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2002 News Releases
For immediate release:
July 18, 2002
Media contact:
James Hoard
Phone: (214) 922-5307
e-mail: james.hoard@dal.frb.org
Dallas Fed Examines
Defense Technology Spillovers, Insurance and Latin American Market
Reforms
DALLAS—The latest issue of the
Federal Reserve Bank of Dallas’ Southwest Economy addresses
the age-old economic question of guns or butter.
The classical dilemma suggests a trade-off
in which increased military spending saps the commercial sector.
But in "Seeding Technology with Defense Dollars," Senior Vice President
and chief economist W. Michael Cox says it's not always that way.
Over the years, military research has made important contributions
to the civilian economy, many of them rarely acknowledged. Just
as today's economy is propelled by the computer, the Internet, global
positioning system satellites and nuclear power—all of which have
roots in past military projects—entrepreneurs are likely to develop
important new industries from what's being done today to win the
war against terrorism.
In another article, Dallas Fed economist
Fiona Sigalla examines the integral role the insurance industry
plays in our economy in "Insurance: A Risk to the Economy?" Catastrophic
claims from September 11 and escalating noncatastrophic claims,
such as mold damage, made 2001 a difficult year for insurance companies.
Weak growth in investment earnings in 2001 left insufficient industry
capital to offset tremendous underwriting losses. In response to
these huge losses, insurers have increased premiums sharply. Sigalla
concludes that recent changes in the industry are likely to make
risk-averse individuals and businesses unwilling to engage in activities
that are not covered by insurance or not covered at a price they
can afford, which will lead economic activity in the United States
to be less than it otherwise would have been.
Finally, a wave of criticism against
market-friendly reforms is spreading throughout Latin America. In
"Latin American Market Reforms Put to the Test," senior economist
Carlos Zarazaga and associate economist Sherry Kiser examine the
reasons for such a negative assessment of past accomplishments.
They conclude that it is too early to give up on market-oriented
reforms as the best strategy to deliver on prosperity-for-all promises.
Find the July/August issue of Southwest Economy online at www.dallasfed.org
under the What's New heading.
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