Business World Left Reeling
Beyond the awful carnage they wrought, Tuesday’s terrorist attacks struck at the very heart of the American economy, threatening the open, connected, computerized order that’s widely credited with having delivered the longest prosperity in U.S. history.
The most immediate economic problem was how to get the huge communications, transportation and production systems that were brought to a near halt by the suicide crashes up and running again.
The attacks and ensuing security alert shut virtually every U.S. airport, many ports and rail lines, and the nation’s financial markets. Concerned families and friends jammed the telephone network that serves the East Coast with close to half a billion calls, more than twice the usual volume, according to managers with AT&T; Corp. and Verizon Communications, the major carriers.
Officials with the Federal Reserve and the Securities and Exchange Commission consulted with financial leaders about when and how to reopen the major stock and bond markets, which will remain closed today.
“It’s going to take a tremendous amount of skill to prevent an absolute panic and rout when trading resumes,” said Gary C. Hufbauer, a veteran economist and senior fellow at the Institute for International Economics, a Washington think tank.
Even if such immediate problems are solved, several respected forecasters said Tuesday that the attacks will drive an already stumbling U.S. economy into contraction, a move that could drag other economies down with it.
“A full-blown, global recession is highly likely,” said Sung Won Sohn, chief economist with Wells Fargo & Co. in Minneapolis. “Who’s going to feel like going out and buying a car now?” added David Levy of the Levy Economics Institute in Mount Kisco, N.Y.
And beyond recession loomed the question of the economy’s long-term prospects.
Several analysts warned that the attacks threaten the very first principle of the nation’s recent growth--that its economy could run in an increasingly global fashion without risk of assault.
“We’ve been living in a kind of delusional sleepwalk that we’re invulnerable,” said Graham T. Allison, former dean of Harvard’s Kennedy School of Government. “It’s as if we thought we were living on a different planet from the rest of the world.”
The attacks came as a special shock to the corporate and financial worlds, whose symbolic and practical center is lower Manhattan.
Benchmark indexes in England and France posted their steepest declines since the stock crash of 1987.
Trading in U.S. Treasury bonds, which continued for some time after the initial attack, stopped dead after the twin World Trade Center towers collapsed, destroying Cantor Fitzgerald, which handled almost one-quarter of the Treasury market.
Corporations evacuated workers from skyscrapers across the country, including the Library Tower in Los Angeles, the Transamerica Building in San Francisco, the Sears Tower in Chicago and the John Hancock Tower in Boston.
Analysts’ worries about getting the economy back up and running were somewhat similar to those that surrounded the Y2K computer glitch, which many feared would slow so many elements of the nation’s and the world’s economic dance that it would prove hard to get them quickly moving in sync again.
“The whole planet is almost hard-wired so it’s all affected,” said Ian Mitroff, a USC analyst. “It’s like the total work stoppage of a nation.”
The global stock tumble that followed Tuesday’s attacks came atop a financial drubbing the night before and left some analysts fearful about a repeat of the kind of financial seize-ups that briefly afflicted the globe in 1998, in the wake of Russia’s debt default.
Economists said the combination of new financial setbacks and jumps in the cost of such essentials as energy could puncture already-fragile U.S. consumer confidence, setting off a recession. They pointed to the 1990-91 Persian Gulf War, which pushed the economy into a nine-month contraction and the country into a weakened condition through the middle of the 1990s.
“The productive capacity of the economy has not been damaged,” said Wells Fargo’s Sohn. “The primary concern is confidence.
“The economy has been on a high-wire act straddling between a recession and an anemic growth; the damage to confidence will push us into a recession,” he predicted.
But some analysts’ concerns went well beyond the immediate ups and downs of growth and focused on whether the nation can sustain its recent productivity gains--the improvement in how much workers can produce for each hour of work.
“This is going to force people to add locks [to increase security] all over the economy and locks are a tremendous waste of money,” said Robert E. Litan, an economist with the Brookings Institution, a Washington think tank.
“Right off the bat, it will add an hour to every flight in the United States,” he predicted.
Economists said the precision of the attacks--the hijackers’ apparent ability to commandeer four airplanes almost simultaneously and dodge protections to strike both New York and Washington--demonstrates that virtually any network on which the nation depends is at risk.
“Telephones, the Internet, subways, water systems, they are all open to attack,” Hufbauer said. “This is going to trigger just a sweeping security increase, and by the time you finish there may not be much left of the open economy.”
