Despite the short-term shock, the September terror attacks will not have significant impact on the U.S. economy, economists in California said Wednesday.
At a news briefing here with foreign correspondents, Christopher Thornberg, a senior economist with the Anderson School at the University of California, Los Angeles, stated that economic recessions are not caused by either natural disasters or social- psychological malaise.
He cited the examples of the Northridge earthquake in 1994, Hurricane Andrew in 1992 and Hurricane Floyd in 1999, which all caused billions of dollars in economic losses. He noted that it took only a single quarter for the economy to fully recover after these disasters.
On the other hand, no past national crises and wars, such as the Korean conflict, Vietnam war, Gulf War and the Oklahoma City bombing, had been associated with a substantial decline in consumer spending or more generally an economic downturn, Thornberg added.
He said the 1990-1991 recession was not caused by a collapse of consumer confidence because of the Gulf War, but by a spike in crude oil prices and a decline in investment which preceded the war.
Thornberg said that while September 11 attacks in New York and Washington, which caused an economic loss of 14 billion U.S. dollars, would cause short-term shock to the economy, they will not have long-term impact as long as the consumer confidence and the dollar remain strong.
In a study on the economic impact of the terror attacks, Thornber and coauthor Professor Edward Leamer, blamed the current recession for "the very disappointing profits that have come from the extraordinarily high level of Information Technology (IT) investments made during the Internet Rush from 1996 to 2000."
"Slow or negative growth will be with us until businesses can figure out how to squeeze reasonable levels of profits from IT investments, or until the excess IT capacity is eliminated by depreciation and technological obsolescence," the report said.
Thornberg also criticized the U.S. governments on different levels and the media for "overreaction" to the terror attacks by playing up the terror threats and creating a sense of insecurity that severely damages the airline industry, which is crucial to encouraging the consumption.
( Xinhua News Agency 10/11/2001)
