The horrific attacks on the morning of September 11, 2001 will go down in history as the day when American imperialism had its nose bloodied and its psychology of invulnerability shattered. As Marxists, we condemn these acts of individual terrorism, and recognize that it will lead only to reinforcing the reactionary policies of Bush and the entire world ruling class. Amid all the calls for "national unity" and the search for a scapegoat, it is clear that we must keep calm and maintain an internationalist and class position. But there is another extremely important implication in the situation &endash; its potential effect on the already tottering US and world economies.
The World Trade Center was a center of US banking, insurance, and investment. The destruction of its two primary towers represents a devastating material shock to an already weakened economy. The "snowstorm" of financial and employee records which fell in a three-mile radius around the towers will not be easily replaced. Investment giant Morgan Stanley alone had 50 floors of offices in the WTC. Dozens of financial and governmental offices were destroyed or damaged by the collapsing rubble. Already shaky consumer confidence, which is largely responsible for keeping the world economy afloat, will be even less confident, and many analysts predict that this will push the US and the world into a generalized recession. The loss of even a few days of financial activity could be devastating. Some analysts have even likened it to the "straw that broke the camel's back".
As the Associated Press reports:
"Consumer spending accounts for two-thirds of the nation's economic activity. Even before Tuesday's attacks, signs of trouble were evident as Americans grew more worried about their jobs with each new rash of layoff announcements.
"The government had reported last Friday that the unemployment rate shot up to 4.9 percent in August as job losses in manufacturing climbed above 1 million.
"The overall economy grew by just 0.2 percent in the April-June quarter, the poorest showing in eight years. Before the terrorist attacks, many analysts had been forecasting a rebound to around 1.5 percent growth in the gross domestic product for the current quarter, helped by seven interest rate cuts from the Fed and nearly $40 billion in tax rebate money being mailed to Americans."
They continue:
"The Fed's promise to supply additional money to the banking system was similar to a pledge it issued on the morning after the October 1987 stock market crash. That action, only two months into Alan Greenspan's tenure as chairman, was credited with keeping the economy out of recession."
According to Sung Won Sohn, chief economist at Wells Fargo in Minneapolis:
"The economy has been on a high-wire act straddling between a recession and anemic growth. Now the terrorists have cut the wire underneath our feet, the United States and the rest of the world are likely to experience a full-blown recession now.
"It is unclear how much financial infrastructure has been damaged, Sohn, chief economist at Wells Fargo & Co. At least temporarily, the financial system could be frozen, further damaging the economy."
Anthony Chan, chief economist with Banc One Investment Advisors said:
"This terrible tragedy is certain to severely dampen consumer confidence and hence have the possibility of shutting down the consumer.
"The extent of this negative impact will depend on whether the federal government is able to resolve who is responsible and whether U.S. officials can find the individuals responsible for these actions -- and whether we can add some certainty that this will not happen again."
"This act has the potential to bring the economy down into a serious recession. The fact that U.S. officials cannot rule out further attacks will keep consumers here and abroad in a deeply uncertain state."
According to CNN Financial News:
"The airline and travel industries, for example, will almost certainly suffer an immediate impact from the attacks. The destruction of the World Trade Center and the severe damage to the surrounding area could also put a damper on financial activity in the United States for days, if not weeks.
"U.S. stock futures plunged after the first airplane hit the World Trade Center in New York Tuesday morning, and trading was halted indefinitely. When trading does resume, stocks are likely to fall on Wall Street, as they did around the world Tuesday."
"There's been no shortage of negative news lately, and this event is likely to further depress the markets," said Alan Ackerman, market strategist at Fahnestock & Co.
"The result is that U.S. investors are likely to flee to safe havens such as Treasury bonds and gold, as investors did overseas Tuesday. Oil prices could rise, and global economies could be shaken as a result. Global equity markets were already feeling the effects of the attacks, while the U.S. dollar fell against the euro and the yen."
According to one headline, "global markets went into free-fall". Stock prices in Europe were hit hard, wiping out all gains in Frankfurt, Milan, and just oil stocks showing rises in Paris and London. Stock indexes across the Americas also plummeted and trading was eventually halted. The impact this will have on the already shattered Latin American economies, in particular Argentina, Brazil, and Mexico will be severe.
"Panic, without a doubt, and complete and total uncertainty as to what the economic consequences to this will be," said Aloisio Lemos, an investment consultant with Lopes Filho & Associados in Rio de Janeiro.
"These types of disasters in the United States always trigger a sense of the need for protection," said a market analyst in Sao Paulo. "These are emotional reactions to what could happen today."
"The possibility of a rebound today is out of the question," said Marcelo Paccioni at Consult Capital in Buenos Aires. "Stocks and bonds are tracking world markets due to the psychological effect of the situation in the United States."
One London trader told CNN: "This is a complete nightmare and an absolute disaster financially.
"This will be devastating for insurance companies, especially reinsurers, who spread the risk of insurance around, Lloyds of London will surely be severely damaged by the claims arising from this horror.
"This is the last thing the world economy needs as it heads towards a potential recession."
The above quotes give an indication of the severity of the economic repercussions of these attacks. Psychologically as well as materially, US imperialism will never be the same. But let us make no mistake - if the economy tumbles into recession or worse, it is due to the madness and chaos inherent in the capitalist system itself. It was capitalism which brought about the conditions which sparked these acts of desperation and terror, and it is the unsound capitalist system, which was already teetering on the brink of disaster which has failed billions of people in the US and internationally. Only world socialism can end the instability and uncertainty which is part and parcel of life under capitalism.