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9/11 and the Economic Prospects of Major U.S. Cities

James H. Johnson, Jr.
William Rand Kenan, Jr. Distinguished Professor of Management
Kenan-Flagler Business School
Director, Urban Investment Strategies Center
The Frank Hawkins Kenan Institute of Private Enterprise
The University of North Carolina at Chapel Hill
Chapel Hill, NC 27599-3440
E-mail: jim_johnson@unc.edu

John D. Kasarda
Kenan Distinguished Professor of Management
Kenan-Flagler Business School
Director, The Frank Hawkins Kenan Institute of Private Enterprise
The University of North Carolina at Chapel Hill
E-mail: john_kasarda@unc.edu

 

ABSTRACT

Drawing on research and media reports, this article provides an overview of the immediate and likely longer-term urban impacts of the September 11, 2001 terrorist attacks. In so doing we highlight three specific post 9/11 threats to the future prosperity of large U.S. cities and metro areas: (1) constraints on international commerce, (2) immigration and foreigner entry reform policies, and (3) re-evaluations of location risks by corporate leaders, their employees, and the insurance industry. We conclude with reflections on the implications of these post-9/11 developments for employment deconcentration, urban commercial real estate markets, and the economic competitiveness of major cities.

 


 Print VersionCONTENTS

  1. Introduction

  2. The September 11, 2001 Terrorist Attacks

  3. Longer-Term Impacts

  4. Qualifications and Concluding Reflections

    Endnotes

    References


I. Introduction

Over the last quarter century, and especially during the 1990s, U.S. economic growth and urban competitiveness became integrally linked with the ability to move people, goods, services, information, and capital easily and quickly -- domestically and especially internationally (Rondinelli, Johnson, and Kasarda, 1998; Kasarda, 2001a,b). Because the nation's metro areas dominated most of this transactional activity (DRI-WEFA, 2001), the September 11, 2001 terrorist attacks on the World Trade Center in New York and the Pentagon in Washington, DC sent economic shock waves throughout the U.S. urban system (Mills, 2002; Lyne, 2001a; Morrissey, 2002; Neikirk, 2002; Nicklaus, 2002; Swanstrom, 2002). No U.S. city was left untouched (Johnson, 2002b,c; Colter, 2002; Belser, 2002; Murphy, 2002; DeValle, 2002; Simpson, Adoye, Feliciano and Howard, 2002; Newman, 2002; Savitch and Ardashev, 2001).

Following 9/11, a series of federal laws and regulations were introduced to reduce the risks of future terrorist acts. In an increasingly speed-driven global economy, however, the new laws -- albeit unintentionally -- are likely to constrain international commercial and transnational populations flows to the United States (Carr, 2002; Hirsch, 2002), thereby weakening the competitiveness of U.S. cities and the industries upon which they depend (Johnson, 2001, 2002a).

Air freight, for example, accounts for 40 percent of the value of world trade and is especially critical to supply chain management in high-tech and other time-sensitive industries such as microelectronics, pharmaceuticals, digitized automobile parts, aerospace equipment, and medical instruments (Kasarda, 2001a,b). The fact that the vast majority of air freight passes through larger urban airports provides substantial competitive advantages to surrounding and nearby cities as a result of greater accessibility of time-sensitive industries to national and global suppliers and customers.

As global administrative hubs, major cities also depend on quick and efficient long-distance movement of executives and professionals into and out of them. And, at the lower end of the employment spectrum, many U.S. urban industries have increasingly relied upon flows of immigrant labor to perform vital production and service functions (Johnson, 2002a). Thus, by constraining goods and people flows into and out of U.S. urban areas, post-9/11 policies, laws, and regulations have struck at one of their key competitive advantages in the globally networked, speed-driven economy.

In this article, we focus on the tension between the U.S. government's post-9/11 efforts to boost homeland security and its objective to facilitate national and city competitiveness in the international marketplace. We commence with a brief review of the near-term impacts of 9/11 on major U.S. cities. This is followed by a more detailed discussion of three types of post-9/11 threats that are likely to influence the longer-term competitiveness and economic prospects of U.S. cities and metro areas: (1) constraints on international commerce, (2) immigration and foreigner entry reform policies, and (3) re-evaluations of urban location costs and risks by corporate leaders, employees, and the insurance industry. We conclude with reflections on the likely effects of these post-9/11 developments on business location, urban commercial real estate markets, and employment redistribution from cities to suburbs and down the urban hierarchy, from large metros to small and mid-sized metros.

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