Term Paper: How Has Terrorism Effected the World Economy in Particular the United States

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Terrorism and Economy

How has Terrorism Effected the World Economy and United States

There is no universally accepted definition of terrorism, and although at times people agree on a definition of terrorism, they also often disagree about whether or not the definition fits a particular incident (Terrorism pp). Thus, one must assess the different views of what exactly constitutes terrorism in order to understand it (Terrorism pp). Attempting to reach a general conclusion on the definition of terrorism has created much debate internationally and within the social sciences (Terrorism pp). However, no single definition seems to satisfy the wide interpretation of what specifically is terrorism (Terrorism pp).

1988 study by the United States Army found over 100 definitions of the word 'terrorism' (Definition pp). The U.S. National Counter Terrorism Center has described a terrorist act as one which was premeditated, perpetrated by a sub-national or clandestine agent, was politically motivated, potentially violent, with symbolic motivations, including religious, philosophical, or cultural, and perpetrated against a noncombatant target (Definition pp). The United Nations has not accepted any definition of terrorism as being authoritative, however its "academic consensus definition," which was written by terrorism expert A.P. Schimd and widely used by social scientists, states that terrorism is an anxiety-inspiring method of repeated violent action, employed by clandestine individual, group or state actors, for idiosyncratic, criminal or political reasons, in which the direct targets of violence are not the main targets (Definition pp). The victims of violence are usually chosen randomly, such as targets of opportunity, or selectively, such as a representative or symbolic targets, from a target population, and serve as message generators (Definition pp). Threat and violence-based communication between terrorists and main targets are used to manipulate the main target, "turning it into a target of terror, a target of demands, or a target of attention, depending on whether intimidation, coercion, or propaganda is primarily sought" (Definition pp). The U.N. short legal definition, also proposed by A.P. Schimd, states that an act of terrorism is the "peacetime equivalent of a war crime" (Definition pp). In November 2004, a United Nations panel described terrorism as any act "intended to cause death or serious bodily harm to civilians or non-combatants with the purpose of intimidating a population or compelling a government or an international organization to do or abstain from doing any act" (Definition pp). The United States Code of Federal Regulations defines terrorism as "the unlawful use of force and violence against persons or property to intimidate or coerce a government, the civilian population, or any segment thereof, in furtherance of political or social objectives" (Definition pp).

The saying "one man's terrorist is another man's freedom fighter" is older than the War on Terrorism, however since the September 11th attack, the term "terrorist" has become much more heavily politicized (Definition pp). Terrorist acts are basically designed and intended to attract notoriety and create public shock, outrage, and/or fear, and to provoke disproportionate reactions from states (Definition pp). Terrorist acts are intended to achieve political or religious goals, not for personal gain (Definition pp). For example, a gang of robbers who kill a bank manager, blow up the vault and escape with the money are not classed as terrorists because their motive was personal profit (Definition pp). However, if a gang executed the same assault with the intent of causing a crisis in public confidence in the banking system, leading to a run on the banks and a subsequent destabilization of the economy, then the gang would be considered terrorists (Definition pp).

The news that al Qaeda operatives have targeted major U.S. And international financial institutions only underscores the likelihood of more attacks, leading politicians, economists, and ordinary citizens concerned that terrorism could derail economic growth in the United States and around the world (Rogoff pp). However, many worry about the potential economic impact of antiterrorism efforts, because the global economy has become so dependent on the free flow of goods and people across borders that even a little additional security could have significant impact (Rogoff pp). For example, a precaution that many experts consider inevitable is enhanced security at shipping ports worldwide to monitor for biological or nuclear weapons material (Rogoff pp). At present, only about 2% of all cargo reaching United States shores is subject to inspection, however, the U.S. 9/11 Commission report noted that authorities should improve methods of identifying and tracking high risk containers, operators and facilities require added scrutiny (Rogoff pp). Yet, if such scrutiny means cargo inspections jump say 50%, then today's slowest customs lines would seem like express lanes, and the costs of many consumer goods would skyrocket (Rogoff pp). Moreover, as trade in goods and the flow of people slows, so too will the breathless pace of product innovation that many individuals now take for granted (Rogoff pp). According to Foreign Policy's economic columnist, Kenneth Rogofff, "Any abatement of the competitive pressures of globalization or any reduction in the free movement of people and ideas would surely undercut growth, not to mention raise prices sharply at your local Wal-Mart" (Rogoff pp). Rogoff believes that another attack on the scale of September 11th would wreak havoc on energy prices, stock markets, and consumer confidence, thus slamming the brakes on today's global economic recovery (Rogoff pp). Rogoff says that "the benefits of today's interconnected market economies will not survive under a vast and inflexible command-and-control security arrangement" (Rogoff pp).

In August 2004, the National Association for Business Economics reported that terrorism had replaced weak employment growth and the ballooning budget deficit as the biggest immediate threat to the economy (Crutsinger pp). The NABE said that terrorism and defense concerns were picked by more than 40% of its survey panel as the biggest short-term threat facing the economy, placing it well ahead of government spending (Crutsinger pp). Duncan Meldrum, president of NABE and chief economist for Air Products and Chemicals, said, "Terrorism produces the greatest short-term risk to the economy," and believes that this should be the focus of the current administration (Crutsinger pp).

According to industry sources, airports and airlines are likely to become increasingly vocal in the near future as they take the view that they cannot take on the full costs of the security forever (Airlines pp). Signs of discontent in the industry were shown by the Association of European Airlines, AEA, which had said that terrorism is aimed at governments, not the aviation industry, and requires a joint front from the industry and governments, including a responsible funding policy (Airlines pp). According to estimates, the industry has mounted up losses of approximately $30 billion between September 11th attacks in the United States and the beginning of 2004, with some airlines affected more than others (Airlines pp).

However, despite terrorism, Asian airlines have managed to derive ever-increasing revenue, and in one case, up to 48% of the total, from freight (Thomas pp). In fact, freight is now recognized as a form of insulation from the fickle whims of passenger traffic, and China, the world's fastest growing market with 9.5% annual GDP growth and exports topping $851.2 billion in 2003, triple the 1997 number, is attracting immense interest from airports and airlines in the region as the "best ticket in town" for cargo revenue (Thomas pp). The China-U.S. agreement that was signed in 2004 has the potential to alter freight markets and flows in the region dramatically (Thomas pp). Although China's aviation fuel costs are the highest in Asia and its landing charges are the second-highest after Japan, many analysts suggest that companies such as FedEx cannot afford to turn their back on a China hub strategy (Thomas pp).

David Wyss, Standard and Poor's chief economist, believes that rising gasoline prices are a major source of economic anxiety for many Americans, "and they see Bush's Middle East policy as part of the problem" (Raum pp). Oil prices have hit a new high of nearly $67 a barrel and that could lead to political and economic consequences (Raum pp). Chairman of the Council of Economic Advisors, Ben Bernanke, said that high energy prices pose risks for the U.S. economy (High pp). According to Bernanke, "Those high oil prices are a burden on U.S. families, on firms, production costs," however, as of the second week in August 2005, "the U.S. economy has not been slowed by the high energy prices" (High pp). Bernanke said the economy has been resilient and has responded well, and moreover, "growth and job creations have proceeded to pace" (High pp).

In New York, the contract for light sweet crude for delivery in September 2005 fell 87 cents to close at $63.07 a barrel, and in London, the price of Brent North Sea crude oil for delivery next month declined 72 cents at $61.98 a barrel (High pp). According to Wyss, a new recession remains a risk if terrorist attacks damage consumer and/or business confidence, if oil prices continue to climb, or if world deflation forces slower U.S. growth (Bartlett pp).

According to Congressional testimony,… [END OF PREVIEW]

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