Introduction

Abstract

The 1990s was seen as probably the best decade since the 1960s; it was heralded as the beginning of a new era based on the success of the capitalist system. The success of the 1990s was attributed to free markets, which, it is claimed, produced an optimal allocation of resources. The neoliberal, model along with the Efficient Markets Hypothesis and the new consensus macroeconomics models, were credited with the success. The US economy expanded for a period of ten years, the longest ever recorded by an industrialised country. The macroeconomic performance was stunning: both inflation and unemployment fell to new lows and short- and long-term interest rates fell to levels that had not been observed since the 1960s. The stock market produced enormous gains, particularly in the areas of technology, media and telecommunications. There was widespread acceptance of the idea that this time was different. The enthusiasts dubbed it the ‘new economy’ where seemingly large productivity gains increased the rate of growth of potential output, thereby making possible the reduction in inflation and unemployment.¹