Introduction
Global terrorism affects the lives and property of the people directly affected by such acts but it also acts like ripples in a pool of water, spreading economic woes on nations far away from the actual attack. The terrorist actions of 9/11 on the World Trade Centers in New York, which resulted in more than 3,000 innocent people being killed, is a prime example. The effects of this action 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.
Main text
The 9-11 attack was projected to cost the U.S. more than $500 billion in the short term not counting what it may spend to counteract terrorism militarily as well as other expenditures directed toward securing the borders. However, on the whole, the damaging economic influence of the terrorist act in the short term was substantially smaller than initially estimated.
Much of the better than expected recovery from this catastrophic event is attributed to effective management by the Administration, the Federal Reserve and Congress. These three entities reacted promptly to re-establish the public and Wall Street’s confidence in the economy “by injecting liquidity and provid[ing] resources to deal with the consequences of the attacks.
The Federal Reserve by lowering the price of credit and temporarily providing vast amounts of liquidity helped safeguard the integrity of the financial system and saved many firms from bankruptcy” (Looney, 2002).
The terrorist attacks of Sept. 11 had an instantaneous negative economic influence on the financial and corporate sectors worldwide. Many companies either closed or scaled back which caused an increase in unemployment and a resulting decrease in the tax base. This lack of consumer, corporate and government monetary resources was not good news for countries that depend upon exporting products to the U.S. and the E.U. 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 national 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. “Tourism makes up 5 percent of the GDP in some of the European countries, but for countries like Costa Rica and the Dominican Republic and Mauritius it accounts for 6.6 percent, 9.6 and 13 percent of the GDP, respectively” (Noshab, 2002).
The South American countries of Brazil and Argentina are more examples of those nations that struggled in the aftermath of Sept. 11 because of their high debt-to-export economic ratio. The disruption of trade that negatively affected all countries to some degree severely damaged these economies and all others that rely on global trading for economic sovereignty. Brazil suffered a major loss of tourism as well. As in the U.S., most nations were spending money they could no longer rely on to fight the war against terrorism resulting in a further decline of their economic stability.
If terrorism causes nations to practice protectionism, reversing the positive worldwide economic gains during the past 20 years due to globalization efforts these attacks will likely produce a long-lasting damaging impact. Increased levels of terrorist attacks carry with it the likelihood of all-encompassing international battles on many fronts including political difficulties and escalating economic uncertainties which has the possibility of increasing expenditures of corporations worldwide to unmatched heights.
This scenario would reduce the positive gains of globalization and reverse the positive gains from international economic cooperation. “Economic uncertainty created in the wake of terrorist attacks, being the most disturbing long-term factor, has its own dynamics and would continue shattering business confidence for a long time” (Noshab, 2002).
The immediate actions taken by the U.S. following Sept. 11 allowed for faster economic healing. The terrorist actions served only to further exacerbate the current economic problems experienced in the U.S. and around the world which had begun well before the attacks. The blame for the economic woes cannot be pinned entirely on the events of Sept. 11. However, in the long term, this event brought a definitive modification of approaches for future economic policy-makers at the national and global levels.
The globalization efforts which focused the world on economic gains in the 1990s have been morphed by one event into overriding interests concerning national security interests. We also face 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 (Noshab, 2002).
Thankfully, the federal government entered the downturn of the economy and the subsequent attacks with a surplus in the budget coffers. Another reason for optimism is that the U.S. economy is structurally resilient.
“Financial markets are deregulated, the banking system is sound, and our labor markets are flexible so we can adjust relatively quickly to the kinds of shocks we’ve recently suffered” (Parry, 2001).
Summary
The extent of the terrorist attacks is financially far-reaching on a global scale as well as on a time scale. In order to attain and preserve an optimum level of security, world governments, as well as corporations and individuals, will be forced to pay the costs for an untold number of years to come.
Works Cited
Looney, Robert. “Economic Costs to the United States Stemming from the 9/11 Attacks.” Strategic Insights. Vol. 1, I. 6, (2002). Center for Contemporary Conflict. Web.
Noshab, Farzana. “Global Economic Implications of 9/11 Attacks.” Financial Times. (2002).
Parry, Robert T. “The U.S. Economy after September 11.” (2001). Federal Reserve Bank of San Francisco Economic Letter. Web.