George Pitcher: Market rallies point to the way the West will win

The terrorist attacks on the US appear to have had little or no lasting impact on western markets. It seems we only really react to good news, says George Pitcher

What struck me most about the huge turnout at war memorial services last Sunday was the range of mixed messages being conveyed. The tradition of commemorating the dead of the two world wars – an essentially patriotic or even nationalistic theme – is now subsumed in a pot-pourri of profound or mawkish sentiments.

These range from observations that the world has actually known no peace since “the war to end all wars” – and that 1968 was the only “post-war” year in which no British servicemen were killed in conflict – to celebrations of freedom (as defined by the West) and a kind of abstract idea that war is “a terrible thing”.

If the British Legion isn’t careful, Remembrance Sunday will soon be entirely hijacked by peace movements. It would at least be colourful to watch the massed ranks of hippie veterans from the Sixties amble past the cenotaph with flowers in their hair.

What has muddled matters so much, of course, is the emergence of what are now almost universally called “the terrible events of September 11”. The very iconography of the date is fast moving into contemporary history as a pivotal point where war was redefined – or even “de-defined”, given that nobody seems to be able to provide a satisfactory definition for this new kind of war.

But, pained as I am to say it, September 11 doesn’t matter much anymore. By which I do not mean that it has ceased to matter to the victims, their families and the companies for which they worked in the World Trade Centre, for whom it will continue to matter for a very long time. Nor do I mean that it has not raised the stakes of terrorism – a point confirmed by the presumptions of terrorism when the American Airlines jet crashed in New York this week. I mean that it has ceased to matter as a political force in the Western public consciousness. If it were not so, Prime Minister Tony Blair would not have had to go to such lengths recently to tell us that we will never forget how we felt on that day.

I suspect the proof of this will be those pictorial reviews of 2001 that will appear in glossy magazines in the New Year: shots of the airliners flying into the Twin Towers will sit alongside David Beckham’s equaliser against Greece in the World Cup qualifiers.

Symptomatic also are the ways in which some markets and economies have been performing over the past month or so, since September 11 slipped from the shock of immediacy into the objectivity of history. This is important, because presumably Western capitalism is one of the things that we are at war to defend.

Equity markets have performed exceptionally well over the past seven weeks or so, once investors realised that the world wasn’t coming to an end. This run may, admittedly, come to an abrupt end this week if retail figures for October published just before Thanksgiving are not well received.

Likewise, I am writing this just ahead of a raft of figures in the UK regarding retail price inflation, retail sales, unemployment and average earnings. Last week’s well-received and surprise half-point cut in interest rates may turn out to be an attempted pre-emption of economic gloom, rather than a celebration of an economy that can support the lowest rates of return on loans of my lifetime.

Or it may be that such stimuli will carry the UK through healthy economic growth rates by halfway into 2002. I’m interested in the outcome suggested by a survey of eurozone economies conducted for Pearson newspaper titles by a consortium of European research institutes. The headline news is that the “eurozone” economy “is on the brink of recession”, with evidence that year-on-year growth in the region is set to fall from 1.2 per cent in the third quarter to 0.5 per cent in the fourth. The first quarter of next year is predicted to shade to growth of 0.4 per cent.

This is perilously close to negative growth for two consecutive quarters, the formal definition of recession. But consider two things: first, these figures were harvested in the immediate aftermath of September 11; second, despite even the hyperbolic world reaction to those events, they suggest growth in the eurozone economy, rather than contraction.

With the shock of September 11 fading in market terms, and the prospect of a sort of war triumphalism emerging from the campaign in Afghanistan plus the greatest interest-rate stimulation in the UK for nearly half a century, there is every chance that those figures may turn out to be unduly pessimistic.

Let me explain what I mean by that triumphalism. What Blair and Bush know is that nothing succeeds like success. The glee with which the right-wing press has greeted the ground war in Afghanistan and the march on Kabul is partly driven by the triumph it represents over the wobbly liberals and pusillanimous peaceniks, who held that the campaign would plunge the world into a new dark age.

It would appear that it won’t. The American Way will prevail. That includes the Western capitalist way, with the UK shoulder to its market-shoulder.

Don’t underestimate our economy’s capacity to react to good news. With September 11 fading and victory (whatever that may mean) looming large, prospects could be coming on nicely – a good performance in next year’s World Cup and we’ll be coining it.

George Pitcher is a partner at communications management consultancy Luther Pendragon


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