TCS Daily

Prioritizing Security

By Uriah Kriegel - August 25, 2003 12:00 AM

A few weeks after the terrorist attacks of 9/11/2001, Congress hurriedly passed with great fanfare a $15 billion dollar bill to aid an airline industry coping with the economic fallout of the attacks. More secretively, a few months ago Senate majority leader Bill Frist pushed through another $3 billion dollar in bailouts. Although on the whole this help to the airline industry -- vital as it is to the economic and personal life of Americans -- was quite popular. But not everybody was happy.


There were worries about the fairness of post-9/11 aid distribution. One of the saddest untold stories surrounding the attacks is the fate that befell New York's Chinatown. Not many Americans are aware that Chinatown is the closest residential and small-business area to the Financial District and the World Trade Center. The smell of debris from the collapsed towers could be felt in many a Chinatown living room for weeks thereafter, but the businesses (as well as residents) of Chinatown were also terribly impacted in deeper and more long-lasting ways. Chinatown, however, does not have a lobby in DC, and so the post-9/11 aid it received was minimal. Thus, according to the Asian American Business Development Center, Chinatown businesses received $7000 in aid on average. The US Department of Labor also provided Chinatown with a $1 million grant for job training -- but that was it. The airline industry would not receive its colossal aid package if it wasn't for its special-interest clout on Capitol Hill.


There are also the standard market-based arguments against any form of corporate welfare. All was not well in the airline industry prior to the 9/11 attacks and it was badly in need of a shakeup. But by bailing it out, the government is effectively shielding it from the wreath of the market.


Also, by federalizing compensation, the government preempts what would be an emerging market for terrorism insurance.


These market concerns are acutely relevant to the security dimension of the airlines' operations. Although security in our airports is significantly tighter than it used to be, anyone who flies frequently inside the continental US but has also flown in and out of more sensitive regions, such as Kashmir or the Middle East, knows that security policies are still lacking and are to a large extent for the sake of appearances.


This may be partly because the airlines don't have a market incentive to implement real measures that will significantly enhance security. They operate on the (plausible) assumption that in the event of another terrorist attack, they will not have to bear its costs. At the same time, they are still accountable to the local impatience of customers. So instead of requesting that customers arrive to the airport hours in advance, and be subjected to the discomfort of genuine security, they choose business as pre-9/11 usual.


Imagine how things would be if the airlines knew that they would have to bear the costs of any future terrorist attack in their flights. A successful attack on board a carrier's flight would put it in such devastating disrepute that the airlines' priorities would be completely redrawn, with tight security becoming non-negotiable.


Another argument for sparing the airlines is that a terrorist attack is not an assault on one particular flight operated by one particular company. It is an attack on all of us. It is an attack on the whole nation, and the whole nation should bear the cost. Terrorist attacks such as the ones we experienced in September 2001 call for solidarity, not for finger-pointing and blame-assigning. Just as the attacks' human victims and their families receive due compensation, as a measure of the nation's solidarity, so the airlines should be supported in such hard times.


This is certainly a good argument, and it is probably what stands behind Americans' willingness to bail the airlines out in the face of terrorism. However, we must remember that there is all the difference in the world between a human victim of terrorism and a business organization "victim." After all, the only human suffering involved in the hardship or demise of a business organization is the economic pain of the share holder, or the laid off worker. These are not trivial, but they cannot by any standard be compared with the pain of the human victims' families.


As a society, we must decide how we would like to balance our concern for this sort of economic "pain" with the need to create a genuine and durable market incentive toward prioritizing security. At the very least, then, there is good reason to embark on a serious public discussion of whether the airlines should be made to bear the costs of future terrorist attacks.



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