Terrorism And Global Business

Terrorism and Global Business

Introduction

From the invasion of France in 1940, to the Korean air bombings in 1987, to one of the most recent and publicized incidents dubbed the 9-11 attack, terrorism has plagued our world nations for decades. As defined by the League of Nations in 1937, terrorism is "all criminal acts directed against a State intended or calculated to create a state of terror in the minds of particular persons or persons in the general public." James M. Poland, a professor of criminal justice at California State University, gives a slightly different definition. He states that "terrorism is the premeditated, deliberate, systematic murder, mayhem, and threatening of the innocent to create fear and intimidation in order to gain a political or tactical advantage, usually to influence an audience."

The perception of terrorism is of a subjective nature: a man defending his nation may be seen as a terrorist to some, but a hero to others. However, no matter the perception, terrorism has an effect on the activities of businesses and profoundly impacts the world's economy: many lose their lives; others lose their homes and source of income as a result of a terrorist attacks. Terrorism forces the reallocation of scarce resources of an economy in an effort to meet the dire needs of its citizens. Small islands such as Grenada would eventually experience higher cost of living as a result of attacks elsewhere in the world.

In the research paper, we shall be focusing on the effects of terrorism on the business activities of countries as a whole, as well as on organizations and individuals. Our research aims to show mainly the negative effects of terrorism in large nations such as United States, and then trickle down to its effects on the Grenadian economy and the Grenadian citizen.

Effects on Targeted Nations

Immediate Effects

The costs of terrorism are grave. The terrorist attacks on Pearl Harbour, the World Trade Centre, the Pentagon, London train stations, London Airports, US Embassies in foreign countries and even the oil wells in Iraq all have both immediate and post consequences. Some of the immediate effects of terrorism, occurring 0 to 6 months after an attack, will now be discussed.

Destruction of businesses and employment

Terrorism causes destruction. Entire businesses are destroyed and serious damage is caused to others. Business buildings, infrastructure, equipment, machinery and important documents and records were obliterated in the 9/11 terrorist attack. But what are the costs of such destruction? According to Robert Looney (2002), in an article about the economic costs of 9/11 to the United States, "Lower Manhattan lost approximately 30 percent of its office space and a number of businesses ceased to exist..... The destruction of physical assets was estimated in the national accounts to amount to $14 billion for private businesses, $1.5 billion for state and local government enterprises and $0.7 billion for federal enterprises."

Naturally, the destruction of businesses leads to loss of employment. "Close to 200,000 jobs were destroyed or relocated out of New York City, at least temporarily" (Robert Looney 2002) after the 9/11 attacks. Assuming that these 200,000 jobs each belonged to 200,000 different people, this would be approximately equivalent to the working population of Grenada multiplied by five.

And the chain reaction continues. The follow up to the above mentioned destruction is a loss in productivity and a decline in economic activity. Productivity immediately drops not only because of the destruction of businesses and loss of jobs, but also because of fear: those heading to work would turn back; those already at work would leave; managers and bosses would send their workers home and close their businesses. There would consequently be less production occurring immediately after a terrorist attack. Economic activity would also be affected. After the London Train station Bombings in July 2005, "the pound fell .89 cents to a 19-month low against the US dollar." The London stock market was negatively affected: "the FTSC 100 Index fell 200 points in the 2 hours after the attack. Markets in France, Germany and Spain also fell 1% on that day." Conversely the US market index rose due to the rising US dollar index against the pound.

(http://en.wikipedia.org/wiki/7_July_2005_London_bombings)

Rescue and cleanup Operations

And off course, after destruction cleanup is necessary. Resources need to be adequately and quickly allocated to perform rescue operations, and medical services to those in need. Policemen, firemen, doctors, and nurses, are all needed to respond to the situation. Added vehicles, equipment and machinery such as fire tricks, ambulances and cranes are all needed to perform the search, rescue and cleanup operations. It is important to note that resources located in other places away from the attack as well as resources allocated for other purposes have to be relocated and reallocated to respond to the attack. Robert Looney (2002) estimated the cost of rescue and cleanup after the 911 attacks to be at least US $11 billion. Those US 11 billion dollars would have probably been used to provide better health care services, better education or even used to provide jobs for the unemployed.

Post Effects on Targeted Nations

Most terrorist attacks are premeditated and are therefore executed with the intent to create political, economical and social disruption long after it occurs. The international arena of business has suffered tremendously as a result of past terrorist acts. For the purpose of this report, we shall assume that long run effects of a terrorist attack occur six months after the incident.

In developed countries such as the United States and England, a number of negative effects on business have surfaced during the long run stage after an attack. Industries that have been affected include airline companies and insurance companies. The governments of these nations and their policies have also been affected by terrorism. Let us now discuss some of these negative effects.

Airline Industry

The airline industry has been the target for a number of recent terrorist acts. During the infamous 9-11