The Price of Terrorism

In the recent onslaught of terror attacks around the world, the emotional and physical impact is obvious. Images of vigils, memorials, and increased security are always in plain sight, even long after an event has subsided. But some of the less visible impact is on the economy. Expensive relief efforts, deficits from decreased tourism, and the heightening of security systems are all lasting effects of terrorism.

Barry Johnston and Oana Nedelescu wrote a 2005 paper called The Impact of Terrorism on Financial Markets which discussed the direct and indirect effects of terrorism on the economy. Investopedia discusses the major points of the paper here:

"The direct economic costs are shorter-term in nature and include the destruction of life and property, responses from emergency services providers, restoration of systems and infrastructure, and the provision of temporary living assistance."

The article goes on to discuss the long-term impacts:

"reduc[ed] productivity because of increased security measures, higher insurance premiums, and the increased costs of financial and other counterterrorism regulations."

Think about how much time you spend in airport security lines. All of that waiting costs money.

The terror attack of September 11th, 2001 cost the United States an estimated $3.3 trillion. The physical damage alone was around $55 billion, and the economic impact was $123 billion. For a breakdown of these costs, check out this infographic from the New York Times.

But September 11th was fifteen years ago, and now things could potentially be a more costly.

Laurie Laird of Forbes Magazinesays that after the attack on Paris back in November 2015, the French CAC-40 index never dropped more than 2% the following Monday. But the tourism sector was truly hurting. While this ebb and flow is normal for the travel stock, increasing fears (especially in Europe) keep travelers away for the longer term. When the U.S. State Department issues a travel warning, a lot of people take it to heart and don't think it's worth the risk.

There are still a number of sources that say you should not be afraid to travel to Europe -- that your risk of being involved in a terror attack is statistically the least of your travel risks. David Cogswell reports on a statistic that you are 14 times more likely to die in your bathtub than in a terror attack.

Will fear and terrorism have a long-term impact on global economies? Perhaps. But this is what an economy is for -- to react to issues that occur in the world, to be malleable. That's why it's crucial that the upcoming November election lead to a President that knows how to handle the responsibility of a potentially volatile economy of terror.

To keep your finger on the pulse of the economy, check out CNN for the latest updates.


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