The Economic Consequences of the New Global Terrorism

Bruck, Tilman
October 2002
Economic Bulletin;2002, Vol. 39 Issue 10, p327
Academic Journal
The article analyzes the impact of terrorist attacks like that of September 11, 2001 on the economy of the United States. Many spheres of public and economic life have been affected by the new global terrorism. The most serious damage was that to airline companies, insurance firms and international trade. In the intervening months the attacks have weakened consumer confidence in the U.S. and Europe causing a demand shock. Directly after the attacks massive additional security measures were taken in both public and private sectors. The collapse of the World Trade Center and the damage done to the Pentagon destroyed a substantial amount of real capital. To deal with the consequences, many firms have made additional voluntary provisions to enhance security. Additional security can be obtained by purchasing new appliances, processing additional information, and improving co-ordination and staff recruitment. These security measures imply higher costs comparable to those that result from additional environmental protection. Calculations for the U.S. show, however, that the increase in public spending for additional security is small in relation to the size of the current defense budget.


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