01 Jan 2002

We are now mechanics, if not masters, of our destiny. Terror and recession will strengthen us, Eric Ellis reports from London

IF you're after a symbol that mankind is fundamentally a forward-looking creature who wants to prosper, a visit to Park Place, Lower Manhattan, lifts the soul.

In front of what was an office of Sandy Weill's Traveler's Group, while tourists rubberneck through the cracks of a fence that separates Ground Zero from Normal Life, Ahmed from Egypt is doing a roaring trade flogging hotdogs, burgers and Snapple from a trolley. A few streets uptown, Soho's bookshops groan with as many as a dozen coffee-table books marking America's horror at $US29 ($56.81) apiece.

It's September 11 as Business Opportunity, a symbol of our relentless drive to make a living and profit, even from adversity.

This year, we'd like to think the War on Terror will go away and the world of business will get back to doing what it does best, coining it for our greater good. Er, here's some bad news. It won't. That's because Terror won't be in recession anytime soon during 2002.

Ominously, look no further than Osama bin Laden's latest message to his fanatical band of camp followers, the men and women who just might be your neighbours, your newsagents, your greengrocers. "Strike at the pillars of the fragile American economy," he ordered.

That probably doesn't mean another epoch-making demolition job, like taking out the Empire State Building, the White House or the Golden Gate Bridge. Taken at his word, it could be something altogether more subtle but even more penetrating; sabotaged oil pipelines in Saudi Arabia perhaps, a never-ending avalanche of computer viruses; suitcase nukes in Silicon Valley or Singapore's container ports. Or the New York Stock Exchange.

Too horrible to contemplate? Of course, but consider it we must. Terror will doubtless strike again though this time, we'll be better prepared for it, psychologically and economically.

On a brighter note, assuming the global terror threat does meaningfully subside, the world (read the US) should gingerly emerge from recession. The first three quarters will continue to be harsh but the zero cost of money after 2001's interest-rate spiral will eventually kick in after June. We'll enjoy free money for most of the year, but rates will start to creep up after June, as will share markets.

As for ongoing recessions, don't expect better news any time soon from most of Asia, including Indonesia, where corruption will keep it in penury for at least a generation, and Japan, where Junichiro Koizumi's allegedly reformist government will continue to be that. South-East Asia has been a economic irrelevance since the mid-90's financial crisis and doesn't look like changing.

In Europe, the euro will be a success on the streets and in the shops, a triumph simply measured by the no-fuss adoption of the new currency. Euro-curmudgeons Britain, Denmark and Sweden will even come to accept the euro, despite some initial confusion as their economies effectively embrace dual currencies.

The world economy needs something to reinvent itself with but it won't be bio-technology, which has been promising and barely delivering for more than a decade.

I suspect it will be a digital or wireless revolution as office buildings, train stations and public spaces buzz with invisible internet-enabled waves for cheap, on-the-run access from anywhere. This won't happen in 2002 alone but we will see the beginnings of it this year.

Another revolution will begin in 2002: the breakdown of the cronified world of accountancy and auditing. This has needed sorting out for years but few have had the ticker to do so, largely because bean counters control the purse strings. Had it been looked at earlier, we may not have endured the collapses of Enron, Asia Pulp and Paper and HIH Insurance, three of the US's, Asia's and Australia's biggest corporate disasters of 2001.

This year might also be the one when air travel starts to be vaguely democratic. Simple survival after the September 11 attacks - and whatever conflagration may follow it this year - demands it.

It is one of the great rip-offs that distance doesn't always dictate the cost of an air ticket. Airlines have lorded it over consumers but this year, the threat of imminent demise will see prices fall, regulations change and low-cost carriers arrive to carve up the flag-carrying elephants. In a globalised WTO world, the notion of a flag carrier protected by government fiat will further become a ridiculous irrelevance.

Asia, for example, doesn't need more than 50 national airlines, most of them unprofitable, when perhaps 20 would suffice. Expect big-time consolidation in global aviation this year. Or more failures. Likewise telecoms. Phone calls are still too expensive, particularly when one considers an expensive after-hours call made from Sydney to Vancouver was likely routed through Sapporo or Salzburg.

It hasn't been a great start to the new millennium. But at least we've taken the pain in 2001. This coming year will be one of patching the wounds. And hoping that Ahmed won't be encouraged to set up his hotdog stall some other place.