Having been attacked, unsuccessfully, in 1993 increased the probability that it would be attacked again. We recognized this immediately after the ’93 bombing, although we could not assign any specific probability to a second try. In contemplating all of the possible forms of attack, we even included among the theoretical scenarios a plane deliberately crashing into the building, although we considered it a remote possibility, and there was little we could do to prevent such an attack. We did, however, recommend measures to permit rapid
evacuation of the towers.
Officials in charge of the property also recognized that another major terrorist attack, even if unsuccessful, would ruin its commercial future. I want to underline this point when as we consider the ruinous consequences of another 9-11 scale attack in the United States.
THE ECONOMIC CONSEQUENCES OF 9-11
The total destruction of the World Trade Center obviated concerns about the commercial viability of the property itself, but the attack had
devastating effects on the American economy.
Calculating the costs of 9-11 is tricky business. In addition to the lives lost, direct damage and business interruptions produced $50 billion in insured losses. Total losses in revenue ascend to the $100s of billions.
Increased security requirements have cost the federal government tens of billions in additional spending (not counting the costs of the war in Afghanistan). State and local governments are being crushed by increased security costs. New York alone is spending $5 million a week to remain on a heightened state of alert. Corporate security costs have increased on average by 40-50 percent, a heavy burden in a weakened economy.
Some commercial property insurance premiums increased by 30 percent. Terrorism coverage dried up.
Consumer confidence plummeted. There was a massive drop in the U.S. stock market, although not all of this can be blamed on 9-11.
Security-related delays eroded productivity. Just-in-time inventories have been increased at a cost. We spent the last three decades exploiting new technology and management techniques to remove friction from the economy. We have spent the past 18 and a half months putting friction back in.
All of this imposes a cost. I doubt that the terrorists themselves were aware of this on September 11, but they cannot help but to have
observed these effects in subsequent months. Terrorism is an effective mode of economic warfare, unless we can develop sustainable counterterrorist strategies.
We cannot rely on a gates and guards approach. We must approach the challenge of security strategically. We must design security that is effective and efficient. We must build critical infrastructure that is strong and resilient, able to suffer damage and continue to function. To reduce the psychological effects of further terrorist attacks and alarms, we must above all abandon unrealistic expectations of total security and instead adopt a more realistic acceptance of risk and not allow attacks or fears of attacks to shut ourselves down.
Read the full testimony here
http://www.rand.org/content/dam/rand/pubs/testimonies/2005/CT203.pdf