What is Terrorism? What are the economic effects of terrorism?
Terrorism is the unlawful use of force or violence against persons or property to intimidate or coerce a government or its citizens to further certain political or social objectives.The economic effects of terrorism are -1. Direct Economic Destruction
The most immediate and measurable impact of terrorism is physical destruction. Terrorists destroy existing plants, machines, transportation systems, workers, and other economic resources. Large-scale attacks, most infamously the World Trade Center bombings on Sept. 11, 2001, can destroy billions of dollars worth of property and senselessly kill thousands of productive workers.
2. Increased Uncertainty in the Markets
Even if you do not live anywhere near terrorist attacks, you might still be negatively impacted indirectly. This is because all kinds of markets hate uncertainty, and terrorism creates a lot of it
3. Insurance, Trade, Tourism, and FDI
There are two obvious industries especially vulnerable to the effects of terrorism: insurance and tourism. Not all insurance companies payout in the event of international terrorism or foreign wars, so the impact is likely less than you might first expect. Nevertheless, terrorism is a risky business for everyone, and insurance companies hate risk as much as anyone else.
4. War Is the Health of the State
There is an old saying in the study of political economy that reads "war is the health of the state." It means that during times of conflict, reactive governments and nervous citizens are far more inclined to give up economic and political freedoms in exchange for security. This could result in higher taxes, higher government deficits, and higher inflation. During wartime, the government often implements price controls and sometimes even the nationalization of industries.
5. Increased Nationalism and Foreign Skepticism
The final risk to the economy is a political risk. This is already on display in the United States and Europe in 2016, where there has been a rise in skepticism of foreign cultures, businesses, immigrant workers, and refugees. Populist movements already won a victory of sorts in the United Kingdom, where anti-globalist and anti-trade sentiments helped pass Brexit. These kinds of major political events have an uncertain economic fallout on everything from currency to trade and diplomacy.
1. Direct Economic Destruction
The most immediate and measurable impact of terrorism is physical destruction. Terrorists destroy existing plants, machines, transportation systems, workers, and other economic resources. Large-scale attacks, most infamously the World Trade Center bombings on Sept. 11, 2001, can destroy billions of dollars worth of property and senselessly kill thousands of productive workers.
2. Increased Uncertainty in the Markets
Even if you do not live anywhere near terrorist attacks, you might still be negatively impacted indirectly. This is because all kinds of markets hate uncertainty, and terrorism creates a lot of it
3. Insurance, Trade, Tourism, and FDI
There are two obvious industries especially vulnerable to the effects of terrorism: insurance and tourism. Not all insurance companies payout in the event of international terrorism or foreign wars, so the impact is likely less than you might first expect. Nevertheless, terrorism is a risky business for everyone, and insurance companies hate risk as much as anyone else.
4. War Is the Health of the State
There is an old saying in the study of political economy that reads "war is the health of the state." It means that during times of conflict, reactive governments and nervous citizens are far more inclined to give up economic and political freedoms in exchange for security. This could result in higher taxes, higher government deficits, and higher inflation. During wartime, the government often implements price controls and sometimes even the nationalization of industries.
5. Increased Nationalism and Foreign Skepticism
The final risk to the economy is a political risk. This is already on display in the United States and Europe in 2016, where there has been a rise in skepticism of foreign cultures, businesses, immigrant workers, and refugees. Populist movements already won a victory of sorts in the United Kingdom, where anti-globalist and anti-trade sentiments helped pass Brexit. These kinds of major political events have an uncertain economic fallout on everything from currency to trade and diplomacy.
