September 11th and Its Aftermath: A Look at 9/11's Political and Economic Effects

While terrorists killed thousands and destroyed the World Trade Center and damaged the Pentagon, economically, they missed their target. Did their acts increase worldwide xenophobia? Not really. Did September 11 halt globalization? No. Has American foreign policy affected the American way of doing business, and foreign companies' doing business in the U.S.? No, again. However, there are economic aftershocks that will not soon disappear. As we all know, the tourism industry continues to suffer, especially in the numbers of American tourists visiting foreign lands, especially Europe as well as Asia and the Middle East. Every Sunday newspaper's Travel section has bargain fares to Europe now, especially to England, where tourist drop off has been critical. Also, "Although Alaska cruising has been growing in recent years, the Sept. 11 attacks sent new ships into the market as some cruise lines decided to pull back from Europe this summer and re3deploy to domestic destinations that some U.S. travelers perceive as safer" (Engle 2002 L2) This means that Alaska will benefit from tourist dollars, rather than Italy, Greece and other Mediterranean ports. However, it also shows that the American discretionary dollar will continue to be spent- just more domestically than internationally.

That, of course, is one aspect of international business moving domestically. And, with the Fed's having lowered interest rates some eleven times in 2001, where does that leave global companies? For one thing Asian problems- especially Japan's were not the result of terrorism. While President Bush's visit to Japan last week attempted to help shore up the faltering Japanese economy, the downward trend really had little to do with September 11. On the other hand, Europe seemed almost smug in its strength following September 11. "It may be a surprise...that Europe is emotionally inured, through distance and experience, to suffering the sort of emotions that has unders6tandably characterized U.S. markets since the attacks on New York and Washington....After years of double-digit, unemployment reached its low point, around 89%" (Borrell 2002 32) Despite the seeming success of the euro, the strong dollar still makes exports to the U.S. more profitable than for American exporters.

One concern, of course, is whether the U.S. government feels that trade barriers or even tariff increases would benefit international business. Most economists feel that this is not feasible, mainly because there would be retaliation. We have already seen that in the so-called "banana wars" and the threat to impose stricter tariffs on French cheeses and wines. One thing seems certain- financial regulations sure to be changed and strengthened after Enron, will affect accounting practices throughout the world. America's politicians have attempted to spur the economy after September 11 through various tax reductions, but, unlike the far higher savings rate in Europe, especially, "The savings rate is very low now" (Lyon 2002 1) Stock exchanges world-wide tend to be tired to the U.SD. exchanges, which are coming out of the doldrums now, but there is no certainty about their continued return to their pre-September 11 levels. Again, Enron seems to be felt in international stock exchanges: "Enron's troubles will lead to a witch hunt for other companies with problems that will deflate stocks for a while" (Lyon 2002 1)

At the same time, some consumer purchases from goods manufactured overseas are slowing. A good example are the cell phones made in Sweden (Ericcson) and Finland (Nokia). "European businesses were, of course, impacted by events in the U.S. Compaq computer, for example lowered its forecast of PC sales by $1 billion" (Borrell 2002 40) We have also seen the failure of once-profitable SwissAir, ongoing troubles with Belgium's Sabena and the inability to agree on volume-sharing between British Air and American Airlines. September 11 and the resulting downturn in travel certainly has not helped.

What about the U.S. government stimulating the worldwide pharmaceutical industry? For more than a generation, the argument has been that the FDA was slow in drug approval, when the medications were readily available in Europe. Will the September 11 aftermath now prod the FDA, or to get Congress to urge quicker approval to boost world-wide facilities, and, at the same time to lower overall drug costs, especially in hard-hit and economically poor Third World nations? But, is "globalization" the answer? Former Secretary of the Treasury "Bob Rubin once remarked that if there were anything that would reverse the trend toward globalization if would be the terrorists...The information technology bubble has burst, the airlines and other sectors are being hurt. It probably will have an impact on the financial sector as well" (Sakakibara 2001 1)

NAFTA, among other pacts, has seen jobs move South from the U.S. Unless consumer confidence and spending rises sufficiently, more jobs will be lost, more offshore facilities will prosper, all at the expense of the American worker and economy. Perhaps one action the U.S. might take is to create a new inter-agency department, combining resources of State, Commerce, Labor, and Treasury, with the stabilization of international business as its priority. President Coolidge was supposed to have said that the business of America is business. We have now moved into a global economy, and while September 11 has created a momentary downward spiral- more of a blip- the goal of American companies with international, global ambitions (already or soon to be in their goals) should be to create a harmonious interrelationship among the various nations of the world- including the Third World which now causes more instability than others.

However, if one were to advise President Bush, the words of Michael Rubin ring loud and clear: "Now that the reign of the Taliban appears over, the question for President Bush is how to confront other state sponsors of terrorism. There are two choices 'engagement' or confrontation." (*Rubin 2001 A 18) Of course, in his /State of the Union speech Bush referred to three nations, Iran, Iraq and North Korea as an "axis of terrorism", which indicated confrontation. In his visit to the demilitarized zone in Korea last week, however, Bush softened his rhetoric (surely at the advice of the South Koreans). And perhaps now some sort of engagement and compromise is possible.

At the same time the Bush administration is eager to promote drilling in Alaska and other wilderness area, heretofore protected by environmentalists (and the Clinton administration). The proponents of drilling suggest that it would reduce the U.S. dependence on foreign oil. It, of course, sense a stern message to the Saudis who are not all that pro-American these days.

If there is one thing government actions must prevent- domestically and internationally, it is a sort of economic xenophobia. Like it or not, the world has become more inter-dependent on each other's economies and production, as well as research and development. If the terrorists sought to break this interdependence, they failed miserably. But, that does not mean the ties are as close and unbreakable as they must be. America's prosperity hinges on overseas products and finances, just as they depend on ours. Again, to President Bush, one should say: Globalization is not a defeat for America, but a chance to link our expertise with that of others for the benefit of all.

CITATIONS:

Borrell, J: "2002 Outlook: Europe" Foster City: Upside,January, 2002

Engle, J.: "In Alaska This Year It'll be Anchors Aweigh" Los Angeles TIMES, February 24, 2002

Lyon, E.: "Economists Tells Harrisburg Pa. Audience that Rebound Appears Weak" Washington: Knight-Ridder Business News, Feb. 8, 20o2

Rubin, M.: "Don't 'Engage' Rogue Regimes" New York: Wall Street Journal, Dec, 12, 2001

Sakakibara, E.: "Those Terrorists Were Acting Globally" interview in Business Week, Sept. 27, 2001