How the Events of September 11, 2001, Influenced on World Markets - Coursework Example

Introduction The events of September 11, 2001 are familiar to just about anybody alive today. Al-Quaeda terrorists hijacked four planes, crashing two of them into the World Trade Center in New York City, and another into the Pentagon. A fourth plane, apparently headed for the White House, crashed into a Pennsylvania field after the passengers on this plane heroically stood up to the terrorists and did not allow them to accomplish this particular mission. The attack was this generations Pearl Harbor, and caused ripple effects that included Americas involvement in two wars, markets to suffer, travel and tourism to decline and led to America adding security measures to attempt to ensure that a similar attack will never again occur on American soil. Effect on World Markets Stock prices are indicative of how optimistic individuals feel about the future. Terrorism disrupts the stock market by causing panic, and pessimism, as people decide, in droves, that their money is better off in a more secure institution or investment (Chen & Siems, 2004, p. 349). Chen & Siems (2004) researched the impact of 9/11 on world markets, in comparison to other historical terrorists events that have occurred worldwide, including the sinking of the Lusitania, the bombing of Pearl Harbor, the invasion of France, different airline bombings, the invasion of Kuwait, the World Trade Center bombing and the Oklahoma City bombing. 9/11 had the potential for a large impact on world markets, not just because of fear, but because the world trade infrastructure was disrupted because of the destruction of the twin towers (Johnston & Nedelescu, 2005, p. 5). What they found was that, while there was a significant negative impact on the stock market for 9/11, in that it stocks were off almost 8%, compared to almost 3% for Pearl Harbor, less than 2% for the invasion of Kuwait, and an increase of almost 2% for Oklahoma City, the stocks rallied much faster than many of the other events listed. For instance, the stocks did not rally after Pearl Harbor for 232 days, after the invasion of Kuwait there was not a recovery for 134 days, and, after the invasion of France, stocks did not recover for over 2 ½ years (Chen & Siems, 2004, p. 354). What they also found was that all 34 world markets that they examined had a negative market impact on the day of the tragedy, with 94% experiencing almost an almost .01% decline, and Helsinki and Austria experiencing a .10% decline (Chen & Siems, 2004, p. 358). However, after 11 days, almost all of the markets had recovered, and that 82% of world markets fully rebounded within 60 days after the attack (Chen & Siems, 2004, p. 360). Impact on the travel and tourist industry The travel and tourism industry, which includes hotels, airlines, restaurants and the like were also affected by the attacks. In New York City, there were 6,000 restaurant and bar jobs that were lost after the attacks, but this quickly rebounded fully by December of that year (Bram et al., 2002, p. 7). The hotel industry in New York was a bit slower to rebound than the bars and restaurants, with 6,000 jobs lost after the attack, mainly due to the drop-off in the tourist industry, and these jobs were not recovered until March 2002 (Bram et al., 2002, p. 8). The nation as a whole suffered a loss of $11.1 billion in restaurant and bars spending after the attacks, much of it due to decline in foreign travel (DeVol et al., 2002, p. 1). The airline industry in New York experienced an even more devastating hit, with 11,000 jobs lost and these had not rebounded as of November 2002 (Bram et al., 2002, p. 9). Overall, the airline industrys consumption expenditures declined by $12.5 billion directly after the attack (DeVol et al., 2002, p. 3). United States carriers suffered a 30% loss in passenger traffic in October after the attacks, while, worldwide, airline passenger traffic decreased by 20% (Drako, 2004, p. 436). Airline stock prices declined by 30% as well after the attacks, with American Airlines being the hardest hit, as their stocks dropped over 50% on the first trading day after the attacks (Drako, 2004, p. 438). Moreover, partly because of the increased security at airports makes travelling more of a hassle, the effects on the airline industry were long-lasting, with a demand shock of -7.4% being felt as late as November 2004 (Ito & Lee, 2005, p. 75). The effects rippled to tourist destinations elsewhere in the United States as well, with the heaviest job losses after the attacks being felt in Honolulu, HI; Chicago, IL; Myrtle Beach, SC; Las Vegas, NV; and Los Angeles, CA. Of these, Las Vegas was the hardest hit, followed by Myrtle Beach and New York City (DeVol et al., 2002, p. 1). Overall, foreign travel to the United States was cut by almost $26 billion directly after the attacks (DeVol, 2002, p. 3). Americas Response to the Attacks In the wake of the attacks, the United States passed different acts that were designed to prevent further attacks. One of these acts was the USA PATRIOT ACT (Herman, 2005, p. 3). Two of the provisions of this act will be discussed here. The first of these provision is Section 215, which authorizes the government to “acquire records and intangible things from custodians – including educational or financial institutions, Internet service providers, or even indignant librarians – under a court order” (Herman, 2005, p. 17). Any record at all can be obtained under this provision, without a showing of suspicion (Herman, 2005, p. 18). Once the affiant states that the information sought is relevant to a terrorism investigation, this information may be obtained ex parte (Herman, 2005, p. 18). Whats more, nobody can disclose to the target that this information is being sought, and there is no time limit on this “gag rule.” (Herman, 2005, p. 19). The criticisms of this provision are that there is no requirement for probable cause; sensitive documents such as medical, library and religious information may be obtained; and there is no requirement that the individual whose records are obtained be shown to be involved with terrorism or be suspected of any misconduct (Herman, 2005, p. 19). This provision also potentially violates the Fourth Amendment in that the target may never find out about the issuance of an order (Herman, 2005, p. 20). This may also be a violation of the First Amendment, in that an individual may feel intimidated enough to not check out certain books from the library or attend Mosque services, for fear that the information related to these actions will be obtained and used against them. This section of the USA PATRIOT Act has been cleverly drafted to preclude litigation. The reason why litigation is difficult is because of the gag rule – nobody can discover if they are the target of an investigation. Without an affirmative showing that they are the target of an investigation, there can be no lawsuit, as standing to bring a lawsuit would be lacking. Another provision that is potentially offending to privacy rights is Section 505, which authorizes the government “to obtain records from a communications provider by issuing its own administrative subpoena, called a National Security Letter (NSL), to seek a variety of information about the customers of communications providers, including telephone companies and Internet service providers ”(Herman, 2005, p. 20). The gag order on this section is even broader than Section 215, as no person may find out that a certain person was the target of an investigation. Section 215 specifies that the target may not find out. Also, like Section 215, there is no requirement of a showing that the person is involved in terrorism, only that the information is being obtained as a part of a terrorist investigation (Herman, 2005, pp. 31-32). There is no requirement of suspicion or judicial review (Herman, 2005, pp. 31-32). This provision was challenged by an Internet service provider who sought counsel and brought a lawsuit that stated that his Fourth Amendment rights were being violated by the statute (Herman, 2005, pp. 31-32). Note that this suit was brought by an Internet service provider, not by a target. The court found the Internet service providers Constitutional rights were violated, and that the search must be reasonable, with the minimum procedure required being the provision of a neutral tribunal to determine if the demand for information complies with the Fourth Amendment (Herman, 2005, pp. 35). In finding a violation of the Fourth Amendment, the court found that the section is unduly coercive on NSL recipients, and that most providers would be compelled to provide the information and give in to the demands for total and permanent silence (Herman, 2005, pp. 35). However, since the lawsuit did not concern a target but, rather, a provider of information, the question of whether a targets Constitutional rights have been violated was still undecided. 2.6.3 The FISA and Warrantless Wiretapping The National Security Agency (NSA) began warrantless wiretapping, without judicial oversight, in 2002 under the tutelage of President George Bush, seemingly in violation of the Foreign Intelligence Surveillance Act, which required court orders before engaging in such surveillance. This has enraged privacy advocates. (Adler, 2007, p. 2). This was a secret program that engaged in electronic surveillance without prior judicial authorization. (Avery, 2008, p. 1). The President justified this act by stating that it was part of a “Terrorist Surveillance Program,” (TSP) and claimed executive privilege in doing so. (Sims, 2006, p. 101). These actions were deemed illegal by many commentators and privacy advocates, who states that the FISA clearly requires judicial oversight, consistent with the Fourth Amendments prohibition on unreasonable searches and seizures. The FISA states that “the United States must seek authorization from the FISA court if electronic surveillance is to be conducted within the United States of if communications of United States persons within the United States are being targeted.” (Sims, 2007, p. 167). The administration stated that the program intercepted calls between citizens of the United States and Al-Quaeda operatives. While these communications do not require a court order if the target is outside of the United States, it does require one of the target is in the United States. (Sims, 2007, p. 168). The Administrations justification for these warrantless searches is that they are authorized by the Authorization for Use of Military Force (AUMF), or, alternatively, the FISA is unconstitutional, two theories that have been debunked by privacy advocates and courts alike. (Sims, 2007, pp. 168-169). Conclusion America suffered an enormous tragedy on September 11, 2001. The terrorists effectively disrupted the world markets by destroying the twin towers, and the effect on the stock market was felt around the world. However, although the stock market did suffer a hit, it rebounded surprisingly fast, when compared to previous terroristic tragedies that have occurred worldwide. The markets were not the only sector that suffered, as travel and tourism did as well. While the tourism industries of Honolulu, Las Vegas, Myrtle Beach, Chicago, Los Angeles and New York City were the hardest hit, there is evidence that, nationwide, there was a decline in bar, restaurant and hotel revenue. Meanwhile, the airlines were the hardest hit sector, suffering by far the most devastating loss and this loss, unlike other losses, proved to be intractable, as there was still a significant negative impact on the airline industry three years later. The response to the attacks by the United States has resulted in a loss of liberty and privacy, as the government has used the attacks as an excuse to delve ever more into our personal life. Because of the attacks, library rentals are scrutinized, as is internet surfing. Americans may now be subject to electronic surveillance without warning or warrant. This loss of liberty was perpetrated under the guise that it was necessary to keep Americans safe, and, although it seemed to have worked, in that there has not been a major terrorist attack since September 11, it seems like a high price to pay. Sources Used Adler, A. 2007, “The Notice Problem, Unlawful Electronic Surveillance, and Civil Liability Under the Foreign Intelligence Surveillance Act,” web accessed 12 June 2010, available at: http://papers.ssrn. com/sol3/papers.cfm?abstract_id=995646 Avery, M. 2008, “The Constitutionality of Warrantless Electronic Surveillance of Suspected Foreign Threats to the National Security of the United States,” Legal Studies Research Paper Series, Suffolk Law School, web accessed 8 June 2010, available at: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1139072 Bram, J., Orr, J. & Rapaport, C. 2002, “Measuring the Effects of the September 11 Attack on New York City,” FRBNY Economic Policy Review, pp. 1-16. Chen, A. & Siems, T. 2002, “The Effects of Terrorism on Global Capital Markets,” European Journal of Political Economy (20), pp. 349-356. Devol, R. 2002, “The Impact of September 11 on US Metropolitan Economies,” Milken Institute Research Report, pp. 1-102. Drako, K. 2004, “Terrorism-Induced Structural Shifts in Financial Risk: Airline Stocks in the Aftermath of the September 11 Terrorist Attacks,” European Journal of Political Economy (20), pp. 435-446. Herman, S. 2005, “The USA PATRIOT Act and the Submajoritarian Fourth Amendment,” Brooklyn Law School Legal Studies Research Paper, No. 34 Ito, H. & Lee, D. 2005, “Assessing the Impact of the September 11 Terrorist Attacks on U.S. Airline Demand,” Journal of Economics and Business (57), pp. 75-95. Johnston, R. & Nedelescu, O., 2005, “The Impact of Terrorism on Financial Markets”, IMF Working Paper, pp. 1-23. Sims, J. 2006, “What NSA is Doing...and Why Its Illegal,” Hastings Constitutional Law Quarterly, vol. 33, nos. 2&3, pp. 101-136. Sims, J. 2007, “How the Bush Administrations Warrantless Surveillance Program Took the Constitution on an Illegal, Unnecessary, and Unrepetentant Joyride, UCLA Law Journal of International and Foreign Affairs, vol. 12, no. 163, pp. 163-179. Read More