When we last checked in with TIME's Board of Economists, at Davos in February, they were already warning that the economic woes of the U.S. were likely to spread to the rest of the world. So with America facing its biggest crisis since Pearl Harbor, what happens now?
Joseph Stiglitz is professor of economics at Columbia University, former chief economist at the World Bank, and former economic adviser to President Bill Clinton. He was awarded the Nobel Prize for economic science in 2001:
"The U.S. economy was clearly sliding into a recession. The attack pushed us over the brink, and this in turn exacerbated the global slowdown. During the Asian economic crisis in 1998, the U.S. was the one factor keeping the global economy going. Now, as you travel around the world, you can see the impact. Areas like Taiwan and Singapore that weathered the last crisis well are now into recession. I spent a lot of time in Latin America recently, and you can see it there even more strongly. Ecuador, for instance, sends a huge portion of its workforce abroad ó it's a source of income and it also relieves their unemployment problem. They are now very worried about their migrant laborers becoming unemployed.
"The attacks have also had an enormous impact on politics in the U.S. The stimulus packages that the Republicans have put forward in both the House and the Senate are not very well designed. They're basically just giving large wealth transfers to corporations and high-income individuals. If we were in more normal times, there would be more willingness to criticize this. I detect a reluctance from Democrats to take on President Bush on this issue.
"Sept. 11 clearly has been a field day for corporate lobbyists, and it's been politically divisive. I think Europeans have taken the right attitude on airlines. They said, ëO.K., you lost four days of revenue, so we'll compensate you. But we won't compensate you for four years of bad management.'
"The U.S. has been going around the world telling countries they can't subsidize, and then we give a huge subsidy to the airline industry. We throw out free-market principles when it comes to airlines, but we won't help the unemployed because it might induce them not to search for a job. But the problem isn't going to be people not looking for a job; the problem will be no jobs."
Kenneth S. Courtis is vice chairman, Asia, of Goldman Sachs in Tokyo:
"Sept. 11 signaled the end of the decade of self-indulgence and celebrity and the beginning of a dirty decade of realpolitik. As for the economics, in early September I would have said that the U.S. would have bottomed by the end of December. But Sept. 11 has compressed into a short period of time things that would have taken months to happen. It compressed monetary policy and corporate restructuring. It quickened the blowout in markets and catalyzed the crash in consumer sentiment. So rather than a long and frustrating U-shaped bottom, we're getting a jolting V. In Japan, which has no margin to absorb shocks, the V will be particularly sharp going down. China will stand out like a beacon of light in Asia as its economy grinds ahead.
"Sept. 11 will crystallize the debate about globalization. Free movement of capital has made the nation state untenable. And we don't have international institutions that will help people through these huge transitions. We have organizations that are strong in finance and trade, but for labor, the environment and health we have very weak international regimes. Now people are saying, ëIt's not just the economy, stupid.'"
Moisés Naím is editor of Foreign Policy, and former Trade and Industry Minister of Venezuela:
"Before Sept. 11, the American economy had been expanding every month for 133 months. That created all kinds of distortions and excesses, and the economy was already slowing down. Sept. 11 just accelerated the trend. The attacks gave a license to the private sector to restructure ó firing people, closing down divisions, retrenching from overseas operations ó more quickly and drastically. Sept. 11 may be to the 2000s what the junk bonds and leveraged buyouts were for the 1980s. Companies will clean up their acts and become leaner and more competitive.
"The other effect of Sept. 11 is the return of the deficit. Before this happened, the debate was over how the U.S. government would spend the surplus. Now the U.S. is spending like there's no tomorrow ó on the stimulus, on the war, on homeland defense. Nobody really knows how much the U.S. is spending now. That plus declining revenues mean a deficit."