The economic impacts of Terrorism

Let me ask you a question. Have you ever been personally affected by terrorism?

Maybe a handful of you have been affected personally by it, but, the majority of you would say “No, we’ve not been personally affected by terrorism”.

Well, let’s see the deeper picture.

When we hear the word “terrorism”, most of us have a picture of Osama-bin-Laden in our heads, some of us have seen some TV series or some other video in which terrorists are shown having guns in their hands, and some of us would have a picture of bombs, guns, and attacks everywhere with planes crashing (again 9/11), fire and gun sounds etc.

For us, 9/11 happened, then after few years 26/11 happened in Mumbai, then the Peshawar school attack, then in Bangladesh, Paris, and very recently London among many others. In between them, there are periods of peace which we see as there is nothing happening and everything is going right.

Let us see some statistics and clear this myth.

In the year 2011, India lost 186,000 lives in road accidents alone, roughly about 20 per hour. India lost another half a million people who were wounded because of road accidents. According to Forbes, 2.7% of India’s GDP was lost in 2011 because of road accidents and comparing it with India’s health budget which was about 1.2% of the GDP, it more than double.

Still in 2008, 10 men came to Mumbai, killed 163 people over three days in the attack at Taj hotel (about 1500 people died in road accidents in the course of those three days) and not only in India, but across the world, billions of dollars were spent to put in security measures in the aftermath of 26/11.

terror 1.jpgTerrorism is effective because it imposes costs on everyone, not just its direct victims. The most substantial of these costs is fear of the future attack, even though such fear is statistically wrong. The probability that an average American will die in a given year from a terrorist attack is roughly 1 in 5 million; he is 575 times more likely to commit suicide.

Every time you enter a five-star hotel and buy a cup of coffee, you give an added surcharge because of various security measures increased and money paid to the extra people employed in security measures after the attack. Each time you buy a plane ticket, you pay a surcharge in the form of time and liberty and maybe monetary because the number of hours a plane can’t take off as extra security is employed at the airport.

Let’s see the 9/11 attacks in America on the Pentagon and the WTC. The direct costs of those attacks were massive – nearly 3000 lives and economic losses as high as $300 billion – as were the costs of wars in Afghanistan and Iraq that the US launched in response.

But wait, that’s not it, there were some collateral costs as well. In just three months following the attacks, there were extra one thousand traffic deaths in the US, why?

One contributing factor is that people stopped flying and drove instead. But the data shows that most of these were drunken driving and reckless driving effects. This means that people started more alcohol abuse and had traumatic stress post 9/11 attacks.

We pay for terrorism on a daily basis and ironically, these buttons once turned on, can never be turned off, post the event. Once the security measure has been put up, it will be there forever and will be paid for by your money.

Now which effect overpowers other, whether more unemployment is reduced or more effect is there due to taxes, but it is sure that GDP loss is present and our money will be used to pay for all the security measures around the country. Tensions among people cannot be measured in economic terms, but they can be realized and it is a big loss to the nation’s productivity.

So, the next time someone asks you the question I asked in the beginning, the answer should be “YES. I have been personally affected by terrorism and that too on a daily basis”.


This was originally posted on Quora.

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