Impact of War on Terrorism and Economy & Business: Spending; $Trillions + Casualties + TSA + and Counting…

“Terrorism is designed to create power where there is none or to consolidate power where there is little. Through the publicity generated by their violence, terrorists seek to obtain the leverage, influence and power they otherwise lack to effect political change on either local or international scale.” ~Professor Bruce Hoffman

According to the “RAND Database of Worldwide Terrorism Incidents (RDWTI) Study”, between 1969 and 2009 there were 38,345 terrorist incidents around the world. Of these attacks, 7.8 percent (2,981) were directed against theUnited States, while 92.2 percent (35,364) were directed at other nations of the world. Between 2001 and 2009:

  • There were 91 homegrown terrorist attacks of all kinds against theUnited States, while there were 380 international terrorist attacks against theUnited States
  • The two most prevalentU.S.targets of international terrorism were businesses (26.6 percent) and diplomatic offices (16.6 percent)
  • The two most prevalentU.S.targets of domestic terrorism were businesses (42.9 percent) and private citizens and property (24.2 percent)
  • The preferred method of attack against theUnited Statesfor international terrorists was bombings (68.3 percent), while the preferred method for domestic terrorists was arson (46.2 percent)

In the articleTrends in International Terrorism Against Business Targets by Andrew Lee writes: One of the key contemporary challenges facing international business is how the effects of international terrorism can be managed, particularly when the terrorism threat is unpredictable and indiscriminate. In addition, attacks on an international business may be based on what the organization symbolizes in the minds of the attackers rather than the actual nature of the business.

International terrorism attacks against business targets account for 18.28% of all attacks; Direct attacks on business infrastructure targets account for less than 10% of all international terrorism targets, suggesting that attacks on infrastructure are less likely to occur as an indirect attack on business targets.

The most widely used tactic in international terrorism against business targets is bombing, currently averaging approximately 39 incidents per year globally. All other forms of attack average less than five incidents a year each. However, the use of bombing is declining in favor of other tactics, particularly armed attack…

In the blog “The Effects of Terrorism on the World Economy” by evan14 writes:  Every year nearly a trillion dollars are spent on combating terrorism. This along with the billions lost in property damage, loss of human resources, and the decrease in potential profit in key industries are substantial enough to award the terrorists a small victory. Terrorism is a plague on the global economy, and it affects everyone, from entire countries all the way down to the individual.

The total cost of terrorism can be broken down into many areas, but at its simplest it comes down to the direct effects, the response costs, and the negative effects on key industries. The direct effects of terrorism can be further sub-divided into categories such as property damage, and loss of human resources.

A perfect example of the havoc an attack can wreak on businesses is the attack of September 11, 2001. When the $100 billion bill is broken down, it really helps you to realize how devastating terrorism can be. Keep in mind this is only for the 9/11 attacks: [Four civilian aircraft were lost for a total of $385 million. The replacement cost of the world trade center buildings is estimated at 3-4.5 billion dollars.

The pentagon endured nearly a billion dollars worth of damages. The clean up cost was $1.3 billion. Damages to surrounding property and infrastructure were almost $13 billion. Direct job losses amounted to 83,000, with $17 billion in lost wages. The amount of damaged or unrecoverable property reached over $21 billion.] Then, in retaliation, ‘defense and security spending increased by a massive amount’ in the aftermath of the September 11 attacks. And, the increased spending was explained as follows:

“The U.S. alone now spends about US $500 billion annually–20 percent of the US federal budget–on departments directly engaged in combating or preventing terrorism, most notably Defense and Homeland Security. The Defense budget increased by one-third, or over $100 billion, in response to the heightened sense of the threat of terrorism – an increase equivalent to 0.7 per cent of U.S. GDP. Expenditures on defense and security are essential for any nation, but of course they also come with an opportunity cost; those resources are not available for other purposes, from spending on health and education to reductions in taxes. A higher risk of terrorism, and the need to combat it, simply raises that opportunity cost”.

In the article “Organizational Stakeholder Expectations in an Age of Terrorism” by Robert S. Fleming writes:  From a business standpoint, an act of terrorism has the potential of compromising the organization’s ability to continue to operate. When it cannot operate, the length of the interruption in operations becomes a crucial factor. When the organization is able to continue to operate, operating costs may become an issue.

Ultimately, the impact of an exposure may be to undermine the organization’s ability to survive. Crucial organizational strengths that contribute to an organization’s ability to prevent and withstand a terrorist attack begin with the presence of an effective risk management program, utilizing the traditional risk management process of risk identification, risk evaluation, risk prioritization, risk control, and risk monitoring. A comprehensive risk management program can be instrumental in reducing organizational vulnerability both in terms of prevention and recovery.

Contingency planning is another organizational strength whose value cannot be overstated when it comes to minimizing organizational vulnerability and enhancing organizational recovery. The development of realistic contingency plans that interface appropriately with the organization’s corporate-level, business-level, and functional-level plans is essential, as is making sure the organization’s contingency plans coordinate with those of governmental entities, including emergency preparedness and response agencies.

The lack of planning and absence of appropriate contingency plans are a major organizational weakness in terms of organizational vulnerability to acts of terrorism (also, these preparations are applicable to pandemics or other major natural  disasters). A lack of controls or ineffective controls also represents a weakness in terms of prevention and recovery from acts of terrorism…

In the article “How can Business Cope with Terrorism?” by Bruno S. Frey writes: The term “coping with”, rather than “fighting”, terrorism has been chosen on purpose. I start from the position that terrorism always has existed, and always will exist. It is impossible to eradicate terrorism completely, not even if the most stringent deterrence policies are employed.

Business leaders should not fall prey to the illusion that terrorism is a transitory phenomenon that will disappear in due course. Rather, they need to muster ingenuity and resources and set out to deal with terrorism as a part of the many other challenges they must face. It is naïve to think that killing terrorists “wins the war against terrorism”. Members of terrorist organizations, who cannot see worthwhile alternatives in their lives will continue to turn to terrorism, and often will do so even more quickly if a superior in their ranks is killed.

This death (e.g. Osama bin Laden) at the hands of their enemies offers them the chance of a promotion within the terrorist hierarchy, and in addition, gives them a moral pretext to engage in revenge. However, based on a ‘rational choice theory’ (that might be naive), we must begin to change the game and explore non-violent propositions (together with a firm hand) for dealing with terrorist and changing the expected costbenefit ratio

In the blog 20 Year Forecast on Terrorism’s Impact on the World Economy by evan14 writes: 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 do not possess the military and political power necessary to combat their perceived injustices through traditional channels, so they resort to terrorism.

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… 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…

Employers need to have a well-communicated plan in place that may include third-party resources if an emergency arises and help protect employees abroad and ease concerns associated with business travel, including:

  • Assure that employees have a set itinerary in place
  • Thoroughly research the hotels, transportation vehicles and travel routes employees plan to use
  • Provide employees with a packet of updated travel logistics before they leave in case they become stranded without an operative communication device

The United States has spent more than $1 trillion on the “war on terror” since 9/11, and a recently released Congressional report says: “Adjusting for inflation, the outlays for conflicts in Afghanistan, Iraq and elsewhere around the world make the “war on terrorism” second only to World War II. World War II cost $4.1 trillion when converted to current dollars, although the tab in the 1940s was $296 billion. World War II consumed a massive 36 percent of America’s gross domestic product — a broad measurement of the country’s economic output. The post-9/11 cost of the conflicts is about 1 percent of GDP…” 

In addition, there are billions of dollars spent by global businesses for both the threat of, and damage from terrorism: Productivity and growth decline in areas where the threat of terrorism escalates, heightened threat of terrorism creates uncertainty and increases costs of doing business and slows down growth. With the threat of terrorism, normal businesses require more time and extra security for their business dealings, and there is a general slowdown in economic activity.

The true cost of terrorism or the threat of terrorism is enormous. In his October 2004 address to the American people, bin Laden noted that the 9/11 attacks cost al-Qaeda only a fraction of the damage inflicted upon the United States. “Al-Qaeda spent $500,000 on the event,” he said, “while America in the incident and its aftermath lost — according to the lowest estimates — more than $500 billion, meaning that for every one dollar al-Qaeda spent, America spent one million dollars (that’s $1 to $1,000,000)”.

Terrorism, on a pure cost-to-benefit analysis, is the most efficient business model of war… From purely a business prospective, this ROI stinks. We must develop a more reasoned approach that protects the populations, minimizes the root cases of terrorism, isolates the countries that sponsors terrorism, and adopt a more focused spending policy that fuels strong economic & business growth…

“If we like them, they’re freedom fighters… If we don’t like them, they’re terrorists. In the unlikely case we can’t make up our minds, they’re temporarily only guerrillas” ~Carl Sagan