THE COST OF TERRORISM
How do attacks like those in Paris affect the world’s economies?
>>> One year ago this month, two gunmen burst into a meeting at the offices of Paris-based satirical magazine Charlie Hebdo and massacred 11 people, plus three more on the streets. Meanwhile, another group of gunmen opened fire in a Jewish kosher supermarket, killing an employee and three shoppers.
The attacks rattled the world – but the markets barely budged. The next day, the French CAC 40 was up 1.8 per cent. Similarly, stocks dove slightly after earlier attacks in Madrid and London before quickly recovering. After the Paris attacks on November 13, in which 129 people were slaughtered by ISISlinked gunmen, European markets took an initial hit, but quickly rebounded. The price of oil increased slightly as investors speculated about increasing geopolitical tensions.
If the markets were the only measure of impact, the terrorists would have appeared to miss their mark. But while the markets are proving resilient, the effects on the wider economy can be great.
No matter how you slice it, the financial blow of 9/11 was immense. A New York Times survey estimated the impacts to range from $178 billion for immediate damage and economic impact, to $3.3 trillion, which accounts for the U.S.’s reaction to the attacks: increased national security and $1.65 trillion for wars in Iraq and Afghanistan.
Depending on the international response, the cost of the attacks in France and any future terrorist attacks could also be significant. In November, France ramped up its airstrikes against ISIS and called on its allies to do the same. And during the holiday season, as the world’s tourists steered clear of France, the country’s tourism industry – which accounts for 10 per cent of its GDP – took a serious hit. By the end of the year, Paris’ shopping districts looked like ghost towns compared to previous years and France’s hoteliers and airlines had seen record cancellations. However, tourism industries in other countries that have been hit by terrorism have rebounded, and there’s little to suggest that France won’t share the same fate.
But there is one other threat to France’s, indeed much of Europe’s, coffers, and that’s the threat to Europe’s open-border economy, one that is already under pressure from the largest refugee crisis to hit Europe since World War II. After Paris, when the hunt for the suspects turned to Belgium, there were calls for an end to the Schengen area, the passportfree travel zone comprising 26 European countries. “What does it say about Schengen if one of the world’s most wanted criminals was able to move freely between Syria, France and Belgium?” read a November 23 editorial in the Irish Times. “That was not supposed to be possible.” Erecting barriers between these countries could not only hinder the free movement of people, including the more than 400 million living within its borders, but also the movement of goods. If that happens, the terrorists will have hit a mark. –
The economic impacts of terrorism have so far been fleeting, but that could change