A New World Economic Order?

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The American boom of the last ten years — a boom that is now very likely to be ended by the economic shock of Tuesday’s horror — was partly built on a worldwide perception of the U.S. as a "safe haven." Its stocks were perennially headed up. Its consumers perennially spent. And most fundamentally, its Treasury bonds and dollars were rocks as stable as its government, storm-proof shelters that were sought out by foreign investors — the so-called "flight to quality" — in times of uncertainty.

In financial markets, perception is reality; confidence in the benchmarks of the U.S. economy made those benchmarks strong, and even more attractive. But when the news of the terrorist attack on U.S. soil spread around the world, it triggered nearly a 2 percent slide against the once-beleaguered euro in world markets — and Muscovites lined up at currency exchange points to trade their once-almighty dollars for, well, rubles.

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Short term, these are knee-jerks, and besides, a slightly weaker dollar may actually speed the U.S.’ recovery by making its exports cheaper abroad. But now America has been violently jolted into the company of nations that must spend their days thinking about terrorist attacks — company that used to be "the rest of the world." And America may be even worse off than that — there’s only one Great Satan.

So what sort of haven is the U.S. now? Technically, and in the very short term, not too different. Alan Greenspan will spare no liquidity to keep the money market and banking system oiled and the dollar in respectable odor, and investors, by the time stock markets reopen Monday, will probably have found enough silver linings in the massive renovations and relocations ahead to keep stocks afloat and perhaps even bid them higher. Think about tech stocks — when the tallest hives of the financial district and the Pentagon’s communications center is destroyed, there’s a lot of capital spending on the way.

Rebuilding longer-term confidence in the solid supremacy of the American economic way may be in George W. Bush’s hands. It starts with the military response for which the world is waiting right now — this ten-year boom started when the tanks rolled onto Kuwaiti soil, and starting it again will take a psychological sense that the U.S. has its enemies in its sights, its political will galvanized, and its thinking cap on about how not to do more harm than good.

Then comes the commitment — to the long, protracted geopolitical struggle into which the U.S. was rudely inducted Tuesday morning. Government spending — defense, airport security, "homeland defense," even a new sort of Marshall Plan for the Muslim world; public relations is as worthy a war as any. A serious reorganization of the way we gather intelligence and guard our vulnerable points would help build the impression that the U.S., at least, is moving toward the same domestic-security vigilance as that "rest of the world" where foreign investors live. And a show of leadership and serious-minded strategy by this administration might even give the impression that we can emerge from this blood struggle stronger and safer than when we entered it.

Perception is reality, and time is of the essence; as any American will readily admit, this haven just doesn’t feel as safe as it used to. And the defining characteristic of investors is to never look back, to flit unblinkingly to the safest haven around, no tears shed and no patriotism considered. And if New York City, dangling nakedly into the ocean, its gateway toppled, doesn’t seem the stronghold it once did, the investing hordes may just start to shop around for a new one, and adjust the balance of world economic power.

After all, when the towers of capitalism fell and the capital caught fire, one reassurance was instantly available: Alan Greenspan was in Switzerland.