It seems almost frivolous that we are spending so much time speculating about the likelihood, depth or duration of a recession when the atrocities of the savage terrorist attack continue to haunt our daily lives.
The economy was already on the brink of recession and the last Michigan consumer sentiment index released before Sept. 11 had shown that consumer confidence was quickly dissipating in the face of rising unemployment.
The non-manufacturing purchasing managers index had dropped below 50 in August indicating contraction in the service sector and investment remained too weak to compensate for a slowdown in consumer spending. That this fragile economy will now plunge into decline after the horror of this past week is a given, but in a rather bizarre way it is almost the least of our worries.
Granted, a recession will exacerbate the demoralizing effects of the savage attacks on symbols of American freedom, power and prosperity that were the World Trade Center and the Pentagon, and the loss of nearly six thousand lives. Yet it is improbable that a recession will be averted despite the best intentions of the Federal Reserve Board and the European Central Bank to inject massive liquidity into our economic and financial system. Markets are deeply dependent on confidence and consumers and investors resent the uncertainty and terror that now surround them.
Ours is also an economy that relies on efficient transportation and communications, and most industries are experiencing difficulties obtaining parts and supplies. The auto industry, for example, has announced a number of plant closures because it cannot replenish stocks of imported as well as domestically produced parts.
The airline industry has presented a strong case for government subsidization, given its loss of traffic and the projected elevated costs of improving aircraft security. Yet the government will be incapable of propping up all those industries threatened by consumer jitters, transportation and communication disruptions, and the effects of recession.
These are not usual times. Besides, how many industries can the government support? Will a bailout of the airline industry lead to financial assistance for the hotel and recreation industry? In the immediate, hotels in New York are bearing the brunt of cancellations of the United Nations Children's Conference and the UN General Assembly as well as a general drop in tourism to the city. Throughout the United States, companies are cutting travelling costs and individual travellers are deciding to stay home. This is unlikely to change soon. A company like Disney has seen its stock plunge as Americans and foreign tourists desert its theme parks and advertisers shun its publications.
The performance of the stock market has confirmed there are many companies in similar straits and it would be naive to believe that, at least in the near term, President George W. Bush and his administration can do much to turn this situation around.
Strangely enough, that really is the least of our worries. Our real concern is for the values of freedom, competition and integrity that underpin modern capitalism. Recession is but a blip on a curve. Freedom is our life.
As imperfect as democracy and capitalism may be, they beat the alternative offered by the mullahs.
Granted, this is not a war against the Arab world. It is a war against the fanaticism and violence of Islamic extremists who prefer the repression and diktats of zealots over choice of religious tolerance, choice of dress, comportment and rule of law. Osama bin Laden may have become the brand name for this kind of fanaticism, but a single focus on this one man is also wrong. It sensationalizes and trivializes the conflict.
There is a complex web of diverse but connected radical groups such as the Egyptian Islamic Jihad, Hezbollah, Hamas, Sa'iqa Ba'ath, the Arab Liberation Front and Fatah Intifadah that function with the obvious complicity of state governments that provide them safe harbour, logistics, access to communications, and often, intelligence.
In turn, these governments benefit from the continuing support of international organizations such as the World Bank and the United Nations as well as a number of bilateral aid programs. It was outrageous to see middle-class Egyptians decked in their Rolex watches and Nike shoes rejoice last week at the loss of American lives. How much more money must the United States pour into Egypt before its government addresses such issues?
In a similar vein, we have watched Yasser Arafat release more than three hundred Islamic extremists from jail whilst he allowed the media he controls to demonize the United States, and took children out of schools to place them on the front lines of Palestinian fighting. He has been teaching them hate instead of mathematics and literature.
Could not institutions such as the World Bank, for example, make development assistance conditional on all Palestinian children being in school, a situation more conducive to development and independence than the hurling of stones? We have been lax with airport security but, more importantly, we have lacked vigilance in defending our basic values and protecting against those who are determined to undermine our very foundation.
This latest surge of barbarism is not about development and independence. If such were the case, the zealots would be spending their money on schools, hospitals, universities, libraries and modern infrastructure rather than on training courses for terrorist pilots and the purchase and development of chemical, biological and nuclear weapons.
President Bush has stated that the United States will do 'whatever it takes' to counter terrorism. That means forceful and effective military, political and diplomatic intervention, but it also requires sophisticated, steady understanding of and reaction to actions, however subtle, that threaten the values of democracy and capitalism.