The Economy, Global Finance and Inequality
Just like other disasters, the bombing of the twin towers in the United States (that has become known as the 9/11) was about several other elements. It rocked the American financial center and had more implications further than the act of global terrorism. For instance, it affected the economy of the world, both particularly and also partially global terrorism. This is to say, international and domestic trade, currency exchange system, debt and capital) finance i.e. GDP, direct investments, fiscal and monetary policies, and balance of trade. Besides, it has been noted that the increase in terrorism across the world was not an issues of impulse. It originated from social factors like inequality and poverty.
Question 1:9/11 and the Global Economy
According to the summary of Sassen (2004) on the economic impact of 9/11, ‘’The bombing of the World Trade Center complex affected both large and small firms, professionals and blue-collar workers, highly profitable and low income activities, rich and not so well-off families’’ (Sassen, 2004, p.84). The impact of the attack was further worsened by the poor timing, a period when the United States and the world at large experienced serious economic recession. In fact, this even heightened the negative economic impact.
The attacks were followed by aftershocks that immediately impacted various aspects and sectors of the global economy. Some of these impacts were direct while others were felt indirectly since governments across the world took various measures in response to the attacks (like strategies to prevent such attacks on them). Some of the areas of the global economy that were affected included foreign equity, consumer attitudes, tourism and travel, and capital flights from the United States (that was temporarily in place). Business was doing quite baldy and this resulted into the slow growth of global economy even further to an estimated 1.4% between 2000 and 2001. Marginal improvements began showing up between 2001 and 2002 (1.9%) and 2002 and 2003 at 2.7%. However, these dismal figures did not bear much promise unlike the estimates of the world economic growth before the attacks. According to the projections of most major econometric organizations, the global GDP (including 185 countries) would grow at a rate of 2.8% and 3.1% in 2001 and 2002 respectively (Sassen, 2004; Johnston & Nedelescu, 2005).
Among other considerations, this trend can be linked to the impacts of the attacks on the increased of international trade and reduced travels. For instance, costs in the private sector went high; insurance costs also rose since ‘enhanced measures to secure the shipmen’’ were also introduced (Sassen, 2004, p.87). There were also several changes in the adjustment costs in the travel and tourism industry. Besides, there was also a significant drop in the number of tourists visiting the United States of 12% and 4% in 2001 and 2002 respectively.
Question 2: 9/11 and Global Finance
Johnston and Nedelescu (2005) argue that there are three ways through which criminal activities like terrorism can affect the financial market. One is as a victim for example a subject of abuse or fraud), another is as a perpetrator that means the direct involvement in the offence of financial crime and the third one is as an instrumentality for instance, accepting to be used by other parties in committing crime. The 9/11 attacks turned the financial market into the victim of terrorism both directly and indirectly. The attacks were aimed at undermining the stability of the United States and international financial structures. After the bombings, the global financial systems were disrupted thereby resulting into huge property and communications systems damages, and heightened market volatility and uncertainty levels.
For instance, the widespread closure of the New York financial markets affected many major market players that had massive operations inside and outside the World Trade Center. The Bank of New York which is the largest custodian and settlement bank across the globe, incurred damages on its communication systems. The time at which the attacks took place dealt a huge blow to the capital markets. For instance, both the New York Stock Exchange and the NASDAQ stock market remained close for trading on September, 11. In fact, this went on until one week later on 17th September. The markets went through a period of volatility. The stock markets in the US, Europe, Dow Jones Euro STOXX index and key equity markets across the world experienced harp and instant declines (Johnstone & Nedelescu, 2005).
Question 3: Inequality, Poverty and Global Terrorism
Even though some think that globalization is the answer to disparities in wealth between the rich and developing nations, this concept has not necessarily turned out to be factual. Besides, these are views that are based on the assumption that globalization is a linear procedure. It is also not true because evidence indicates that globalization could lead to disparities in wealth. According to Fatton Jr. (2001), such differences are not new occurrences but a feature of the nature of global political economy. This means that according to him, globalization has not just engendered the exploitative patterns within and across nations, with the exception that, perhaps, such differences are just obvious and extreme for some to push aside.
Fatton Jr. (2001) points out that another impact of globalization is that it has resulted into the paradoxical inward focus upon individuals, i.e. localistic and nationalistic utterances. He attributes that the ‘fragmentation of nation-states into smaller units’’ (p.3) and the increase of religious and ethnic fundamentalism to this trend.
Piazza (2007) is in concurrence with the popular view among politicians and political figures in the public and media that international terrorism is a predictable outcome of global poverty as well as inequality in the distribution of wealth. This is based on the simple concept that:
‘’If citizens of a given nation are denied access to means of satisfying their basic human needs, deprived the access to reasonable economic opportunities, or experience soaring levels of socioeconomic inequality, they are rendered to become hopeless and enraged and might start looking at acts of political violence as an acceptable way of expressing their grievances…(even) in the estimation of the right thinking and moderately reasoning people’’ (Piazza, 2007, p.1).
Despite the statements above, the findings by Piazza (2007) give the implication that poverty and inequality are not necessarily the causes of terrorism. For instance, as poverty has significantly decreased, from an estimated 66.9% in 1982 to 47.6% in 2006, there has also been a similar trend on terrorist attacks (from 300 to 138 attacks). However, Piazza (2007) also says that increased disparity in wealth between nations between 1972 and 2006 has not been in correspondence with the increased number of terrorist attacks.
On the other hand, the impact of poverty and inequality cannot be sidelined just because of that reason, even if that impact is indirect. In fact, the conditions that are described above do not justify the reason for the excusal of global terrorism; they have partially given a reason for it. As argued by Fatton Jr. (2001) that ‘’they are certainly nurturing this ugly, murderous beat’’ (p.10).
Question 4: Recommendations
Despite the argument by Hagler (2012) that there is no possibility of another kind of attack like the 9/11 taking place again, he does not entirely dispute the occurrence of another terrorist attack on a major infrastructure.
The government has indeed taken various measures towards preventing such attacks. However, Hagler (2012) still points out a Rasmussen poll, which indicates that most Americans believe that there is a possibility of such an attack again. In the poll, 64% hold the belief that it might have a domestic origin. However, terrorism is a global issue as even seen in the earlier attacks on United States Embassies in Nairobi and Tanzania. Thus, all countries must put in place measures towards preventing another attack like the 9/11. The question is therefore focused on what should be done in order to avoid such an attack. It is necessary to come up with proactive solutions, instead of an active approach like:
- Establishment of the initiative for reporting suspicious activities nationally.
- Prevention of terrorist travel through imposing passenger screening and enhanced explosives screening
- Increasing the security of surface transportation
- Improving the safety of the global supply chain
- Adoption of strategies and technology for enhancing the detection of radiological, biological, and nuclear threats.
- Protection of major infrastructure
However, it is important to note that these strategies are only aimed at addressing the immediate security needs. They might not be sufficient if the factors that resulted into the emergence of global terrorism, like poverty and equality, are still in existence. Provided that these factors are still in place, many young people are likely to become members of terrorist groups. Maybe it is high time the United States changed its ‘big daddy’ foreign policy in the Middle East, an element that has been viewed as a stirring factor for increased terrorism in religion. It will take many years for this to be effective; however, it can slowly save future generations of potential terrorists.
9/11 and global terrorism are indeed phenomena that have since impacted various aspects of life. According to the sentiments of this paper, the global economy and finance was also affected, especially since different measures have been taken towards recognizing global terrorism as a new problem. The recommendations that are given above are just part of the steps that can be taken towards avoiding this menace.
Fatton Jr. R. (2001). Globalization, Poverty, and Terror. Retrieved 06 December
Hagler, F. (2012). September 11: Why Another Major Terrorist Attack could Happen in
2012, Policymic, Sept. 11. Retrieved 06 December 2013, http://www.policymic.com/articles/14502/september-11-why-another-major-terrorist-attack-could-happen-in-2012
Johnston, R.B. & Nedelescu, O.M. (2005). The Impact of Terrorism on Financial Markets,
IMF Working Paper, WP/05/60
Piazza, J.A. (2007). Global Poverty, Inequality, and Transnational Terrorism: a Research
Note, Perspectives on Terrorism, 1(4)
Sassen, S. (2004). Global Financial Centers after 9/11, Wharton Real Estate Center
Review, Working Paper No.474