Yeah I'll comment. Funny yes. accurate hardly. What is more, it totally downplays the effects of Islamic extremism as it pertains to economic activity. Who in their right mind is going to build a 100 story building now? who can afford the new insurance rates for public buildings. Who can afford to invest in new overseas developments. Who can afford not to factor in additional costs to products and services directly reulting form terroristic considerations?
Basiclly Bush is correct in realizing nothing he does domesticly will have a lasting impact if the economic in flow and outflow of the country is influenced by terrorism.
The impact of terrorism on the economy has been, and is being, greatly exaggerated. More investment in the stock market? More 100 Story buildings? To what end? Investment is driven by future profits which needs sales which needs consumption. If consumption is OK, where does the profit come from? (for any economists, I apologize for the gross over-simplification). There was significant risk before Septemeber 11 that was already factored into the global economy.
Blaming terrorism for the current economic malaise is a cop out. Sure, risk premiums on certain activities have increased. But, in the grand scheme of things, it is a drop in the bucket.
This is a correction - a very big one, and we had it coming. If and when we recover is open for debate.
It does have an impact. If you are unsure about economic times your investments will tend to be more short term. Sky scapers are long term investments. That is just one aspect. Guns or butter is a big question with different impacts on the economy. If you invest in guns, you protect the country, you also increase smaller segments of the society. If you invest in butter, you impact a larger segment of society, you develop larger commercial ventures and you bring about other investments. Butter has a bigger return for the economy than guns do.
Terrorism is not the only blame, it is more of a catalyst, but does still bear a portion of the responsibility. Terrorism also bears a portion of the responsibility for economic slowdown elsewhere. Travel has dropped off significantly, directly because of terrorism, Boeing had a 26% drop in profits because of cancelled plane orders because no on is traveling...get the picture.
Now Indonesia has lost its entire tourist industry because of terrorism. Australians have all been urged to leave by their prime minister, westerners are leaving an area wholly dependent on tourism.
While it is a correction (and really not as big as some in the past, saying its a very big one is an exaggeration), it is a moderate correction exacerbated by terrorism. It is ridiculous to ask when and if we recover because there is no evidence in the past that we have "not" recovered from a correction, as a matter of fact we have "always" recovered from a correction. The speed of the recovery actually depends on Congress and the President doing as little as possible because presidents rarely have an impact on the economy, unless its a sea change in policy (ie we went to monatarism or in the future went to a completely different tax structure).
I don't think the article meant to say anything about terrorism. He was really just pointing out that in the face of economic crisis, Bush is using war (against Sadddam, not terrorists) as a wag the dog tactic to get people's attention elsewhere.
Posts: 237 | Registered: Sep 2002
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Yes, there are specific industries; travel, airlines and aerospace for example that have suffered real consequences. Of course, people probably drove more, spent more on security, and travelled inside the country more than out. So, some industries gain. Even the cost of cleanup is positive to GDP.
I'm not saying there's no impact. But, just about everyone is assigning far too much blame for current economic woes to terrorism. Sure, maybe my "if" statement was melodramatic. I too suspect there is recovery on the way. But, one never really knows. If we did, then there would be no real risk.
You know, I'm not sure it WAS "incredibly moronic." Leaving aside all other diplomatic niceties, I would be understandably upset if a head of state ordered the murder of my father, especially if my father happened to be the President of the United States. Posts: 22935 | Registered: Nov 2000
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Given that it's pretty much impossible to "recuse" a president -- and that the next guy in line, Cheney, has about as much reason to be pissed at Hussein as Bush does -- we may as well concede the fact that Bush has several valid PERSONAL reasons to pursue this war.
Those aren't IMBECILIC. They're just not necessarily OUR reasons.
I thought the finding during the previous Bush administration was that Hussein, in fact, was unrelated to the assasanation attempt.
As to the economic impact, as I've pointed out elsewhere, the recession had started a number of months before the attacks took place. They may have (likely) quickened and deepened it, but the handwriting was largely already on wall.
I hadn't heard that consumer spending was bolstered by war, could you point me to a source for that? I thought the 'positive' economic was generally attributed to the increased military spending that took place.
quote:I thought the finding during the previous Bush administration was that Hussein, in fact, was unrelated to the assasanation attempt.
The attempt was done during the Clinton administration so this could not be accurate. Clinton, upon investigation (or reveiw from his advisors more likely) found the evidence compelling enough to send several cruise missiles into some of Saddam's palaces.
quote:As to the economic impact, as I've pointed out elsewhere, the recession had started a number of months before the attacks took place. They may have (likely) quickened and deepened it, but the handwriting was largely already on wall.
True enough, it may actually have begun in the last months of the Clinton administration (Clinton had nothing to do with the slow down), however its a safe bet that the attack (and reorganization) has had a fairly strong effect on the economy.
As to war having a positive impact. It acts as a stimulus package does. Creates jobs, stimulates the economy it pulled us out of a depression in WWII. However it is a less effective stimulous package than other methods.
What do you get when you put 3 Nobel-prize winning economists in one room with an economic situation to comment upon?
Really. This is why economics as a "science" is so disputable. If there are "laws" that allow control, these are laws describing human action (the same stuff Von Mises wrote so well about). And as an attempted control is applied, the humans will act ... a little differently. Or not.
Krugman's point, and the "war means a bad economy", is to a big extent that the productive wealth-creating capacity is being wasted in a war.
The "war is good for the economy" school note a typical expansion in gov't expenditure increasing war industry employment and employment security in general (except for the relatively few soldiers). I suspect the increased security feelings, leading to greater consumer confidence, even dominate the direct employment influences.
And like so many pro-con situations with humans, there is truth on both sides, but the weighting of each factor, in this situation, is not fully known.
Adjustments due to terrorism will certainly create some frictional "waste" that wasn't in the economy before. But the price of oil, and how it changes, will be a bigger determinant. And I notice that none of the links was willing to clearly state the direction of the price of the oil -- surely a simpler issue than the direction of the entire US economy.
But that's part of what makes the art of economics so continuously interesting.
And Dubya talking about economics, and helping the economy by stomping on Saddam -- kinda funny. But, while not point-less, what IS the point?