By Eoin Callan

The annual meeting of the World Economic Forum in Davos prides itself on international diversity. But US leadership will be tough to resist when it comes to considering the implications of the new economy.

The US has been on the front line of the digital age, pioneering new technologies and reaping the rewards of unbridled economic growth.

Alan Greenspan, chairman of the US Federal Reserve, said recently: "It is safe to say that we are witnessing this decade, in the United States, history's most compelling demonstration of the productive capacity of free peoples operating in free markets."

Apostles of the new economy believe fundamental structural changes have allowed the US economy to sustain unprecedented annual growth without the recessionary hang-over of inflation.

True believers see the changes as a result of technological innovation; financial and entrepreneurial dynamism; flexible labour markets; and enlightened fiscal policy.

Not everyone at the World Economic Forum is a believer in the new American dream. "Perhaps the biggest US problem is that it could become a victim of its own public relations," wrote the Harvard economists Jeffrey Sachs and Andrew Warner, and development experts, in the 1999 WEF's Global Competitiveness report.

They see evidence of a "bubble economy" held aloft by consumer confidence, and fuelled by soaring stock prices. "There seems to be a bit of a self fulfilling prophecy at play. But consumer driven growth, by itself will not be enough to justify the high stock market valuations."

The productivity gains that have characterised the new economy have been largely concentrated in the high-tech sector. Deeper penetration of the manufacturing and service industries by internet technology is seen as critical to spreading productivity gains and harnessing economic potential.

Louise Kehoe, of the Financial Times, writing on the future of e-commerce, said: "The next and more promising wave of internet opportunities lies in 'e-business', or the transformation of all business processes - customer relationship management, sales, supply chain management and human resources management - to take advantage of internet technologies."

"There is a genuine productivity boost created by technology," says Mohanbir Sawhney, professor of e-commerce and technology at Northwestern University. "Business-to-business e-commerce will rewire interactions among businesses to achieve significant efficiencies and reduced friction."

Technology-driven business models pioneered in the US travel well to western Europe, said Mr Sawhney, but poor infrastructure in the developing world demands a more creative approach to the new economy.

Low wages in the US have helped keep inflation under control, but Lester C. Thurow, an economist at the Massachusetts Institute of Technology, says they are also an obstacle to innovation in the service industry. He points to the security guards at MIT parking lots. "You won't see that in Switzerland, they're automated. Its not because MIT doesn't know the technology exists, its because labour is cheaper."

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