Divining the Aftermath of the Aftermath

By now, the effects of the September 11 attacks on America are well known, from huge slumps in air travel, tourism, and dining to an aggravated recession, massive layoffs across a range of industries, dwindling print orders and shrinking advertising budgets, a freeze on capital expenditures, and a generally sour outlook.

Equally well known is the fact that the underlying causes for a good many of these effects were already in place and under way prior to September 11; the catastrophic events merely served as catalysts for further action. Managers, pushed to size up real business prospects with a far colder eye, stepped up layoffs, cost-cutting measures like pay cuts or pay freezes, market pullbacks, and restructurings. And so the summer slowdown really screeched to a halt.

The consensus view: "Hunker down and let's get through this."

But what about the aftermath of the aftermath? Longer term, will the recovery from this recession follow economists' historical models—that is, bounce back better than ever in a surprisingly short time? Or will the unique and violent nature of the attacks—coupled with their widespread psychological effect, likely long-term problematic resolution, and now the troubling anthrax scare—push recovery into a new, one-of-a-kind category?

Is it possible that, like the war on terrorism, the expected recovery won't follow the norms but may instead introduce a new era of "normal" economic conditions? In such a ratcheted-down scenario, jobs don't come back, mail delivery doesn't come back, and tourism and business investments also don't come back—either very soon or to prerecession high levels.

Let's take a closer look at historical recovery models, which incidentally include rebuilding in the aftermath of natural disasters like hurricanes, floods, and earthquakes. To begin with, economists say that these "headline events" don't dissipate economic activity; rather, they shift it from, say, activity (spending) in the third or fourth quarter of this year to some time next year. Their point: demand remains but it will take a while for consumers and businesses to get back in the mood to spend money.

Observers are cheered by reports that businesses have been cutting back for most of the year, which means the time for inventory replenishment, including printing, should come sooner than later. Also, energy prices are now about half what they once were and the Bush administration is working on a highly stimulative fiscal policy, said to be more focused on spurring spending than cutting taxes.

On the other hand, there's a lot of talk now about a change in the psychology of investment, spending, and even overhead. In recent meetings of magazine publishers in New York City, speakers posed troubling questions about how, in the longer term, major advertisers may rethink their expenditures for run-of-book ads. That spending might be diverted to alternative means of communications, or simply be trimmed, options that would have direct consequences to present models of magazine publishing and printing.

The root question that separates the field: will the "headline events" of September 11, as wrenching as they were, be followed by a recovery with historical precedent, or has the nation's free-market economy been so badly shattered that a new norm now needs to be created?

Already, programs for upcoming industry conferences are sprinkled with insights on improving operations, surviving and thriving in a challenging era, dealing with structural change, and managing in good times and bad.

American business, it seems, is thinking about what it takes to manage through to the recovery.