Terror as an economic weapon

Charlie Hebdo is a French satirical weekly that has courted controversy in the past with its irreverent take on news and current affairs. On Jan 7, Gunmen shot dead 12 people at the weekly’s Paris office in an apparent militant Islamist attack.It is believed to be the deadliest attack in France since 1961.

Attacks on developed countries, including the events of Sept 11 in the United States, cause economic calamity. Of course, the direct costs of death and damage can be expensive. Losses of life and infrastructure on Sept 11 cost upwards of $55 billion in New York alone, while increased security efforts, decreased economic activity and other costs add up to more than $3.3 trillion.

The American economy did suffer in the days and months after the attacks of Sept 11 as companies shed jobs, tourism dropped and investor confidence plummeted. Unemployment increased 0.6% from September to October, including a loss of 60,000 jobs. The climate of uncertainty led many businesses to forestall hiring and new capital investments in favor of stockpiling cash. Nervous investors unsure of the economic implications of the attacks also kept capital on the sidelines.

Terrorism undoubtedly poses a grave threat to the security of open societies. Conventional wisdom holds that terrorists also hold the power to inflict grave harm upon modern economies, which in turn can impact financial markets and investments globally.



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