Beyond the Economy

War on Terror (economic impact)

The Bush administration declared a war against terrorism in Iraq and Afghanistan in 2003, following the September 11th terrorist attacks. President Bush believed Iraq to be harboring weapons of mass destruction, and considered them to be a threat to the United States. When White House officials predicted the costs of this war in 2002 and 2003, their estimates seemed very low in comparison to the nation's GDP, the size of the federal budget, and the cost of past wars. However, it is presumed that the impact of the war on the nation's economy was not seriously considered when deliberating whether or not to go to war. The war on terror has now been going on for over 4 years, and it is uncertain how much longer it will last. It is clear that the duration of this war has and will continue to strongly effect the US economy. Although current estimates for the overall cost of the war vary, depending on people's economic and political views, it is now apparent that the price is much greater than initially predicted.

When calculating the total cost of the war, there are several direct and indirect costs that must be considered, such as military expenditures, occupation, security, health care and payment for troops, taxes, rising oil prices, and interest on national debt. Some might also include the statistical "value" of life for soldiers in these costs. The Pentagon is spending about $6 billion a month on the war, which is $200 million a day. It was calculated in March of 2006 that if the US were to exit Iraq in another 3 years, direct and indirect costs to US taxpayers could be more than $400 billion. Nobel Prize- winning economist Joseph Stiglitz estimated the final total cost of the war against terrorism to be $1 trillion to $2 trillion. These figures prove that the war on terror, and its extremely high price, have dramatically impacted the economy, and will continue to do so for a long time.

Fear

The fear of economic repercussions from 9/11 were far higher than a natural disaster. What scared people most about 9/11, was that it was an act of man, not a natural disaster, that caused 9/11. After Effects (Air lines losing hundreds of millions of dollars per day Empty airports, hotels, and theaters, Concerts and conventions were canceled, Wall Street spiraling downward) On 9/11 terrorists struck the heart of global capitalism. We were in economic trouble before the terrorist attacks on 9/11. That’s what makes them so scary. The economy was already fragile. The Fed has already cut rates seven times as of September 10, and business investment was still falling.

The reason to be concerned about the economic impacts of 9/11 is not because of the physical damage done to NYC, but the emotional. The possibility that investors and consumers will be nervous, and out of fear stop spending. “The only thing we have to fear is fear itself” - Paul Krugman

Immediately after 9/11 vacations were canceled because initially there no planes were flying and later out of fear. Consumers also were shy to purchase luxury goods, and businesses scaled back on their investment plans.

9/11 was directly effected a small part of one city, how could destroying a few buildings possibly threaten an economy as large as the US economy?

- 1% of the office space in the nation was destroyed (15 million sq ft)

- Rebuilding costs, in the tens of billions of dollars will be less than 0.1% of our national wealth

- While airlines were grounded for a short time, and did suffer financial setbacks, they are back in the air now

A disaster can impact an economy in two ways. It can reduce supply or reduce demand. A decrease in demand can be caused by fear. Demand is a matter of psychology, and its in large part determined by feelings. The main economic concern from 9/11 is not the physical damage done to NYC, but the emotional trauma.

The goal of terrorist attacks is to strike fear, fear in the core of a population, disibilitating fear. This is why terrorists choose such visible targets such as the Twin Towers, the Pentagon, the London Madrid and Paris train systems. The hope is that out of fear, the people will more or less stop living, thus causing the economy to fall into a massive recession, crippling the country.

Racism

Immediately after 9/11 racism of Arab's and people who "appeared Arab" spiked dramatically.

The Journal, How the Hindus Became Jews:American Racism after 9/11. Written by Vijay Prashad highlites numerous examples of this.

- A report from the South Asian American Leaders for Tomorrow found that in the week after 9/11, the U.S. media ‘‘reported 645 bias incidents directed towards Americans perceived to be of Middle Eastern descent.”

- September 13, 2001, an Iranian woman was punched in the eye by another woman who wanted to register her displeasure at those who look like terrorists

- September 15, 2001, in Tulsa, Oklahoma, when Kimberly Lowe, a Creek Native American, stopped her car to confront a group of white males who had yelled, ‘‘Go back to your own country,’’ they pinned her down and drove over her till she died.

International

9/11 resulted in some positive changes internationally. The European Central Bank had previously refused to cut interest rates. The terrorist attack changed that, shortly after the Federal Reserve acted and lowered rates, the European Central Bank matched the changes.

Economic Impact of 9/11