Economist Dr. Woody Brock spoke yesterday of the rise and fall of the US economy - and how America's wealth and good fortune has tied in to recent terrorism attacks and war.

Dr. Brock also spoke of how the near-recession would not be thrown off by Federal cuts to interest rates, as many thought.

In a breakfast session held by Lines Overseas Management, Dr. Brock said the US economy had been in a period of more than 30 years of "off the wall" innovation and productivity, which ultimately has driven a "wedge of envy", between those who have and those who have not.

Dr. Brock, who holds degrees from both Harvard and Princeton where he received his Ph.D in mathematical economics and political philosophy, was speaking to a room of about 40 businessmen.

The big story, Dr. Brock said was the shadow-boxing around the issue of wealth of nations.

Dr. Brock spoke of several components that have to be in place for a nation to move forward economically. He said there has to be market flexibility including necessary labour, product and capital, to process the scientific and technological revolutions. Following that, Dr. Brock said the market had to be augmented by institutions of civil society, and there had to be optimism, entrepreneurs, investors and consumers.

Dr. Brock said most central to this was not the presence of innovation, or inflow of capital - but the "rule of law".

Citing the truism that "absolute power corrupts absolutely" Dr. Brock said the world was seeing, more and more, the absence of rule and law.

"The terrible problem of the world is that the proportion of states run by thugs has increased," Dr. Brock said.

Speaking of the war that has resulted from the September 11 attacks, Dr. Brock said there should be concern about whether or not an open, Western society can fight this kind of attack.

Speaking of "renascent terrorism" Dr. Brock said no one was talking or writing about who will win this war, looking at the situation analytically, he said it comes down to who wants "it" most and who is prepared to take the greater risk.

Dr. Brock summed up the engagement of the bin Laden camp as: "How much can I screw you, minus how much it costs you to try and screw me."

Dr. Brock said it was a conflict of double mirrors and that for America it was not clear how much damage can really be waged on the enemy.

"These are not freaks - these were highly rational men living in our society. They rented movies like you and me. We are an open, nice society - we don't want to get involved in all of this dirty work," Dr. Brock said of the September 11 terrorists.

Dr. Brock said the will of the terrorists had been demonstrated, and that in their thoughts it was a win- win situation. He said death to the terrorists is a trip to paradise: "where 40 virgins are waiting for them," he said.

Dr. Brock said the attacks could be tied to the economic climate and the contrast between the global economies: "Do you think people would be doing this if they could take their families to Disneyland?" he said.

Dr. Brock said the terrorist camp is highly unlikely to pull off another attack of the magnitude of September 11, but long term: "it does not look good".

Focusing on the economic downturn, which first showed signs last year, Dr. Brock said the optimistic bubble had burst - and he said this was something quite apart from the events of September 11.

Speaking of how the economy collapsed, Dr. Brock said there was excess optimism and excess capacity with money being "thrown" at those who did not know what to do with it - as with the dot coms, now largely known as dot bombs.

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