Resilience gives hope for future

One certainty about last week’s London bombings is that they will have a minimal economic impact. The murder of dozens of people – the exact number was unknown as we went to press – is of course a tragedy for their family and loved ones. But any assessment of the economic effect has to take into account that Britain has 60 million inhabitants and a GDP of about a trillion pounds.

If there is an economic danger it comes from the possibility of a negative reaction to the attacks, rather than the bombings themselves. This distinction is of critical importance.

The economic impact of the bombings depends largely on how people react to them. If people demonstrate resilience, as far as possible carrying on business as usual, the economic impact will be tiny. If, on the other hand, people capitulate to the climate of fear, the effect will be significant.

From this perspective the potential dangers that some economists have identified are not effects of the terrorist attacks but of a fearful reaction to them. It is true that businesspeople could postpone investment, consumers could defer spending and tourists could avoid London. However, if they do it will be because of a failure of nerve on their part rather than the bombings.

From this perspective it is instructive to look back at the attack on the World Trade Center in New Your almost four years ago. Thousands were killed and billions of dollars worth of damage was done.

Yet, in contrast to the immense size of the American economy, the impact was small. The economy was already slowing before the attacks but growth began to pick up afterwards. The relatively robust response from the people and authorities of New York meant that economic life could continue with relative normality.

The reaction by Londoners gives hope that the same will be true in Britain. The vast majority calmly got on with their lives as best they could in difficult circumstances. Such resilience is the best cause for hope for the future.

Daniel Ben-Ami