NCPA - National Center for Policy Analysis

Attacks Took Toll on U.S. Business Efficiency

February 21, 2002

Observers liken it to fine sand being sprinkled into the gears of American businesses. It's being called friction and it stems from the after-effects of Sept. 11. From higher security costs to airport delays, from planning for supply-chain breaks that might arise to dealing with personnel problems that have already occurred, companies are staring at substantial new costs in their operating budgets.

  • The bill this year may top $150 billion, according to a Fortune magazine study -- a full 1.5 percent of U.S. domestic output.
  • That includes $18 billion of new costs related to workplace security, $15 billion for information technology security and contingency operations and $65 billion for logistical changes to supply chains.
  • Then there's $12 billion for new employee travel costs, $35 billion for insurance and liability, and $6 billion for employee absenteeism.
  • Experts warn that Wall Street doesn't yet seem to have factored these costs into its economic models.

Not included in what the authors of the study consider quite conservative estimates are the costs of items relating to morale, psychology, fear and distraction from strategic goals.

Richard Berner, Morgan Stanley's chief U.S. economist, figures the cost over time to be a half percentage point reduction in annual growth in domestic output.

Source: Anna Bernasek, "The Friction Economy," Fortune, February 18, 2002.

 

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