The 1990s began with a recession that helped make the economy central to the 1992 presidential election. What followed was a long expansion, falling unemployment, and eventually federal budget surpluses. We weigh NAFTA against the rise of the internet as the decade’s most consequential economic change. Along the way, we look at what the dot-com boom built, even after its most famous companies disappeared.
In this episode, we talk about:
How the early recession shaped the 1992 election
Why falling unemployment challenged economists’ expectations
NAFTA, budget surpluses, and the internet as contenders for the decade’s defining change
What survived the dot-com boom after companies like Pets.com did not
How new technology changed everyday life and the way people thought about investing
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This Week’s Drinks 🍻
Matt went with his trusty Centennial IPA: tasty, reasonably priced, and, by his account, an economist’s dream. Jadrian’s first choice was a cider that had been placed a little too close to the ice maker. A quick trip back upstairs led to a Sam Adams Cold Snap substitute. The replacement was much easier to drink; the plan for the cider was to let it thaw and mix it back together.
Name That Stat 📊
We both stayed on theme for this week’s stat, but we went in two wildly different directions. Matt chipped in the market capitalization for one of the dot-com boom’s most famous companies. Jadrian stuck with the 90s, but went in a completely different direction by highlighting recent survey results showing that Millennials and Gen Z picked the 1990s as the most fashionable decade.
Show Notes
The U.S. entered the 1990s after a long expansion, with inflation and unemployment well below the painful levels of the early 1980s. Then came a recession. Despite George H. W. Bush’s popularity after the Gulf War, unemployment was on the rise and the economy became a central issue in the 1992 election. “It’s the economy, stupid” captured the political moment.
After that rough start, the picture changed. Unemployment kept falling through the decade, reaching roughly 4% by its end while inflation stayed low. That combination pushed economists to reconsider an assumption many had learned in class: that unemployment could not remain much below 6% without causing trouble.
So what best defines the decade economically? We put three candidates on the table: NAFTA, federal budget surpluses, and the dot-com boom. NAFTA mattered, though its effects extended beyond the 1990s. The surpluses were striking, especially looking back from today. But the internet felt like the strongest answer for its lasting effect on how we live, work, and build businesses.
The boom gave us new companies that would eventually vanish (like Pets.com), but the bigger impact was the money poured into internet companies that far exceeded expectations. The investment helped build infrastructure that later businesses could use. The future felt so uncertain at the time: dial-up connections, a household phone line tied up by the computer, and serious predictions that we might all browse the web through our televisions.
The stock market had a long climb throughout the 1990s, and reinvesting dividends would have made people a fortune. A lot changed for people living in the 90s, from buying CDs and writing checks to getting a second phone line. There’s more to unpack, so we’ll return in a few weeks with a fresh episode that looks more closely at labor market shifts, how Americans saved and spent, and the decade’s policy choices.
What change from the 1990s most reshaped your everyday life? Leave us a comment with the thing you remember noticing at the time.
Pop Culture Corner 🍿
Jadrian brought back a favorite Today Show clip where the presenters are trying to make sense of an email address by asking, “What is the internet?” It’s a charming reminder of how unfamiliar something so ordinary now felt in the mid-1990s.
Matt gave a shout-out to Linda and Alan’s Yada Yada Yada Econ collection of Seinfeld clips. His favorite clip comes from the Soup Nazi episode to show how a distinctive product can give a seller some room to charge more. Jadrian’s favorite is the bottle-deposit scheme, where Kramer and Newman discover that a price difference only looks profitable until you account for the cost of getting the bottles to Michigan.
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