Dialogue: All our daily lives will be changed

A generation from now the effects of yesterday's attack on America will still be felt on the world economy, says HAMISH McRAE

America will move some way towards a war economy footing, for the entire might of the world's largest economy will be directed to making sure that nothing like this could ever happen again.

This also has profound implications for the rest of the world: it is the seismic shock that renders irrelevant all those arcane calculations that people make about what consumers might do, what happens to international trade flows, what happens to interest rates or the financial markets. The world economy will be different a generation from now as a result of what happened yesterday morning. This is not just a security matter; it is a matter of how we live our lives.

It is hard in the midst of such human catastrophe to do more than set out a framework for understanding how the effects might unroll. There are some obvious short-term effects that we can sketch now.

But there will also be medium and longer-term ones; ways in which the daily lives of all of us will be changed. For the world economy is the sum of millions of decisions by billions of people. Those decisions will be shaped by the events of yesterday.

What has happened will not - we must all desperately hope - become analogous to the way the First World War swept away the interconnected world economy of the 19th century. But it will make our present, infinitely more complex, global economy harder to run.

In the short term there will, of course, be great disruption. The normal calculations of businesses, the normal behaviour of people are frozen.

Start with the people. We have to eat, we have to sleep, we have to work - but for weeks we will behave differently. We will travel less, we will be more careful in our day-to-day behaviour. In America, the shock is greater than elsewhere, but the rest of the world will be changed too.

The business community will react, as it does to all changes in human behaviour. You do not take a big commercial decision in circumstances like this. So business plans for investment, for the hiring of staff, the way the community organises the minutiae of daily life - all these things go on hold for a while.

In addition, many US corporations and financial enterprises have their headquarters in Lower Manhattan. Even when they have absorbed the consequences of the human tragedy that has struck their people, they will find their activities disrupted beyond any of their experience.

But not for ever. There will be a burst of activity, led by the US Administration, to try to create an economy that will be less vulnerable.

To make calculations as to whether such a catastrophe adds or subtracts from economic growth would be obscenely callous - quite aside from being unknowable. But we can say that the commercial consequences will be immense.

In the medium term, tremendous energy will be devoted to developing an economic system less vulnerable to terrorist attack.

Remember that the internet was developed by the US military as a way of keeping telecommunications open in the event of a nuclear attack, or that our present mobile telephony was derived from cellular military communications. So the technologies that will be developed to make the US economy more secure will have consequences for all of us.

Some of those consequences will affect privacy and liberty. Now it is possible, in theory at least, to identify and track people as never before. A mass of information about most of us is held on computers. The US will inevitably devote its ingenuity and resources to identifying threats to its security.

Of course, the rest of the developed world does not have to follow the US in the detail of its security measures, but it will inevitably be changed by the technologies that America develops and applies. The US, by virtue of its economic might, sets many of the standards that the world subsequently is bound to take on.

So there will be a decade, maybe more, of change in the relationship between government and citizen. We may not trust government more, but we will to a greater extent find ourselves accepting its authority.

The developed world will not move fully to a war economy - unless there are some dreadful events in the future that we cannot bear to envisage - but some of the aspects of wartime security will start to pervade our lives.

And the long-term consequences? The great question is whether terrorism in America ends the march towards a more liberal, more interconnected world economy.

For the past half-century, greater freedom of the international movement of goods, of money, of ideas and, to some extent, of people has fuelled the greatest burst of prosperity the world has ever known.

There have, of course, been losers. Some countries have not had the appropriate organisation to allow their people to share in greater prosperity. Many people do not have the appropriate skills to do as well as they might. Others simply are born in the wrong place.

But the prosperity, for the developed world at least, is real - and with it the other facets of the liberal world economy. People in Britain, for example, regard it as normal to pop down to the Mediterranean (or even to New York) for a few days holiday. We watch the latest Hollywood movie on satellite television without thinking about the technology.

These are the benefits of an interconnected world economy. But an interconnected economy is a vulnerable economy. It is vulnerable to technical failure. It is vulnerable to ideas: witness the resonance the anti-globalisation protesters have achieved. And now we know it is vulnerable to terrorism.

It is possible that September 11, 2001, will prove a turning point; the start of a gradual clamping down of the international movements of trade and money, a gradual retreat from an interconnected world. Isolationism in America could be matched by retrenchment in Europe. If that were so, then the decade between the collapse of communism in Eastern Europe and yesterday's catastrophe will seem like a brief golden age. If that were so, terrorism would have won an extraordinary victory.

But it is also possible - let us believe more likely - that the US, together with the other liberal democracies of the world, will face down this threat, just as it has so many others.

The enormous resources of the world's democracies will be thrown into an orderly, tough-minded and self-confident fight against the enemies of the liberal order. And they will win.

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