Any terrorist campaigns that persist have at least some economic costs for governments and states that are targeted. There can be significant opportunity costs for national economies when money is diverted to security personnel and police agencies. Private security efforts can also be costly, and reliance on private security can have hidden costs. … When the limited available funds are spent defending against the dissidents, they cannot be spent elsewhere for education, social welfare, or infrastructure that might improve national economic efficiency. Such precautions may well be necessary, but they still can have a significant cost.

The most important insight I gleaned from the paper relates to the rationales for the targeting of business activity and the foreign interests and investments that it often represents. According to the authors, while the desire to reduce government access to needed resources is an important goal, so to is demoralizing impact economic attacks have on the public:

Business activities have frequently become one of the favorite economic targets for terrorists. One of the earliest examples involved the Social Revolutionary Party that operated in Russia before World War I. The party realized that economic well-being in the country could reduce popular discontent, so the party consciously used terrorism as a means to discourage investment in industry and to disrupt agricultural production (Perrie, 1982). Much later in Northern Ireland the IRA attacked both domestic and foreign business and industry in an effort to increase economic disruption and deter future investment. The leaders of the IRA, like the Social Revolutionaries before them, calculated that the investments provided jobs and other benefits that could reduce popular dissatisfaction in the region and help to pacify the population—and even reconcile some to continued British rule (emphasis added).

The above examples are valuable for what they contribute to the ongoing debate about the root causes of terrorism. For some it is poverty and poor economic conditions, along with a absence of social justice, that are terror’s necessary and sufficient conditions. The Lutz’s suggestion that economic targets can be chosen for their ability to reduce the economic security of states and to inflict economic hardship on its citizens is one that is made much less frequently, thought it should not be. It is an idea that needs further developing. Another valuable insight from the study concerns the impact of attacks on economic targets on foreign investment. In general, more of the former leads to less of the latter:

Analyses of levels of foreign investment in specific countries that have come under attack from dissident terrorist groups have indicated that increases in the level of terrorist attacks have led to decreases in foreign investment at significant levels

The reasons why are straightforward:

The terrorism not only sours the business environment and threatens profits, but it also raises doubts about political stability in the country, a very great concern among investors who prefer the certainty that comes with stability in the political system.

Interestingly, the fallout is not limited only to the country in which the economic assets are located or by whom they are owned, at least not for high-profile attacks like 9/11. Citing a UN Conference on Trade and Development report from 2003, the authors note that

The attacks of September 11, 2001, had a depressive effect on foreign investment in general. Direct foreign investment in the world dropped by half from 2000 to 2001, reflecting the dramatic impact that the attacks had in just the last part of 2001 (United Nations Conference on Trade and Development, 2003, p. 303).

The authors’ discussion of attacks on tourism and tourists, they use the Bali attacks of 2002 and 2005 to underscores the fact that economic impacts of terrorism are one of several factors taken into account by attackers:

Bali had many advantages as a target. First, the tourist areas clearly represented the intrusion of Western influences. The night club areas with alcohol and Western entertainment were examples of the evils that came from abroad. Second, the tourists themselves were symbolic of the West, and the bombs were one means of attacking the West. Third, the attack had significant negative effects on the tourist industry in Indonesia. This attack on tourist revenues increased the problems of the government, and a weakened government might be more susceptible to a takeover by Islamic groups or might become more dependent on the Islamic parties for survival, thus strengthening the role of Islam in state policy. This attack can be seen as a reaction to globalization, an attack against the West that demonstrated the vulnerability of its citizens, and an attempt to reduce revenues and create economic problems for a government that has a pro-Western orientation.

The authors also discuss the activities of a wide variety of ecologically- and environmentally-inspired economic warfare by groups like Earth Liberation Front, Animal Liberation Front, and Animal Rights Militia, groups whose agendas have fewer overtly political objectives:

The Animal Liberation Front (ALF) originated in England in groups that were opposed to fox hunting and the cruelty attendant on this pastime. ALF has since used property attacks against companies and individuals that are seen as abusing animals. There have been property attacks against animal research facilities. Vandalism of cars and buildings, arson, pouring glue into locks, and similar activities have intimidated individuals and business, and the vandalism has extended to the homes of individuals working in the targeted research facilities. A number of firms that supplied animals to research facilities have closed down or stopped supplying the animals as a consequence of the attacks. There have been product tampering cases in England by animal rights groups opposed to the company’s use of animals for experiments that have increased costs for company. These product scares have been effective in damaging the profits of the companies involved. An apparently separate group (or perhaps a subgroup within ALF) has escalated from economic attacks to personal attacks.

The Animal Rights Militia (ARM) has resorted to car bombs, letter bombs, and severe beatings of persons employed in “inappropriate” economic activities. There have also been personal attacks against hunters. All of these actions have sought to have individuals and businesses modify their behavior because of the economic costs involved. Changes have occurred when companies no longer wished to pay the higher costs of dealing with the terrorism and the fear of lost sales from the attendant publicity. The ELF and the ALF in the United States have been responsible for over 600 criminal acts between 1996 and 2002 and caused $43 million in damages. Clearly the actions of these kinds of groups have had important economic implications.

The paper concludes with a summary of the patterns evident from the preceding analyses and discussion:

* (L)eft-wing Marxist groups in Europe virtually never used this kind of tactic. These groups attacked multinational corporations or executives as symbols of the global capitalist system that they were fighting, but there was relatively little effort to attack the economic base of capitalism.

* Ethnic and religious terrorist groups have been the most likely to attack foreign investors.

* Trade and foreign aid were less frequently chosen as targets by terrorists. Foreign aid workers will withdraw from dangerous situations, removing the potential targets. Trade is a very diffuse target except for obvious infrastructure elements like pipelines. Attacks on trade, as a consequence, have been largely limited to pipelines and situations where the dissidents are using guerrilla tactics as well as terrorism.

* Tourists are an easy target, the damage to the local economy can be significant, and foreigners are symbolic of the intrusion of presumably negative outside influences on local societies. The attacks on tourism have had immediate negative effects on revenues, unlike attacks on trade or foreign investment. … As a consequence, the tourism sector is likely to remain a major target for those countries where the sector is important.

The authors end with a sobering assessment of the effectiveness of economic warfare and the reasons why its use will continue unabated for some time to come:

Perhaps economic terrorism in some cases works best when changes in economic behavior are what are being sought. As a consequence, economic terrorism that is directed towards changing business and personal (rather than political) behavior could increase because it has been, and probably will continue to be, fairly effective in bringing about the desired results. It is important to remember, however, that economic terrorism has also been successful in attacking national political and economic systems; therefore, this kind of targeting is likely to continue at the recent levels or higher in the future.

Commentary
One idea that the authors did not discuss is how states and business should best fight economic warfare. It would be interesting to know whether they favor location- and condition-specific responses or if they favor a centralized policy administered by a newly created Board of Economic Warfare.

Tags: terrorism | economics | animal rights | Environment

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See also: The The Belmont Club's discussion of the environmental destruction wrought by a certain former tyrant leaves me to wonder why groups like ELF, ARM, and ALF never supported or called for eco-terrorist attacks against said tyrant. Maybe it's because he wouldn't have treated such attacks as mere property crimes.

Belmont Club