In light of the recent terror attacks in London and past terror attacks around the world, how do these attacks affect our economy, down to our everyday lives? Terrorism and extremism seem to be forever in the news, from the recent Manchester attacks to 9/11, but how else can terrorism affect us?
Terrorism has a surprising lack of effect on our holidays. People often change location but still continue to travel, with the travel and tourism sector in 2015 actually growing by 3.1 percent worldwide. On the other hand, an immediate effect is felt by the targeted place, such as after the Paris attacks when Paris’ rate of people staying in hotels and residences fell by 21%. Travel insurance also spiked but returned to normal rates after a week or two. Whilst the location and frequency of the attacks need to be taken into account, typically the targeted area takes 13 months to fully recover from attacks, which is short when compared to other factors that affect tourism for even longer, such as diseases (21 months recovery), an environmental disaster (24 months recovery), and political unrest (27 months recovery). Companies have found that cutting prices re-attracts customers after attacks, with more experienced travelers being more likely to travel despite the attacks. It seems that a good deal is hard to resist despite the threat of terrorism.
In fact, tourism only tends to drop when countries suffer from long-standing issues, for example Egypt, which has experienced several years of political unrest, saw an average annual decline in UK visitor numbers of 18.5% from 2010 to 2014, according to the Office for National Statistics.
The effect and damage on the stock market depends on the attack. According to one estimate, the Paris attacks wiped out over $2 billion in value among Europe's travel and leisure companies. In the past, terrorists have specifically attacked strategic assets like oil fields or financial institutions in the hope of causing large damage to the economy. Oil companies would be hurt by long-term interruptions in supply, but may be helped by increases in the price of oil as a result of demand. As we use large quantities of oil for everyday life in cars, trucks and planes, this would inevitably force people to pay up to double what they might usually pay.
Nonetheless, for banks and their stocks, any attack that cripples the financial infrastructure, either by shutting down the Internet and telecommunications or by physically closing an exchange, would make shares in these companies vulnerable. This would have an effect on people who have a share in the company as they would be unable to sell their shares to make a profit. In extreme cases, banks lose millions in their clients’ money after being hacked.
In worst case scenarios, the country that is subject to a terror attack can go into a recession, causing millions of people to lose jobs. This happened to some in extent in the US following 9/11 due to the stock market being closed, all in the midst of the threat of war. Unemployment was at 6% during the peak of the recession and the ‘war against terrorism’ caused severe government debts which the US still has to pay off today.
When it comes to the government, after the Manchester and London Bridge attacks as well as the Westminster attack, we can most likely see an increase in campaigning and funding for the ‘de-radicalise’ programme as well as an increased focus on the Investigatory Powers Bill, particularly after the government has spent over a billion dollars on it. Some question why there are still people escaping the authorities’ notice, even with the Investigatory Powers Bill. Given the statistic that it takes 30 people to have surveillance on one person, is it even possible to keep an eye out for all terrorists? Alternatively, does the UK pose the threat of becoming too paranoid and isolating itself and the border in the future in order to prevent terrorism?
Our government is already feeling an increased pressure to tighten border control and immigration clearance. In other cases, after a terror attack, countries pass sudden counter-terrorism legislation policies that may infringe on personal freedom and individual privacy.
Overall, it can be seen that terrorism does have an effect on our economies but, despite a slight wavering in confidence in the safety of the affectd area, people continue to travel abroad and seem to be relatively unfazed by terrorist attacks.
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