9/11 Attacks Impact on the Economy

Introduction

The catastrophic terrorist attack of September 11, 2001, by the Al-Qaeda terror network is considered the most devastating assault by foreigners on US soil. This attack led to devastating losses of life and property in the US. They also exposed the United State’s vulnerability to international terrorism. The 9/11 attacks had a number of social, political, and economic effects on the US and the rest of the world. The economic impact of the attacks is of importance since a key goal of the attackers was to negatively influence the economy through their actions. The Al-Qaeda terrorist network sought to destabilize the US economy by attacking the World Trade Center, which is the symbolic hub of world trade. The infamous Al-Qaeda leader, Osama bin Laden, emphasized his intent to ruin the US economy through the terrorist attacks of 9/11. In the short term, the attacks cost the targeted cities $21 billion (Richman 947). However, this event had many long-lasting economic influences on the US and the rest of the world. This paper will set out to discuss the effects of the 9/11 attacks on the economy of the US and the world in order to show that while these attacks did not destabilize them to the extent that Al-Qaeda hoped, they had markedly negative effects on the US and the world economies.

Effects of the Attacks on the Economy

The 9/11 attacks affected the US economy by causing a diversion of resources to fight terrorism. Richman confirms that following the attacks, there was a pronounced shift of resources from the civilian labor force to the military (948). Following the attacks on the US, the president declared a War on terrorism. This war necessitated the mobilization of resources to implement a full-scale attack on Afghanistan, the country that had harbored the terrorist group that carried out the attack. The US was able to topple the Taliban regime by the end of 2001 with little effort. However, the US has since then struggled to maintain peace and establish a functional government in the country. The US together with North Atlantic Treaty Organization troops has continued to operate in the Afghan State for over a decade. Koehler states that the measurable costs to the US from the war on terror are at least $1 trillion (92). In addition to this, the 9/11 attacks made Homeland Security a critical priority. The country spent billions of dollars enhancing its security and coming up with counter-terrorism measures. As such, resources that the US could have used to enhance its productive capacity, hence fostering economic growth, were diverted to security.

In addition to the monetary cost of the war on terror declared after 9/11, the United State’s global reputation and its soft power were degraded due to its military campaigns. Koehler reveals that the soft power that the US wielded was negatively affected especially in Muslim countries (93). In the months following the 9/11 attacks, the US implemented policies that were deemed anti-Muslim. This was followed by the invasion of Iraq in 2003, which created a perception of the US as an aggressor against Muslim nations. These actions tainted the US image and led to some international isolation of the US. As a result, the country suffered from reduced leverage in multilateral settings. The US is therefore not able to enjoy the amicable trade relationships it enjoyed with almost all countries before the 9/11 attacks.

The 9/11 attacks led to a decrease in the efficiency of air travel. Air travel has played a major role in the world economy over the last century. It offers efficient transportation, which is a key driver of economic growth for the international community. Following the 9/11 attacks, the Aviation industry suffered significantly. The devastating attacks on US soil had been perpetrated using passenger planes, which had been run by the terrorists into important buildings. The US government initially grounded most commercial planes following the attack. Once flights were resumed, travelers had decreased confidence in air travel since they feared that their planes would be used to stage other 9/11 style attacks (Aimable and Rosselo 176). This led to reduced revenue for the industry and some airlines were forced to declare bankruptcy. In addition to this, as security became a chief concern, more time was spent scanning passengers and goods at airports. While these activities enhanced security, they increased the cost of transportation and decreased efficiency.

The 9/11 attacks led to an increase in customs requirements at seaports. These economically disadvantaged developing countries are unable to fulfill US requirements. Shipping plays a major role in world trade as a high percentage of world trade is moved through shipping companies. In shipping, containerization is used to increase efficiency and 90% of world trade is moved in containers. While containerization increased the efficiency of world trade, it leads to some security concerns since it would be impossible to carry out thorough inspections on each container entering the US each year. In the post 9/11 years, the US embraced security measures aimed at preventing terrorists from exploiting the relative vulnerabilities of containers to perpetrate attacks on the nation (Rose and Blomberg 4). The customs and border protection security initiatives implemented by the US following the 9/11 attacks have radically altered the way international maritime trade is conducted. Odoyo reveals that the Container Security Initiative aimed at protecting the US from terrorists has led to the isolation of some countries in world trade (262). Many developing nations lack the resources and technical know-how required to implement the Container Security Initiative’s requirements and this has led to these countries being excluded from significant trade with the US. Koehler observes that the extra security measures imposed by the US have turned out to be trade barriers to many nations (269). The post 9/11 measures are contrary to the WTO goals of reducing the complexity of export and import formalities between nations so that goods can freely flow across borders.

The cost of shipment to the US has increased due to security initiatives such as the 24-Hour-Rule. This security measure implemented by the US Coast Guard requires cargo ships to provide the US Coast Guard with detailed information on the contents of the ships before the ship’s entry into port. This manifest must be submitted to US federal officials 24 hours before the cargo is loaded onto the US-bound ship. This is a major change from the old procedure where ships were only required to carry the manifest on board and the US federal officials inspected the manifest when the ship got to the US port of entry. The post 9/11 requirements adversely affect international trade. Odoyo reports that these conditions impose obstacles to just-in-time shipping and increase storage costs at the port of origin (266). The shipping charges have therefore increased significantly due to the additional security measures imposed. The US and global economies have suffered from this in a number of ways. Exporting countries incur higher costs leading to decreased profits. In the US, consumers are unable to purchase the same volume of goods due to higher prices leading to a negative impact on the overall US economy.

Tourism, which is a major contributor to the US economy, has suffered greatly due to the travel restrictions imposed after 9/11. Tourism is important for the economic advancement of countries and the WTO reports that it is the largest economic activity. The World Tourism Organization reveals that tourism is the world’s largest employer and it contributes 9% of the global GDP (2). While tourism has over the past decade experienced continued expansion, the US has not enjoyed the significant growth that other tourist destinations have enjoyed due to the anti-terrorism laws enacted after 9/11. While other countries are continually removing barriers to international travel in order to promote tourism, the US is increasing travel restrictions. As a result, the US is suffering from a declining market share for international travelers. While the US attracted 9.4% of travelers in 1992, the figure had reduced to 6.1% in 2007 (Rose and Blomberg 6).

The 9/11 attacks led to changes being imposed on the banking industry and this has had a negative impact on the economy. The banking industry, which plays an important role in global and national economies, was affected by some policies enacted after 9/11. To been with, the Terrorism Act of 2001 led to additional expenses for financial institutions. In its bid to address money laundering and terrorist financing, the US increased the obligations of financial institutions and raised the penalties for money laundering violations. After 9/11, financial institutions were subject to many record-keeping requirements that are aimed at flagging suspicious activities and reporting them to federal officials. The cost of compliance with the requirements imposed on the banking industry by the US government in the post 9/11 era has been great and many foreign investors have chosen not to transact with US banks because of them (Odoyo 275).

Many businesses in the US and other Western nations experience additional expenses in the form of increased insurance costs due to the 9/11 attacks. Before these attacks, many insurers used to underwrite locations in major metropolitan areas without much consideration for non-natural catastrophes. Companies operating in major metropolitan areas were therefore able to enjoy considerable insurance costs. However, the 9/11 attacks led to a reassessment of insurance policies by many insurance firms (Rose and Blomberg 7). The insurance industry suffered devastating losses due to the 9/11 attacks. The industry lost over $40Billion as it paid the various insured businesses that had suffered catastrophic losses due to the terrorist attacks. This led to a major reassessment of how risk is calculated leading to higher premium costs for businesses in major metropolitan areas.

Conclusion

This paper set out to show the negative effects that the 9/11 attacks had on the US and global economy. It began by noting that the terrorists hoped to damage the US economy through their attacks. The actions taken by the government in response to the attacks have contributed to the negative economic impacts. To begin with, the government diverted resources to the military in order to fight terrorism. In addition to this, the anti-terrorist laws enacted after 9/11 have frustrated international business and trade. Significant frustration has been from the additional security measures imposed on shipping companies and international travel. It can therefore be concluded that the 9/11 terrorist attacks had a negative effect on the economy of the US and that of the rest of the world.

Works Cited

Aimable, Eva and Jaume Rosselo. The short-term impact of 9/11 on European airlines demand. European Journal of Tourism Research 2.2(2009): 145-161.

Koehler, Marc. The effects of 9/11 on china’s strategic environment: illusive gains and tangible setbacks. Joint Force Quarterly 12.68 (2013): 91-98.

Odoyo, Susan. The effects of U.S. anti-terrorism laws on international business and trade. Syracuse Journal of International Law & Commerce 38.2(2011): 257-294.

Richman, Vincent. Short- and long-term effects of the 9/11 event: the international evidence. International Journal of Theoretical and Applied Finance 8.7 (2005): 947-958.

Rose, Adam and Brock Blomberg. Total Economic Consequences of Terrorist Attacks: Insights from 9/11. Peace Economics, Peace Science and Public Policy 16.1 (2010), 1-12.

World Tourism Organization. Tourism Highlights. 2013. Web.