Terrorism is robbing the world off its wealth! Besides the painful deaths that nations have had to deal with, their economic growth and development efforts are being crippled. A good example of such a loss is that of the recent November 2015 terrorist attacks in Paris. The French government had just announced that the economy was going to grow again. As people prepared for celebrations, the ISIS- affiliated terrorists struck the nation. The devastation that followed got the whole world worried about the economic impact of terrorism.
Markets detest the uncertainties caused by the terrorist’s activities. A day after a blast, there is chance the few people will be willing to trade in the major capital markets of a country. For instance, following the 9/11 attacks in the United States, the S&P 500 fell by approximately 5%. Even though the markets will be resilient enough after a while, constant attacks will eventually have a huge economic impact in an economy. At this point, though it may be early to speculate the full costs of the terrorist attacks in Paris , it is possible that the markets are suffering grievous losses.
Besides the effects on the markets, terrorist activities prompt governments across the globe to spend highly on the military. For instance, in the United States, immediately after the 9/11 attacks, the government set aside a lot of money to engage in a 13 year war in Afghanistan. Specifically, close to 700 billion dollars were spent fighting in the war. In the process, the numbers of service men lost were more than those involved in the terrorist attack; such individuals would have been useful in re-building the economy after the attacks. In the same way, France may be forced to spend more money on attacking Syria. Already, in the past five year, the government has launched three airstrikes on Syria. In the wake of the recent attack, there is a chance that more money will be spent on such airstrikes, which will cost the country a lot of money. Military spending, though necessary, should always be limited since it can limit the rate of growth and development in a country. Specially, when money meant for investment is diverted towards the military, negative impacts in the economy will be inevitable.
The confidence of the consumers and investors is always jeopardized after war. Terrorist understand the aspect well and will therefore target some of the places where the consumer is likely to visit. In so doing, they are able to affect the growth of major businesses and the economy as a whole. In Paris attack, for instance, the terrorists targeted areas where nightlife and cultural offerings existed. The economy of Paris is built on such activities and places. Major restaurants and bars have not been receiving guests due to the fear of another attack. The existence of such fear cripples the growth of Paris economy in the short-run. More than that, the ability of France to deal with the terrorists will determine whether it will continue to play a major economic role in the Euro zone.