Healing Wounds, Learning Lessons

Rarely has a year brought so much pain and turmoil to so many. One calamity followed another, with brutal terrorism compounding a recession that fell over a country still reeling from a divisive Presidential election. But in the long sweep of time, 2001 may well be perceived as the year when Americans withstood the cauldron of crisis, relearned basic verities about their society, and used them to navigate difficult times ahead. For 2001 was clearly a watershed, and the world of 2002 and beyond will be a very different place. As the new year quickly approaches, it is well worth taking a moment to consider the lessons learned from the trauma of recent events.

Values Count. The horror of the World Trade Center and Pentagon attacks revealed that the Old America of shared values, not competing interest groups, of common cause, not hateful opposition, still thrives beneath the showy veneer of partisan politics and me-now materialism. The respect suddenly paid to people in uniform--firefighters, police, and soldiers--and their values of sacrifice and courage was startling in a society that only recently held telegenic financial analysts and techno-billionaires in thrall. The outpouring of patriotism and the generosity of charity was as surprising as it was comforting. And overseas, the sight of women in Kabul daring to show their faces to smile, old people listening to music, and children flying once-forbidden kites was a powerful reminder that civilizations preaching hatred and repression are not equal to those believing in tolerance and opportunity. The challenge ahead is to remember what unites us, not what divides us, to embrace America's secular values of democracy, religious pluralism, opportunity, and individual liberty, and to reject the voices of homegrown hatred, such as Jerry Falwell declaring after September 11 that the country brought death and destruction on itself because of abortion, homosexuality, and the American Civil Liberties Union.

Pragmatism Counts. The adaptability and flexibility of American society in the face of crisis proved crucial in 2001. Policy changed abruptly to deal with extreme situations. A Republican Administration that catered to the notion that government is usually the problem turned on a dime to ensure that government became the solution. After 9/11, billions of federal dollars went to helping New York cope and to keep the airlines solvent and flying. Airport security was taken over by federal authorities. Politicians of both parties rallied around the President to join in the delicate task of curbing civil liberties to fight a war while insisting on sunset clauses to return those rights to the people once the battle is over. On the economic front, as growth plummeted, the Bush Administration and Congress passed an unprecedented income-tax rebate in the summer to get money into the hands of consumers and boost demand, while Federal Reserve Chairman Alan Greenspan moved with incredible speed to lower rates and add liquidity to the financial system. The challenge ahead is to retain this new pragmatism and not return to ideological partisanship in Washington, to accept different political views without the left or the right impugning the integrity of those expressing dissent.

Security Counts. The terrorist attacks on New York City and Washington ended America's sense of invulnerability. Following the fall of communism, the U.S. took security for granted and focused its energies on economic affairs, enjoying the tech boom of the late '90s and expanding market capitalism around the globe. Security will now play a much bigger role in American lives. It will sharply boost military spending, reorder budgetary priorities, and put constraints on discretionary spending for other programs. The success of high-tech combat in Afghanistan will lead to a transformation of the military and may also bring Silicon Valley closer to the Pentagon. Geopolitics will intrude on globalization, much as it did during the cold war. Corporations will raise the importance of geopolitical factors when they invest around the world. The terror attacks on America's homeland may well transform foreign policy. In a post-9/11 world order, Europe, NATO, Japan, and the U.N. probably matter less to U.S. security than Russia, Britain, Turkey, and a host of alliances with Central Asian and Middle Eastern states. But unilateralism has its own pitfalls, and the challenge ahead is for the U.S. to build a security coalition with broad, common, global goals.

The Equity Culture Counts. The sharp downturn in the business cycle is a powerful reminder that Joseph A. Schumpeter's "creative destruction" is working its way quickly through the U.S. economy. Sustained productivity increases suggest a return to profitability and growth sometime in 2002. The system is proving flexible, and the U.S. will emerge from recession quickly and in better shape, in contrast to Japan or even Europe. The stock market is already reflecting an upturn. This is good news since stocks have come to play a dominant role in financing growth, rewarding enterprise, compensating employees, and securing retirement. But the dot-com blowup, the high-tech meltdown, and the Enron Corp. disaster have revealed big holes in the foundation of the nation's equity culture. Opaque off-balance-sheet partnerships that hide debt, corporate regulations that undermine 401(k)s, auditing firms that don't question numbers, and Wall Street analysts who never say "sell" raise the risk of investing. The financial lesson of this business cycle may be that bottom-line numbers have become so unreliable that the economic well-being of the nation is threatened. The challenges ahead in restoring credibility to the equity culture are for Washington to get tougher, Wall Street to demand honesty, and Corporate America to come clean.

Tragedy and crisis have the power to reveal and teach, and Americans have learned much these past months. The new year may well see the rebuilding of New York, the rebounding of the economy, and the rebirth of the nation's spirit.

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