attractive than stocks, and it became cheaper to bor-
row in order to buy stocks on credit.
In the late 1990’s, the stock market boom took on
many aspects of a “bubble.” This term describes a sit-
uation in which particular stocks are driven up in
price by speculative demand based on the expecta-
tion that their prices will rise still further. Stocks asso-
ciated with computers, Internet businesses, and tele-
communications were particularly favored—thus
the episode was called the “dot-com boom.” Some
firms were recent start-ups with no experience of
profitability. The bubble was to burst in 2000, to be
followed by several years of lackluster stock price
performance.
Business and Technology The number of business
firms grew rapidly during the 1990’s. In 1990, fed-
eral tax records listed about 20 million firms, of
which 3.7 million were corporations. By 1999, the to-
tal reached 24.4 million, 4.9 million being corpora-
tions. Each year, more than 500,000 new firms were
established, but each year almost as many went out
of business.
By year 2000, an estimated 51 million households
were using computers and 42 million had Internet
connections. Novel types of businesses came to
prominence: Yahoo! demonstrated the potential for
an Internet search engine. EBay showed the enor-
mous appeal of online auction activities for both
buyers and sellers. Cell phone usage expanded ex-
plosively in the 1990’s. An estimated 5 million sub-
scribers used them in 1990. By 2000, the estimate was
109 million—a twenty-fold expansion. Compact disc
sales also mushroomed, reaching a peak of 943 mil-
lion units in 2000 before slackening off slightly. Ca-
ble television already had 50 million subscribers by
- This grew to 67 million by 1999. Satellite ser-
vice, which was inconsequential in 1990, grew rap-
idly during the decade; by 2000, there were about
50 million installations in place. The number of pas-
senger cars on the road was relatively constant,
around 134 million, but the number of vans, pickup
trucks, and sport utility vehicles (SUVs) increased
from 48 million in 1990 to 79 million in 2000—an in-
crease of about 60 percent.
Globalization The international involvement of
the U.S. economy continued to increase during the
1990’s. Exports rose from 9.5 percent of GDP to
10.3 percent, while imports increased from 10.9 per-
cent to 13 percent. As a result, the country’s trade
gap widened. This was associated with an increase in
capital inflow into the United States, helping to
close the financing gap resulting from the decline in
the rate of personal saving.
The United States continued to exercise leader-
ship in the effort to reduce trade and finance barri-
ers around the world. A milestone was the creation
in 1995 of the World Trade Organization (WTO).
This provided a forum in which countries ex-
changed trade concessions for mutual advantage.
The rapid economic emergence of China owed
much to the reduction of import restrictions against
Chinese products by the United States and the Euro-
pean Union. Another landmark was the creation in
1994 of the North American Free Trade Agreement
(NAFTA), involving the United States, Canada, and
Mexico. Internationalization of the markets for
goods helped to protect the United States against in-
flation. Internationalization of financial markets
provided abundant international capital to finance
American investment projects. American interest
rates became increasingly influenced by conditions
in worldwide capital markets.
Another dimension of globalization was immi-
gration. Over the period 1991-2000, nine million
foreign-born persons obtained legal permanent res-
ident status, about one million of them refugees. In
addition, by 2000 there were an estimated 8.5 mil-
lion unauthorized immigrants, of whom 4.7 million
were from Mexico. Despite much criticism that im-
migrants were “taking jobs away from Americans,”
research studies determined that most immigrants
found jobs that Americans did not want or could not
fill. These jobs were at both ends of the income scale,
as many scientists and engineers came from China
and India to meet the needs of high-tech industries.
On balance, the availability of immigrant labor
helped strengthen the demand for American work-
ers doing complementary jobs.
Globalization was not popular. Violent demon-
strations disrupted the WTO meetings in Seattle in
December, 1999. Much criticism was directed at
“shipping jobs overseas,” or outsourcing, despite the
very strong performance of the U.S. labor market.
Critics were apparently unaware that some major
foreign firms such as Toyota established factories in
the United States.Federal Government Policies One of the most
prominent federal officials dealing with the econ-136 Business and the economy in the United States The Nineties in America