The first is "Guns for Butter." In the war on terrorism, government will dramatically shift expenditures from "butter"education, infrastructure and health care. Architectural, engineering and construction firms with clientele weighted to aerospace and defense companies will prosper, as will firms with contracts to build military facilities. But other firms that rely on contracts for "butter" will face reduced demand.
The second is capital flight. Risk-averse business executives will divert productive capital for new plant and equipment into "protective capital," for everything from more security guards and fences to more sophisticated surveillance technologies. This "terrorist tax" will deal a sharp blow to productivity and growth. But firms that recognize this emerging new market will find interesting opportunities.