[OUTLOOK]Finding a Silver Lining in a Black CloudI would like to depend on my intuition at this moment, despite the criticism of distinguished economists who opine that the world economy will get worse and that the recovery of that economy will likely be delayed, because of the terrorist attacks on American soil.
First of all, will the economic recovery be delayed? It's difficult to say. We know that a recovery path can be charted in the aftermath of the attacks. The judgment that economic recovery will be delayed is based on the expectation that the bountiful consumption that has so far has propped up the U.S. economy, will shrink.
However, apart from the consumption in civilian sectors, what about government spending? And what about several demand promotion policies, such as interest rate cuts in many countries?
After the terrorist attacks, it was the facts mentioned below that drew my attention, more than the huge loss experienced by investors caused by a rapid plunge in stocks. Both the United States and the European Union promptly cut interest rates by 0.5 percentage points. If not for the terrorist attacks, this kind of decisive policy cooperation would not have occurred. The U.S. government appropriated $40 billion for disaster relief expenditures, which both the ruling and opposition parties agreed to. A professor at Princeton University, Paul Krugman, a leading figure in economics, writes columns, sometimes frantically, almost every day in the New York Times. He insists that the government should expand spending right now.
Curiously, the attacks may serve as a silver lining for a great policy change. Governments that have cut interest rates bit by bit and were not willing to spend money in order not to stimulate inflation, are more afraid of "post-terrorism" than inflation. Though the economic downturn may seem more serious and the speed of a downturn faster than it was before the attack, this would lead to early economic recovery that we couldn't have expected otherwise.
What's next? Will prices go up? Contrary to the forecast, oil prices went down. As consumption shrinks, prices will go down. We should pay attention to the announcement of the Organization of Petroleum Exporting Countries, which has promised price stability. All this proves that the world is looking squarely at the reality that the bigger catastrophe is the "proliferation of the terrorist attack effect." In this context, we can also comprehend recovery efforts around the globe, such as Yasser Arafat donating blood, and the much-calmed dispute between Israel and Palestine.
In addition, we should note that oversupply is a major factor of the current world economic depression. Also the "War Against Terror" is totally different from World War II and it may not solve the problem of oversupply. Instead, as consumption declines, the industries of "oversupply" may see the "bottom" earlier, which may also lead to an early recovery. Seeing the "bottom" may certainly be painful, for the pain is further accompanied by severe competition as seen in the survival game between Hynix of Korea and Micron of the United States.
On the other hand, the aftermath of the terrorist attack will continue for a while. The insurance, airline, maritime and tourism industries have been hit directly by the attack, and the stock market, which is experiencing severe fluctuations, entered a general downturn. When will the general trend overturn? This may just be a time for a "neo-world order."Moreover, a neo-order after the Cold War, a neo-order against Pax Americana, a neo-order over unilateral globalization will join hands with the neo-order against terrorism.
The Midway naval battle during World War II was a watershed victory for the United States and served as an inflection point that put an end to the Great Depression. In the same manner, the emergence of a neo-order that will lead to a victory over terrorism will surely be an inflection point of world history. Surely that battle won't be easy. The Western world should not make the Islamic countries its enemy and the United States should be cautious in retaliation. It is better to believe in rationalism to block World War III than to peruse reports that say the stock market is in a psychological depression.
The writer is the chief economic news editor of the JoongAng Ilbo.
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