The Market and Muslim McVeighs
Jude Wanniski
September 17, 2001


The most hopeful sign that we will be able to creep our way back to a semblance of normalcy has been the absence so far of a military response to the terrorism. We’ve counted on Vice President Cheney and Secretary of State Colin Powell restraining the civilian hawks at the Pentagon, who are chafing at the bit to bomb something, someplace, and so far they have been kept in check. Almost anything done militarily will involve killing innocent civilians without necessarily disturbing specific organizations or personnel, such as Osama bin Laden. This would in turn increase the risks of doing business in the world at large and in the United States in particular. Wall Street behaved reasonably earlier in the day but clearly began worrying the moment President George W. Bush announced that he wanted bin Laden “dead or alive,” which reflects the views of those Pentagon civilians who want the law changed to permit assassinations. There is nothing more likely to produce an escalation of terrorism, with Muslim McVeighs showing up in shopping malls and government buildings practically anywhere in the United States, bringing commerce to a halt. The President had been doing well until today, which is why we think the markets began coming back in Europe this morning. But unless he cools his rhetoric, he may paint himself into a corner that leads to the use of “whimsical” force, to use Saddam Hussein’s term in a statement he issued today. Mr. Bush has to be constantly reminded of Waco and the unintended consequences of the ill-considered use of force.

Many Americans now think we are in a “war” that can only be won with physical resources, which would mean the markets and the economy would remain weak for several years. It doesn't have to be that way. Just consider what might have happened if Timothy McVeigh had heard on the radio while on the way to Oklahoma City that Congress suddenly decided the government was to blame for the deaths of the Branch Davidians and that those responsible would be punished instead of decorated. His motivation almost certainly would have dissolved, and at least he would have waited to see if it were true. Anyone now on the margin contemplating further terrorism – whether part of a network or an entrepreneur – would hold back if the President were leaning toward Colin Powell’s caution, and going ahead if the President were leaning toward Defense Secretary Donald Rumsfeld’s belligerence. Vice President Dick Cheney remains the man on that margin. The volatility in the markets -- equities, bonds and gold -- reflects the guessing game on what will happen from moment to moment. Rumors of an imminent attack on Kabul to kill some of the Taliban are the most unsettling, but it is hard to believe the President would pull that trigger. There would be no global coalition for such action as it would put all participating countries at risk of home-grown Muslim McVeighs, with nuclear escalation in sight.

Political terrorism occurs because political activists encounter closed minds. The exact wrong reaction to September 11 is to close minds completely. I’d hope Senator Joseph Biden, chairman of the Foreign Relations Committee, or Rep. Henry Hyde, his counterpart in the House, would announce hearings to open the ears of Congress to the problem. I think Hyde will. The sooner they would, the sooner the financial markets would see lower risk and advance accordingly. I’ve also written to House Minority Leader Dick Gephardt about the need to have more debate on these issues and less “bipartisan” unanimity when the Arab/Muslim world is involved. That memo is posted on the Polyconomics website today. Please read it and circulate it as broadly as you can. It is not that difficult to defeat political terrorism once you see it can be undermined by open minds, a willingness to listen.