Introduction
The terrorist attacks of Sept. 11 on the World Trade Centers in New York destroyed lives and property, increased government spending at a time when the country could ill afford the excessive expenditures, and squelched corporate and consumer confidence which further slowed the economy and hindered the recovery efforts. On that day and for about a year and a half prior, the major economies of the world were teetering on the edge of at least recession conditions and many were close to a full-scale depression. The attacks prevented any perceived or real economic upturns that were predicted given the factors present at that time. The events lasted over a period of a couple of hours but their effects are still being felt all over the world. The heightened insecurity regarding terrorist acts and their effects on the economy continues to give worry to investors and businesses which only serve to further cripple the economy.
Ripple Effects
Corporate Scandals
The actions of 9/11 spread human misery further than those affected directly by the loss of lives. The U.S. economy, which was not in the best of health prior, was held to a temporary stagnation and the resulting ‘ripple effect’ negatively affected almost everyone in the U.S. and all of the countries it trades with. (Morris, 2009). The attacks put a quick end to all optimistic outlooks and, in addition, acted to exacerbate the already slow-moving economies on a world scale. The cautiousness that corporations exhibited with their assets in 2000 and early 2001 became more intensified which kept the world markets, hostage, to the most prolonged market slowdown that many people could remember. This extended bear market condition was not the result of September 11, though it was initiated within the U.S. borders. This time the attack was internal and not as obvious. A seemingly never-ending succession of multiple corporate scandals including Enron, Merck, WorldCom, Arthur Andersen, Halliburton, and many others (Patsuris, 2002) brought about a sudden halt to the modest and commendable market growth following economic resuscitation measures. While these corporate misdeeds caused a major slowdown of the U.S. markets as well as in the economy as a whole, its contaminating effects were also suffered in the European and Asian markets. The EU was affected even more than the U.S. itself by these U.S. corporate scandals. “The economic downturn does indicate a greater role of factors other than those related to the 9/11 events; however, the fact that these attacks have brought a major shift in global patterns is beyond dispute” (Noshab, 2002).
World Economy
The attacks of Sept. 11 had an instantaneous negative economic influence on the financial and corporate sectors worldwide which, in turn directly affects the U.S. economy. Many U.S. companies either closed or scaled back which caused an increase in unemployment and a resulting decrease in the tax base. (Kubarych, 2001). This lack of consumer, corporate, and government monetary resources was not good news for countries that depend upon exporting products to the U.S. for economic stability such as the Asian ports located in Thailand and Singapore. Regions of the world that depended on tourism suffered as well as consumers were watching their expenditures and were less likely to travel to foreign countries by air. The slowing down in air transportation and tourism sectors has particularly affected American economies that were mainly dependent on them. The travel industry in the U.S. and other countries was obviously negatively affected by the slowdown in tourism. Asian, European, and Caribbean economies were devastated by the lack of tourism and exportation. All regions where tourism supplied a substantial quantity of a nation’s income were adversely affected as well (Noshab, 2002).
Far-Reaching Effects
The extent of the Sept. 11 attacks is financially far-reaching on a national economic scale as well as on a time scale. In order to attain and preserve an optimum level of security, American governments, as well as corporations and individuals, will be forced to pay the costs for an untold number of years to come. Everyone, including corporations and individuals, will be burdened with the extra costs to businesses in the form of elevated insurance premiums and other added costs of doing business in the post-9/11 world. (Kubarych, 2001). “The losses from the terrorist attacks for the insurance industry (including reinsurance) are estimated at between $30 and $58 billion with the main uncertainty concerning liability insurance. By comparison, the losses associated with Hurricane Andrew’s 1992 damage in Florida came to around $21 billion” (Looney, 2002). Businesses must pay higher insurance and warehousing costs because they must retain higher levels of inventory to protect against interruptions in imported supplies (Moskow, 2001). “Business may be required to hold larger inventories than previously, owing in part to less reliable air and rail transportation. There is anecdotal evidence from the auto industry that production was interrupted because components were not immediately available from suppliers after the September 11 attacks, owing to delays in shipments crossing the U.S.-Canada border” (Looney, 2002). This is but one example of the peripheral costs of terrorism, costs that trickle down and spread out to all citizens of the country and the world. Security issues increase the cost of doing business which will probably decrease the rate at which business grows for an indeterminate amount of time, but how much and how long is unknown (Moskow, 2001).
Conclusion
The efforts which focused the country on economic gains in the 1990s have been morphed by one event into overriding interests concerning national security interests. The nation faces a longer-term uncertainty, namely how the emphasis on increased security will impact the economy. This new trend that forsakes economic gain for security concerns is likely to continue at least for the next several years. Hopefully, the economy of the U.S. will adjust to the new hurdles imposed by terrorism. When the collective economies of the world self-correct to absorb the elevated costs of supposed threats to safety, production and economic growth will return to levels experienced prior to 9/11.
Works Cited
Kubaryc, Roger M. “Aftermath of the Terrorist Attack: Economic, Financial and Policy Consequences” (2001).
Looney, Robert. “Economic Costs to the United States Stemming from the 9/11 Attacks.” Strategic Insights. Vol. 1, I. 6, Center for Contemporary Conflict. (2002).
Moskow, Michael H. “The Economy after September 11: Fed’s Role and Perspective.” Ft. Wayne, IN: Federal Reserve Bank of Chicago Economic Forum. (2001). Web.
Morris, Anderson. “What Effects Did The Terrorist Attacks Of 9/11 Have On US Policy Towards The Caribbean?” (2009). Web.
Noshab, Farzana. “Global Economic Implications of 9/11 Attacks.” Financial Times (2002).
Patsuris, Penelope. “The Corporate Scandal Sheet” (2002).