By Mike Verdin BBC News Online business reporter in Davos

War with Iraq would not damage the American economy, the US Secretary of Commerce has insisted.

Speaking in a debate at the World Economic Forum in Davos, Donald Evans denied that conflict, which could cost the US $40-50m a day to wage, would unduly affect a superpower economy.

Donald Evans: "Optimistic" about economic prospects

"In the context of a $10 trillion economy, we expect the economy to continue... to be resilient and flexible and deal with the input of war," Mr Evans told a packed session on US economic prospects.

He said he was "upbeat, optimistic" about the future, citing solid productivity and the stimulus package presented by President George W Bush as his grounds for optimism.

Spending power

Meanwhile, Cisco Systems chief executive John Chambers warned the seminar bad government threatened growth and living standards and around the world.

Mr Chambers said that, long-term, both US and global economies were poised for growth as productivity improvements, fostered by technology, improved corporate growth.

Small and medium business will be the hiring engines of the next decade John Chambers, chief executive, Cisco Systems

"Unlike in the industrial revolution, to benefit you will not have to be in one location to participate," he said.

"The standard of living is going to go up, real disposable incomes will go up."

The danger to growth was that policymakers "misexecute, and not react, not create", he said, citing the importance of education and infrastructure in maintaining economic performance.

Countries lagging in education stood to lose jobs "very quickly, at most within 15 years", as rival nations snapped up trade.

He also warned that, in employment terms, smaller firms, traditionally the most innovative, would create the most jobs as the boom progressed.

"Small and medium business will be the hiring engines of the next decade," he said.

"Large companies will not hire much over the next two to three years in particular."

Near term challenge

Short-term, he questioned the ability of the US economy to meet targets.

"The majority of CEOs I talk to across America are conservative about budgets this year, particularly about employment," he said.

But once profits started to recover, company spending would increase two to four months later.

Charles Holliday, chairman at DuPont, said that growing corporate thrift had led to "flat water cancellations" of orders.