November 23, 2001

September 11, 2001 Turned War and Politics Topsy Turvy: Its Effects on the Economy Are Less Important, But We Still Don't Know What They Will Be

The Macroeconomic Outlook for 2002

With the terror attack on the World Trade Center on September 11, 2001, winter came to the world economy. Both the direct and the indirect effects of the terror attack, coupled with the already existing sources of weakness--from the collapse of the dot-com bubble in the United States, from European interest rates too high in the interest of strengthening the new euro in the short run, from the resumption of recession in Japan--promise to make the twelve months following September 11 the worse twelve months for world economic growth since the early 1980s. We do not know how harsh this winter will be, but we do know that we are in it.

However, winter will pass and spring will come. The second half of the 1990s--even with all their speculative excess--revealed that the fundamental economic benefits from the technological revolutions in data processing and data communications (and from the coming technological revolution in biotechnology) are enormous and promise a bright long-run future for the growth of the world economy. There is every reason to hope that world governments will get their macroeconomic policies right in 2002, and that starting in 2003 the world economy will once again begin to fulfill the promise of more rapid economic growth.

Posted by DeLong at November 23, 2001 09:17 PM | TrackBack

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