Analysts say diversified U.S. economy unlikely to be hobbled for long by any terrorist attacks
Wednesday, January 2nd 2002, 12:00 am
News On 6
WASHINGTON (AP) _ The resiliency the nation has exhibited since Sept. 11 shows just how difficult it would be for Osama bin Laden's followers to carry out his call to bring down America by destroying its economy, economists say.
The $10 trillion U.S. economy is so diverse and decentralized and its technology so redundant that the loss from an attack on any one facility, institution, company or component would be filled quickly by another, according to the analysts.
If there's potentially an Achilles heel, it's the psyche of the American consumer, whose spending accounts for two-thirds of all U.S. economic activity.
``If everybody decided to stock up and spend all their time in basements, that would be pretty bad news,'' Stephen Cecchetti, an economics professor at Ohio State University, said in a recent interview. ``Terrorists could surely affect people's confidence by striking fear into them.''
But even there, Americans have shown themselves to be extremely resilient. A month after the airliner hijackings, auto sales reached an all-time high, albeit with the help of zero percent financing deals.
And consumer confidence bounced back in December after falling for three months. A new poll by The Associated Press also shows a new wave of optimism sweeping across the country.
While 70 percent of Americans think another terrorist attack is ``very likely'' or ``somewhat likely'' in the near future, 56 percent said the country is on the right path. Fifty-two percent felt their own family's financial situation will improve in the coming year, compared with just a third of Americans who expressed that view a year ago.
The poll of 1,013 people, taken Dec. 14-18, had an error margin of plus or minus 3 percentage points.
The American economy over the past couple of decades has become increasingly resistant to shocks, Federal Reserve Chairman Alan Greenspan says.
``Deregulated financial markets, far more flexible labor markets and more recently, the major advances in information technology have enhanced our ability to absorb disruptions and recover,'' Greenspan told Congress a week after the Sept. 11 attacks.
In a videotape broadcast last week, bin Laden said the attacks ``struck deep in the heart of America's economy'' and that ``this economic hemorrhaging continues until today.''
But according to Greenspan and other economists, America's financial system operated with remarkable efficiency to minimize the fallout from the September attacks, which included two planes crashing into the World Trade Center.
The destruction of communications lines in the heart of New York's financial district disrupted the normal process of settling billions of dollars in transactions between banks for a while. But the Fed supplied record amounts of cash to the banking system in the days following the attacks to cover the shortfall.
Investors, meanwhile, rode out the crisis.
By the end of the year, the stock market _ which was shut down for four days after the attacks _ had regained all of its losses. In the past three months, the Dow has climbed nearly 22 percent, the Nasdaq is up more than 37 percent and Standard & Poor's 500 index has advanced almost 19 percent.
When U.S. airlines were temporarily grounded in the days after the attacks, travelers and businesses turned to alternative forms of transportation.
``Because our economy is so big and so diversified, not only in terms of products but geography, as well, to some extent, we have our own safety net built in,'' said Sung Won Sohn, chief economist at Wells Fargo.
``If one company were to be knocked out, another company offering the same services could step in. If one part of the country were to be attacked, the rest of the country could help out as was the case in New York City,'' Sohn said. ``Let's say one of the exchanges stopped trading, you can trade other places. Every financial institution and most companies have backup systems that can be used in the case of an emergency.''
On the energy front, if bin Laden had any thought of harming the U.S. economy by disrupting world oil markets, he hasn't succeeded.
Right after Sept. 11, oil prices briefly jumped on fear that a U.S. retaliation could trigger disruptions in Mideast oil supplies.
But the Organization of the Petroleum Exporting Countries immediately declared it would not allow oil to be used as a political weapon. Since Sept. 10, oil prices have actually dropped 25 percent to 30 percent.