The relocation of terror

Thus, beyond their spectacular nature, the attacks of New York (2001), Madrid (2003) or London (2005) are not representative of the four hundred transnational incidents perpetrated on average every year. Actually, without including the attacks perpetrated in times of war, like in Iraq today, almost three-quarters of incidents are now located in developing countries. From our research, we observe a striking regularity: the human targets are often the nationals of advanced countries, but the main economic victims of those acts are the developing countries themselves.

Of course the United States was economically hurt following the New York events, but only temporarily, even given the memorable nature of the attack. A more durable economic impact is observed only if attacks are repeated and persistent in a given location. A recent study found that the aggregate income of the Spanish Basque country would have been 10 per cent higher, in the seventies and eighties, if the ETA had not perpetrated incidents during this period.

As a matter of fact, studies have shown that for some developing countries, such as Colombia or the Philippines, when incidents are viewed as persistent, it affects their business climate. This perception impedes the transactions of goods and services in the domestic as well as international markets. Yet, for firms in the South, the Occident is the main market of destination and the effects induced by the incidents are not insignificant. For instance, a 1 per cent increase of past incidents from Colombia, which frequently hurt American interests, results in a more than one percent decrease of its exports to the United States.

Finally, we observe that effects of terror cannot be considered a national problem: they are always a regional problem. Networks propagate well beyond the territory of source countries and end up contaminating their neighbours. In fact, in the past two decades, many terrorist organisations have been extending their network beyond their original territory, like the new Al-Qaeda’s branches in North Africa. As terrorist threats are becoming global, many security measures set up by western governments at their borders have been designed correspondingly. In recent work, we document the propagation effects: attacks launched by terrorists’ from a given country directly affects the trade of its culturally, geographically, or religiously close neighbours with the United States.

In addition, security measures taken by occidental governments to fight against terrorism reinforce these negative effects. They hinder the mobility of goods and people at borders. As an example, the attacks perpetrated by Greek groups, against American interests in Greece, partly explain why Greeks still need a non-immigrant visa to travel temporarily to the United-States. This is quite an exception in the 15 old European Union member-states.

The South gets caught in a vicious circle. By de-multiplying the negative impact of terrorism, security policies generate a decrease of income in the countries of the South, fostering, in return, terrorism. Thus, protecting lives in the North would induce a worsening of livelihoods in the South.

How can we break this vicious circle? Security measures, decided unilaterally by the advanced countries, seem to perpetuate problems more than help to solve them. In this regard, the most urgent call seems the implementation of a framework of international cooperation oriented to reduce the occurrence of attacks in the North and the South. In the short run, it would be advisable to transfer to developing countries the most advanced technologies and tools to prevent terrorism. In the long run, a voluntarist policy would allow fighting more effectively against the sources of terrorism. At-risk countries should thus, be encouraged and helped to adopt measures in favour of employment, training and economic and social integration of the populations most likely to get involved in terrorist activities, such as the young without qualifications, or qualified without any prospect of a job. To that end, it seems crucial to convince the income taxpayer in the North that its own protection goes through his contribution to the improvement of the livelihood of people in the South.

José de Sousa is Assistant Professor of Economics at the University of Rennes and research fellow at the Sorbonne.

Daniel Mirza is Professor of Economics at the University of Tours and research fellow at CEPII in Paris.

Thierry Verdier is Director of the Paris School of Economics.