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20 Year Forecast on Terrorism’s Impact on the World Economy

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Executive Summary Extensive research into global terrorism suggests that there is no realistic way to eliminate terrorism in the next twenty years. Terrorist groups will continue to exist and operate as long as there is an imbalance of power between governments and individuals with opposing beliefs and values that see asymmetrical warfare as the only means of a solution. Many terrorist groups operate because they do not have the adequate tools and tactics to achieve their goals.

Many terrorist groups do not possess the military and political power necessary to combat their perceived injustices through traditional channels, so they resort to terrorism.

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Global terrorism has a negative economic effect on the world economy as seen through its impact on Foreign Direct Investment (FDI) and Gross Domestic Product (GDP) of a given country. Over the next twenty years, governments will continue to combat terrorism and the effects that it has on the global economy, but there is no real end in sight for terrorism.

There will be attempts to curb and disrupt terrorist activity through changes in foreign policy, but no real way to eliminate one hundred percent of terrorist activity. I. The Current Brand of Terrorism The terrorism witnessed around the globe today is very much shaped by the unparalleled power of the terrorists’ opponents. There is no doubt that the United States possesses the most powerful military and intelligence network the world has ever seen.

For the fiscal year of 2009, the United States Department of Defense budget is estimated to be $515. 4 billion USD. This figure is up approximately 7. 5% from 2008. Because of this, the proponents of these “terrorist” causes can no longer fight on the battlefield when the less extreme means of pushing their agendas fail; rather, they must pursue indirect tactics through asymmetrical warfare. A prime example of this lies in the way in which the terrorists hide themselves. They purposely live amongst civilians as a tactical advantage.

The United States, being a legitimate governmental power, cannot simply drop a nuclear bomb on Kabul knowing that a terrorist is hiding in the city because the global community will not permit them to murder thousands of civilians for the death of one man. However, terrorists can kills thousands in the World Trade Center, and this act is not considered uncharacteristic. A similar proof of asymmetry lies in the use of torture. When over a hundred cases of torture were found to have taken place against detainees at Guantanamo Bay, the people of America as well as the worldwide community were outraged.

These actions were shunned, minimized the opinions given to our Government, thus explaining the United States determination to conceal these acts from its people and the worldwide community. However, Daniel Pearl was kidnapped, tortured and beheaded by terrorists in 2002. As the terrorists filmed this gruesome act and broadcast it to the world, this act was free of the same constraints that bind the United States. The terrorists very much exploit the importance of political image to their advantage.

This example also goes to show how today’s terrorists strike. Their goal is not so much to go for the maximum amount of casualties (though they would obviously prefer a high amount), they actually want to hit targets that will cause the greatest psychological effect. This concept is known as “propaganda of the deed”. They attack structural targets in addition to individuals for the purpose of evoking broader emotion and demolishing a symbol of their enemy (i. e. The Twin Towers). These acts are meant to spread terror amongst their enemy.

The use of indirect warfare is further demonstrated by the increasingly popular use of the suicide bomber. Not only is this lethal weapon extremely useful because it can go to where the greatest amount of people are and know exactly when to blow himself up to cause the greatest amount of damage (making it the ultimate smart bomb), and not only can the person who is the suicide bomber not be interrogated after the fact, but to face an enemy who is willing to die to win strikes fear into the hearts of the opponent (think of kamikazes).

Because of difficulty in communication due to the United States’ highly effective intelligence network as well as the tactical necessity of spreading out, the terrorists groups of today are highly decentralized and rely on a vast and trusted network of person to person spoken communication in order to relay messages. This extreme decentralization makes it nearly impossible to put an end to terrorist groups because once someone gets captured; his subordinate will step up and take his place in less than twenty-four hours . Terrorist financing can come from a number of sources. Many use charities across the globe as a cover for etting donations and many engage in legitimate businesses. Hamas, for example, has become a legitimate political party in Palestine and as such can accept financial support. Some groups get money from countries known as state sponsors of terrorism (Iran gives money to Hezbollah). Others get money from drug sales. Ninety percent of the world’s opium comes from Afghanistan and the Taliban is said to get a huge chunk of those profits. It is important to note that there are many different kinds of terrorists with many different motivations. Though it is a common belief that all terrorists are motivated by religion, this is incorrect.

The terrorist groups that the United States is concerned with are predominantly Islamic such as Al Qaeda, Hezbollah, and Hamas. There are many other groups today whose motivation is not religious such as the Tamil Tigers, ETA, or the FARC. Quite often what motivates groups to form is that they perceive themselves as victims of an injustice and, having lesser power than their persecutors, resort to indirect tactics to push their agendas. II. The Economic Effects of Terrorism There are two types of economic effects of terrorism: 1) direct and 2) indirect.

Direct effects of terrorism are related to things such as property damage and delay in work. For example, if a widget store was bombed, the examples of direct costs would be the amount of money required to repair or rebuild the building and the amount of money that was lost due to the store not being open for business from the time the explosion happened to the time it was rebuilt (like an opportunity cost). These costs tend to be more in the short term compared to the indirect costs. Indirect costs are costs incurred in response to the terrorist attack not usually related to the damage caused by the attack.

So in the same example of the widget store, an example of an indirect cost would be the amount of money required to have security personnel at the store at all times or the amount of money required to place video cameras around the store. These indirect costs tend to far outweigh the direct costs as they last for a longer period of time. There is a theory, unproven it may be, that the terrorists of 9/11 committed their attacks in order to induce the United States into war. This way the indirect costs relating to the attacks would be the billions (and aybe even trillions) spent waging war in the Middle East and sinking the country further and further into debt and subsequent economic collapse. Without the attacks of 9/11, the government would have no legitimate reason to pursue war in Afghanistan and Iraq (although they still didn’t have reason for Iraq). Paul Krugman divides the indirect costs into two subgroups in his paper titled, “The Costs of Terrorism: What Do We Know? ”: Group one, “budget costs of responses to terrorism”, which we have discussed earlier, and Group two, “costs of distorted individual decisions because of fear of crime” (Krugman 2).

In countries in which terrorism is rampant, their economies suffer because foreign travelers choose not to visit out of fear of their safety. The United States issues travel warnings against dangerous countries, encouraging US citizens not to travel there , affecting the local economy. Foreign investors may also be scared to invest in a country with terrorism because in part, it demonstrates the government’s lack of control over the inhabitants, requiring a higher return on investment for the those who are willing to place capital in those countries.

There is a negative correlation between greater terror risk and net foreign investmest in a given country—the greater the risk the less foreign investors feel confident in investing capital into the country. For example, after the attacks of 9/11, the Comptroller of the city of New York “estimated a substantial decline in New York’s Gross City Product as a result of individual and corporate decisions to avoid the city” (Krugman 5). Though this example is of a city, it can easily be applied at the country-level, demonstrating how terrorist negatively affect the national and worldwide economy.

Terrorism reduces the expected return on foreign investment, thus lowering the amount of Foreign Direct Investment (FDI) into a given country. FDI is a large contributor to all economies. Traditionally, due to their stability, the greatest amount of FDI can be seen in the Organization of Economic Co-Operation and Development (OECD) countries. However, for developing nations FDI plays a greater role as a relative portion of the country’s GDP and thus any threat to FDI in either a developed or developing nation can be felt economically. III. Governmental Responses to Terrorism

There are seven governmental responses to terrorism: 1) Infrastructure 2) Intelligence and Covert Action, 3) Military, 4) Public Diplomacy 5) Financial Control Trade, 6) Law Enforcement, and 7) Foreign Policy. Each has their own advantages and disadvantages, and they are all more effective when applied in combination with each other. Infrastructure is a broad category consisting of things such as border controls, travel security in documentation of people, airport security, aircraft security, ports and maritime security, nuclear power plant protection, cyber protection, and emergency response planning.

The goals are to prevent or reduce the damage from an attack and operational or casualty losses. Intelligence and covert action consists primarily of collecting data and intelligence (through wiretapping or having moles planted for example). This information is then used either unilaterally or even through joint intelligence operations against targets of concern. Supposedly, the United States no longer carries out targeted assassinations; however, there has been much evidence that there are exceptions made for terrorists.

Covert action is useful during asymmetrical warfare because when the government needs to get something done that may not look too good to the world, they can do it. For example, it has been uncovered that the United States has gone into countries like Syria and Pakistan in 2006 or even earlier (Schmidt). Also, covert action can be used for the rendition of an individual (unilaterally lifting someone out of a foreign country). The Central Intelligence Agency (CIA) was just caught and found guilty of acts of rendition in Italy.

Many times covert action is carried out by the CIA’s SAD/SOG , and many times it is a joint operation between the Intelligence Organization and the Military (i. e. Delta Force, Navy Seals, Green Berets). All operations are behind the scenes. Military action, unlike intelligence and covert action, consists of overt deployment of troops to battle a certain group. This is usually the decision of last resort because of the high cost of warfare, both of causalities and finances. In addition, militarily occupying a country tends to enrage its citizens, worsen the United States’ public image, and give the terrorists a larger pool of constituents.

Public Diplomacy tools consist of influencing media at home or overseas to present a better image of the US and its policies, to influence foreigners to reject terrorism and accept counterterrorist policies, and by having visitor programs and cultural exchange. Public diplomacy is used to create confusion, dissent, and distrust among the terrorists, and to amplifying voices of certain “reformed” terrorists or moderate respected people in their potential constituent community. Employing all media means possible such as books, newspapers, the radio, the television, and the Internet can do this.

Public diplomacy is about gaining the hearts and minds of the constituency of the terrorist groups and drawing away their support. With the support of the people, the United States can more easily combat terrorism. Much of public diplomacy consists of cultural sensitivity and using the country’s cultural norms and rhetoric to promote our cause and our American ideals of participative voice and freedom. It is all about influencing the way the people think. Some of the main strengths of public diplomacy are that it is easy to execute, there is no significant risk of loss of life, and it can psychologically destroy the enemy.

Financial Controls consist of sanctions, trade embargoes, and freezing assets. Trade embargoes and sanctions are used against state sponsors of terrorism, but they are often ineffective since they often cause humanitarian crises and harm the people not the politicians. Financial controls also consist of tracking and seizing drug money, preventing or catching groups investing or laundering money in legal businesses, and monitoring and preventing corruption. Financial controls unfortunately take a long time to implement and are often not very effective.

Law Enforcement consists of tools such as VIP protection (president, religious figure, etc. ), forensic assistance, and monitoring possible terrorist groups developing in prison (i. e. JLN). Law enforcement tends to be too understaffed to be extremely effective. In the case of terrorism, law enforcement really provides support for the three-letter agencies. The last tool to fight terrorism is foreign policy. It can have a huge effect on whether or not the terrorist groups have a lot of support or not. For example, if the United States did not so staunchly support Israel, the terrorist groups would not hate the United States so much.

Now, many of these religiously driven groups see Israel as the near enemy and the United States as the far enemy. Foreign policy dictates how the United States deals with nations and terrorist groups, who it gives financial and other support to, and whose side it is on in a conflict. Recently, a big issue was the question of whether or not to negotiate with terrorists. The former administration did not but the current administration is willing to sit down with opponents unconditionally (without concessions beforehand). IV. Conclusion: Twenty Year Forecast – Cloudy with a High Chance of Terror

What will terrorism look like in twenty years? In short: unpredictable. Terrorism can obviously only do two things: 1) get better or 2) get worse–whichever direction it goes will most likely be an extreme. The chances of completely eliminating terrorism are zero percent. The only way to eliminate terrorism is to eliminate causes to fight for. So long as there is a cause or conflict, there will be a chance that someone will commit a terrorist act. In addition, terrorism is cheap and effective. It costs next to nothing to make an IED (Improvised Explosive Device).

Even if the United States is successful in bringing down groups, there is still the danger of single individuals (i. e. the Unabomber) or BOGs (Bunch of Guys) committing these crimes. According to the Homeland Security Advisory Council’s 2007 “Report of the Future of Terrorism Task Force”, “There is every indication that the number and magnitude of attacks on the United States, its interests and its allies will likely increase. ” Most likely it will indeed get worse before it gets better. But the report also states, “The future of terrorism will be shaped by our actions in defending against terrorism”.

In the Bush era, the United States would walk with a big stick, never sit down or “negotiate” with terrorists (which is kind of difficult when they are legitimately elected by their people as a political group (i. e. Hamas)), blindly support Israel, and show deaf ears to the Muslim world. However, with the current change in Presidency, there is an opportunity for a mass campaign of hearts and minds. There are new opportunities to re-market America’s image. President Barack Hussein Obama is a vastly different symbol for the United States, versus former President George W. Bush.

He has Muslim blood in him; his middle name is Hussein; and he has been stricter with Israel regarding their settlements in the West Bank. In President Obama’s speech, delivered at Cairo University, his reaching out to the Muslim world was well received in the Middle East. If the United States uses this opportunity to alter foreign policy as it says it will, there is a good possibility that terrorism will lessen over the next 20 years. If instead of spending money waging war in the Middle East, the United States reaches out a helping hand and builds infrastructure, the terrorists will be divided.

Currently, terrorists feel persecuted by the United States, but if the United States were to provide aid, only the radical extremists would be left in these groups. This differentiates from the many who have a difficult life and thus blame the United States. The U. S. was aware of the necessity to try a softer approach before the new administration came into office, as exemplified in the report, “Broader avenues of dialogue with the Muslim community should be identified and pursued by the Department to foster mutual respect and understanding, and ultimately trust. Though the United States does play a big part in dictating the future of terrorism, we must also remember that not all depends on us. Major factors in the future of terrorism are the quality of the leadership, the availability of safe havens to terrorists, global political reforms, the adaptability of the groups, the increases in technology, and the efficacy with which the terrorists can acquire funds. In addition, the National Intelligence Estimate writes that “[g]reater pluralism and more responsive political systems in Muslim majority nations would alleviate some of the grievances jihadists exploit. The terrorist groups may be pushing an extreme religious message but many, if not most, of its members are just people struggling to survive, just wanting to change their current circumstances and for the world to hear their plight. When forecasting the twenty-year economic impact of terrorism on the economies of the world it is necessary to follow the changes in foreign direct investment, both outflows and inflows. As seen in OECD report for 2002, FDI in 2001 had seen a large decrease. It must be noted the U. S.

FDI, both inflows and outflows did not rely solely on the impact of 9/11; however, more isolationist policies did play a significant role on the long run impact of FDI as a portion of country’s Gross Domestic Product. Ultimately, if the threat of terrorism begins to grow it will slightly negatively affect the GDP of the given country through a significant decline in foreign investment. There is no possible way to accurately predict what terrorism will look like in the future. The best bet would be to follow governmental policy to forecast.

The more understanding, cultural exchange, and support that is given to the Muslim world, the less terrorism will be present in the future. However, if the United State chooses to continue to ignore the screams of those in need, then we can expect a type of terrorism that will require absolute security everywhere—a place where Americans will not feel safe filling up their cars with gas, where embassy walls will need to be made of missile-proof material, and there will need to be as many police cars on the street as there are civilian cars.

If terrorism is not curbed, it will only grow. While its economic effects may initially be minor on the country’s GDP, with more extreme terrorism, isolationist policies will develop. However, we predict that over the next twenty years, with the new administration in place, and with greater attention given to developing the infrastructure of nations directly affected by terrorism, terrorist tactics and groups will be curbed to a degree that will allow FDI and GDP to grow at a constant rate, but terrorism itself will never fully disappear.

Cite this 20 Year Forecast on Terrorism’s Impact on the World Economy

20 Year Forecast on Terrorism’s Impact on the World Economy. (2018, Feb 18). Retrieved from https://graduateway.com/20-year-forecast-on-terrorisms-impact-on-the-world-economy/

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