By the time you read this, rescue efforts at the World Trade Center and the Pentagon will be over. The tally of casualties will be complete or nearly so, and the process of rebuilding shattered structures, businesses and lives will be getting underway.
But as I write this, two days after terrorists attacked on September 11, volunteers are still trying to find survivors beneath the rubble. The stock market has not yet reopened. A national consensus is emerging that we are engaged in a war, though we do not yet know precisely against whom, and the political landscape has changed almost as dramatically as the Manhattan skyline.
It was only three days ago that each party was swearing it would never be responsible for dipping into the Social Security surplus. With the economy teetering on the edge of recession and the overall budget surplus shrinking almost daily, politicians were boxed in by their own rhetoric. They could not find the money for additional tax cuts or spending that might restart the economy even though Uncle Sam was still raking in far more cash than was anticipated a couple of years ago.
Today, those constraints have vanished along with the Twin Towers. The country is rallying around the president, as it traditionally does in times of crisis. Congress is prepared to hand George W. Bush a virtual blank check for reconstruction, retaliation and reinforcement of our security structure. Social Security is going to have to wait.
There was concern immediately after the attack that a recession was suddenly more likely. Worried consumers might shutter their wallets to wait out both the recent rise in unemployment and the prospects for additional terror assaults on our institutions, this line of reasoning went.
Some of our clients called us to discuss whether to sell stocks and take a more conservative or defensive stance amid the uncertainty. But we counseled them to stay with their programs, for two reasons.
First, as always, we believe it is impossible to time the movement of stock markets effectively. Even assuming that the markets were likely to decline after the attack — a huge assumption — how low would the markets have to go, or how long should the investor wait, before it would be time to go back in? Along with lack of diversification, failure to be invested when the market is making one of its steep, unpredictable upward moves is a leading cause of poor investment results. Selling in response to sudden crises is almost always a mistake.
Second, the attack probably will have no major impact on America’s economic productivity in the long run, and the long run is what investors should be concerned about. In the short term, the money spent on relief, recovery and defense efforts may stimulate the economy and make a recession less likely than before. This often occurs in the aftermath of a disaster if the reconstruction is orderly.
In that respect, the fact that the assault took place during an economic slowdown probably was fortuitous. Not only were the doomed planes flying with many empty seats, which would not have been the case a year or two ago, but manpower for the rebuilding effort is available and is less likely to be diverted from other projects.
This is not to say that a disastrous terrorist attack is a good thing for the economy, of course, nor do I mean to imply that it will not have important long-term effects. It clearly will. But as the initial shock of the assault and urgency of the rescue are replaced by our anger at the perpetrators and determination to stop them, it is going to be important that we proceed calmly and rationally. We need an efficient recovery and an effective response.
Even at this early date, recovery efforts are getting off to a good start. Workers are quickly restoring the communications infrastructure that is vital to the financial markets. Large companies are locating substitute office space and restoring computer systems from off-site backups. Across the New York and Washington metropolitan areas, and elsewhere in the country, businesses of all sizes — including ours — are considering how they can help get things back in order. One example: An attorney I know was asked this morning to assemble and review all the contracts her firm had prepared for one of the World Trade Center’s tenants.
Although these efforts pale next to the heroism of the rescue workers and many of the victims themselves, they are vital if we are to maintain the strength that allows us to work toward a more safe, just and democratic world.
Here is my personal wish list for positive developments that might flow from that awful September day:
- Recognition that every government has the right to defend its citizens against attack, everywhere. Americans have long been particular targets of wanton violence launched from abroad. No civilized government allows its territory to be used for this purpose or shelters those who hide from justice after the fact. President Bush’s pledge not to distinguish between terrorists and those who harbor them has to be translated into a policy that is supported by our allies and at least understood by the rest of the world. Then that policy needs to be implemented effectively.
- Realization that we are all targets. The suicide hijackers and their handlers appear to have been interested in killing as many people as possible. There is no reason to believe they would have stopped at the World Trade Center if, for example, it might have been possible to wipe out everyone in New York City. In this case, airplanes were used as weapons of mass destruction; next time it may be something else. We absolutely must find ways to cut off the financing and organization of terrorist efforts from every source. What we saw on September 11 was not the price of failure, but only the down payment.
- Choosing our friends, and enemies, carefully. China was almost certainly not involved in this attack, and in fact promptly condemned it and may well support our response. However, we should keep in mind that China’s opposition to our proposed missile defense program is designed specifically to allow Beijing to threaten us with far worse destruction if, for example, we were to support Taiwan in a bid for independence. Our true friends may doubt the wisdom of missile defense, but they do not feel threatened by it. Although great damage obviously can come from many quarters, the greatest single risk to peace in this generation may come from China’s failure to democratize. Our political and business leaders must face up to this danger before it is too late.
- Having a more enlightened and civilized political discourse. This is really wishful thinking, but here goes. Terrorists on those aircraft neither knew nor cared whether the people they killed were Democrat or Republican, conservative or liberal, pro-life or pro-choice. These distinctions, which usually seem so important to us, proved to be trivial. The endless political warfare in our country cheapens our discussions and distorts our policies, ultimately weakening our society. We do not have to agree and we do not have to like each other, but it would be helpful to have more intellectually honest discussion and less emphasis on winning, losing and destroying the opposition. We have to remember that the person on the other side of the debate is a neighbor and fellow citizen. He or she is not an enemy.