Independent Student Newspaper Since 1969

The Badger Herald

Independent Student Newspaper Since 1969

The Badger Herald

Independent Student Newspaper Since 1969

The Badger Herald


War has various economic effects

As American forces launch the first offensive wave in a long campaign against terrorism, the implications for the United States economy are unclear.

UW business professor Richard Green said wars generally profit the national economy.

“Wars historically stimulate the economy,” Green said. “World War II got the United States out of the Great Depression.”

While the war manufacturing industry is expected to benefit from the country’s ongoing military action, there is no precedent for the current U.S. military operation. This makes it impossible to predict what the long-term, overall effect will be on the American economy.

“These events are so different than anything we’ve seen in the past, so to make predictions is not helpful,” Engel said.

UW economics professor Charles Engel said the uncertainty created by the terrorist attacks has left people feeling more vulnerable, which has not been good for consumer confidence.

“When there is uncertainty, consumers tend to cut back on some expenditures, and businesses tend to cut back on production,” Engel said.

The nature of this crisis has encouraged government lawmakers to respond quickly, which might work to counter the negative effects of the terrorist attacks.

“Everybody knows Sept. 11 was bad for consumer confidence, so policymakers acted quickly,” Engel said.

In addition to moves taken by Congress and the president, the Federal Reserve cut interest rates half a percent immediately following the attacks, keeping consumer confidence from collapsing.

Terry Ludeman, a market analyst for the Department of Workforce Development, said while the terrorist attack of last month did affect the national economy at the time, the situation is quickly returning to normal, and he expects consumer confidence to recover soon.

“People are moderately affected, but people are pretty much getting back to their normal life,” Ludeman said.

During the Persian Gulf War, the greatest economic impact was at the pumps. Oil and gas prices rose during the Mid-Eastern conflict, although Green said gas prices should not increase because of the current war.

“If people aren’t spending money or going places, it could lead to lower gas prices,” Green said.

Much of the economic effect will depend on the success of the military campaign.

“It’s hard to say what the impact will be, but if the war spreads, there are arguments either way for the direction of the economy,” Green said.

Ludeman said because of the structure of the international economy, the war will not have a huge global economic effect.

“The international economy is largely made up of small developing countries,” Ludeman said. “Some countries may see a recession, but there is almost no chance of a worldwide recession.”

However, Engel said the global economy already suffered before the attacks, and the current instability can only worsen the international financial situation.

“The whole world economy is going through a period of slow growth,” Engel said. “Putting that together with these events, it is pretty certain there will be a global recession.”

The Wisconsin economy, which was suffering before the attacks, has been further damaged since the events of the past month, especially since the state’s economy relies so heavily on manufacturing.

However, the industry hit hardest has been transportation, which means Wisconsin’s economy might be safe from serious harm.

“The good news is that Wisconsin relies much less on travel, since this isn’t a major travel destination,” Green said.

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