Like almost any American over the age of 25, I vividly remember Sept. 11, 2001. The images of planes striking buildings and people fleeing in terror — and the resulting acts of heroism — are indelibly etched.
The human consequences defy measurement, and the economic costs were substantial. Property damage and cleanup costs were extensive. The stock market was shuttered for days and plummeted upon reopening. Air travel was also halted and required considerable time to recover. Thousands of lives were lost, along with their potential creativity, earnings, and productivity. The events of 9/11 caused $100 billion in losses in New York City alone, with the fallout affecting companies around the world. Consumer and business confidence dropped, causing further economic harms.
Spending increased in some industries in the aftermath. Investments in private security and the military increased for a few years. Research and development to deter future issues was also encouraged.
Rules for many activities changed, such as more stringent requirements for airport screening. While less obvious on the surface, the attacks brought a new risk into focus — the idea that terrorists could cause such damage on U.S. soil. Consequently, we have implicitly raised the discount rate on everything, thus affecting the level of investment and how resources are allocated.
For the overall economy, however, the events of 9/11 presented only a transitory setback. We were already in a recession at the time (the aftermath of the dot-com bubble), and it continued a few more months before things turned around. The losses were far less severe than the Great Recession, which in turn pales in comparison to the steep COVID-19 downturn.
The reason for this remarkable ability to recover from even horrific events such as 9/11 is the adaptability and resilience of people and markets. Things changed, but we adapted. Flying became different in 2001, but we still fly. We have strong institutions such as the Federal Reserve ready to take swift and decisive action as needed to help curtail downturns and support recoveries.
As we struggle with the lingering pandemic and its deleterious effects on our lives and livelihoods, the tragedy of 9/11 offers a compelling and uplifting lesson. Rarely have we had our collective confidence and emotions so thoroughly shattered. Things changed, but we endured and achieved new heights. Many aspects of our daily sojourn have been temporarily (and in some instances permanently) altered over the past 18 months — how we work, how we travel, how we shop, how we interact with one another, and even how we play. What has not changed, however, is the institutional strength and human ingenuity that has brought us through past challenges and will do so again. Onward! Stay safe!