evolved from the cumulative innovations of the past half century have now begun to bring about dramatic changes in the way goods and services are produced, in the way they are distributed to final users.

Those innovations, exemplified most recently by the multiplying uses of the Internet, have brought on a flood of startup firms, many of which claim to offer the chance to revolutionize and dominate large shares of the nation's production and distribution system. And participants in capital markets, not comfortable dealings with discontinuous shifts in economic structure, are groping for the appropriate valuations of these companies.

The exceptional stock price volatility of these newer firms and, in the view of some, their outsized valuations indicate the difficulty of divining the particular technology and business models that will prevail in the decades ahead. How did we arrive at such a fascinating and, to some, unsettling point in history? While, process of innovation of course is never ending, the development of the transistor after World War II appears in retrospect to have initiated a special wave of innovative synergies. It brought us the microprocessor, the computer, satellites, and joining of laser and fiberoptic technologies.

By the 1990s, these and a number of lesser but critical innovations had, in turn, fostered an enormous new capacity to capture, analyze and disseminate information. It is the growing use of information technology throughout the economy that makes the current period unique. However, until the mid 1990s, the billion...

KYRA PHILLIPS, CNN ANCHOR: I am Kyra Phillips back in Atlanta. We are going to leave Greenspan right now.

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