• Do Counterterrorism Measures Stifle Economic Growth?

    Saturday 28th January 2006 - 9:00am - 10:15am

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  • Do Counterterrorism Measures Stifle Economic Growth?


    World Economic Forum Annual Meeting 2006

    The US economy lost billions after the 9/11 attack and the costs are ongoing, especially with respect to security measures, noted moderator Frederick Kempe, Assistant Managing Editor and Columnist, Wall Street Journal, USA, opening this session. No one argues that measures are needed to prevent another terrorist attack, but have the costs been excessive? Have they been cost effective? How have they affected our competitiveness? And, what has been the economic impact of anti terrorism measures?

    "The economic costs were big after 9/11, but from a global perspective they have been relatively modest," said Kenneth Rogoff, Thomas D. Cabot Professor of Public Policy and Professor of Economics, Harvard University, USA. He noted that the risks will be much greater if there is another big attack, particularly for the shipping and transportation industry, which Rogoff sees as a key engine in globalization. "We need to prepare for a more flexible market oriented response to bear the costs."

    David Abney, President, UPS International, UPS, USA, said security costs to his company which moves 16.5 million packages a day increased after 9/11, with the biggest costs going to capital equipment (i.e., radiation detectors) and a change in processes and procedures. "These costs have been significant, but manageable," Abney said. Helping to mitigate some of the risks, companies like UPS are working with the government on counterterrorism measures. One example has been a private public partnership that has established air cargo security and procedures.

    Howard Kunreuther, Cecilia Yen Koo Professor of Decision Sciences and Public Policy, The Wharton School, University of Pennsylvania, USA, advocated coordination between government and the private sector in establishing regulations for certain industries, such as the airline industry, but cautioned against going "overboard" with some regulations that can in the end be counter productive. "There are high costs associated with going overboard," Kunreuther said. Regulations "should be appropriately coordinated mechanisms with balance". He also stressed that the uncertainty of events makes it difficult to decide what actions to take, and when actions are taken, there is always the problem of the "weak link" where the vulnerability of one part of a supply chain can compromise a company or industry (i.e., the airline and shipping industry).

    Faryar Shirzad, Deputy Assistant to the President; Deputy National Security Advisor for International Economic Affairs, National Security Council, USA, also cited the importance of private public partnerships to address counterterrorism measures. He said that the government is working with trading partners throughout the world to improve security measures and measures are constantly being reviewed to strike the right balance. "The trick," Kempe added, "is getting the balance right so that we are not killing innovation and economic growth."

    On human capital and education, Lee C. Bollinger, President, Columbia University, USA, said the US university system has suffered since 9/11. Hundreds of thousands of foreign students have foregone studies or are unable to gain visas to the US. "There is a general perception that US universities are at risk of losing a significant percentage of the most talented students to other countries," Bollinger said. "If there is another attack, there definitely will be a drop in enrolment in US universities. To fight terrorism, I would invest in knowledge by helping young people understand different parts of the world."


  • Howard Kunreuther Howard Kunreuther
    James G. Dinan Professor and Professor of Decision Sciences and Public Policy, The Wharton School, University of Pennsylvania, USA

    1959, AB, Bates College; 1965, PhD, Massachusetts Institute of Technology. Formerly, with University...

  • David Abney David Abney
    Chief Executive Officer, UPS, USA

    Bachelor's in Business Administration, Delta State University. Since 1974, with UPS International in...

  • Lee C. Bollinger Lee C. Bollinger
    President, Columbia University, USA

    Leading First Amendment scholar; has taught and written on freedom of speech and press for over 30 y...

  • Kenneth Rogoff Kenneth Rogoff
    Thomas D. Cabot Professor of Public Policy and Professor of Economics, Harvard University, USA

    1975, BA (Hons), Yale University; 1980, PhD in Economics, Massachusetts Institute of Technology. For...

Moderated by

  • Frederick Kempe Frederick Kempe
    President and Chief Executive Officer, The Atlantic Council, USA

    Graduate, University of Utah; Master's degree, Columbia University. Member of the Board, American In...