As the United
States forges an international military and political coalition to
counter the heinous attacks of September 11, it is equally important
to mount a coordinated response to the economic dimension of the
crisis. Acceptance of a financial meltdown or global recession would
represent as great a defeat as a failure to punish the perpetrators
of the bombing itself and their protectors.
The case for a
multilateral economic strategy is compelling. Even prior to the
attacks, the world was experiencing its first synchronized turndown
in decades. Growth had slowed sharply almost everywhere and turned
negative in a number of countries. There was genuine risk of a global
recession and the latest, pre-attack US data underscore that
actions will depress economic activity further for at least a while.
More importantly, the shock to confidence could lead American and
other consumers into more cautious spending patterns for months or
even longer. A worldwide downturn is all too possible.
policy response is thus required. The key central banks have already
taken the first essential steps by pumping sizable amounts of
liquidity into the markets to prevent cash shortages that could
disrupt commerce, and by making initial cuts in interest rates. The
OPEC countries have also made a major contribution by announcing that
they will maintain oil production at levels that will avoid
exacerbating the problem. Much more is needed, however.
The next move
should be a further, coordinated reduction in interest rates by the
central banks, especially our own Federal Reserve and the European
Central Bank that manages the euro. (The Bank of Japan’s interest
rates are already near zero.) Given the urgent need to restore
confidence and provide the maximum stimulus to reviving economic
activity, the world’s monetary authorities should continue to act
together in a rapid and decisive manner.
All three of the
chief economic areas, including Japan as well as the United States
and Europe, should also adopt expansionary fiscal measures.
Strangely, the major European countries and Japan have been
contemplating spending cutbacks, in the face of recession or sharp
slowdown, to meet pre-planned budget targets. This would be akin to
the Hoover economics that helped bring on the Great Depression in the
1930s, making a bad situation much worse. The arbitrary deficit
ceilings targeted by Prime Minister Koizumi in Japan and the
Stability Pact in Europe should be relaxed immediately to cope with
the global crisis.
States has already cut taxes modestly and will be increasing
government spending to respond to the humanitarian and security
implications of the terrorist attacks. However, we must not slip into
our own brand of Hoover economics by regarding the fictitious Social
Security “lock box” as a deterrent to deploying our large budget
surplus. We should promptly implement a significant chunk of the cut
in personal income taxes that has already been agreed for later
years, or simply repeat the rebates of the recent past, injecting
another $100 billion or so of purchasing power into the economy over
the next few months.
The success of
such measures will be determined largely by their impact on the
psychology and confidence of consumers and investors. These crucial
intangibles will be steered importantly by developments outside the
economic sphere, especially the effectiveness of our leadership in
responding to the direct security effects of the attacks. But the
impact of the economic steps themselves can be greatly enhanced if
they are taken quickly, decisively and especially through a
coordinated multilateral approach that demonstrates that the
authorities of the leading countries are ready to couple their
military alliance with effective economic collaboration.
can best be displayed through highly visible international meetings.
The most obvious is the session of the finance ministers and central
bank governors of the Group of Seven industrial countries (US, Japan,
Germany, France, UK, Italy and Canada) on October 6 than can announce
the economic component of the war strategy. It is unfortunate that
the annual conclave of the International Monetary Fund that was
scheduled for September 29-30 was cancelled, as it could have been
used to broaden and reinforce support for the multilateral strategy.
The community of
nations can also display unity in responding to the destruction of
the World Trade Center by moving forward together on world trade. The
ministerial meeting of the World Trade Organization in November
should proceed as scheduled, especially as it is to be held in Qatar
on the Persian Gulf. The quibbles that have raised doubts about the
participants’ ability to launch a new round of multilateral
negotiations should be set aside in light of the new circumstances,
just as the Cold War allies traditionally overcame their petty trade
disputes in the face of overriding security imperatives. The similar
quibbles that have kept the Congress from enabling our own President
to participate in such negotiations since 1994, let alone lead them,
should also be set aside with early passage of Trade Promotion
Authority if we want to convince the world that we are serious about
responding effectively to the events of September 11.
dimension of the terrorist attacks has naturally been overshadowed
during these first few days by the human tragedy and by the quest to
restore a secure America. As life returns toward normal, however, the
everyday concerns of jobs and business will resume their traditional
primacy for most people, here and around the world. It is thus
essential that the economic front of the conflict be handled with as
much priority, skill and international cooperation as the security
front. We can achieve victory over the terrorists only with a vibrant
recovery of our economies along with a destruction of their ability
to ever commit such atrocities again.
EconomicsOfWarEssay, ResearchPaperEconomicsofWarThe choice to bomb the World Trade Center was more than symbolic. The collapse ... lost incomes. Theeconomicsofwar show that in wartime, the production of standard consumer goods ...
The Great WarEssay, ResearchPaperThe Legacy ofthe Great War After reading William R. Keylor’s The Legacy ofthe Great War, I realized the important ... Keynes published a book called “TheEconomic Consequences ofthe Peace.” According to Keynes he ...
EconomicsOf Eisenhower Essay, ResearchPaper In November of 1952 General Dwight D. Eisenhower was elected to the office ... a profound affect on the economy ofthe United States. During thewarthe country was prosperous ...