Jihadist terrorist attacks perpetrated on European soil during the last months have heightened fears that a new terror wave could be building across the EU.[i]
The multi-faceted outcomes of these dramatic events[ii] are reflected in both the short and long term in different internal and external aspects of EU member states, causing, to mention a few, the emergence of a culture of fear which affects political[iii] and voter priorities,[iv] a renovated interest by the media in Islamist-inspired terrorism, and put the fight against homegrown and international terrorism at the top of the agenda of European policy-makers.[v]
Nevertheless, the consequences of the terrorist threat go far beyond intangible factors[vi]. Behind the casualties, the symbolic and communicative charge brought by the perception of a jihadist looming threat, reverberates in concrete impacts on the economy of a State, turning fear into costs or variations in economic standards at different levels.[vii]
Indeed, in this respect, the approximate total losses incurred in real GDP terms by EU member states due to terrorist events, from 2004 to 2016, is €180bn. While, a single jihadist attack, as the one that happened in Paris in November 2015, approximately costs to the national economy €2.1bn[viii].
From this perspective, based on previous researches and surveys in different sectors (i.e. socio-economic, marketing, policy-making, etc.) this series of papers aims to suggest which areas could be better monitored to have a clear picture of the economic consequences of terrorism in the EU and highlight which elements of the phenomenon are still over or underestimated.
Human drivers of insecurity and consumer behavior adaptation patterns
The civilian population is the first and most vulnerable segment affected by the perception of the jihadist terrorism threat.
Although there is not a large literature on the correlation between jihadist terrorism and its economic consequences on citizens, studies and surveys on the proportionality between insecurity and consumption can help to draw a pattern of possible impacts that the perception of terrorism generates on consumer behavior.
With these premises, the psychological repercussions of a terrorist attack can trigger two opposing consumption impulses. The first impulse is related to the fact that experiencing loss of control brings to the abandonment of entrenched habits and changing methods of purchase in order to feel safe. The second impulse is related to the perception of increased awareness of mortality, which sparks an impulse to enjoy limited and uncertain life to the fullest, developing in materialistic consumption behavior.[ix]
These aspects have been firstly monitored in the United States after the 9/11 terrorist attack, which brought American citizens to suffer psychological trauma that increased impulsive consumption and sedentary activities.[x] In fact, the period between September 2001 and March 2002 in the US was characterized by a 67% stock jump for electronic retailers along with an increased sales at home furnishings companies and discount chains[xi].
In Israel, researchers found that concerns with frequent terrorism increase people’s desire for control and may lead to avoidant behaviors, depending on consumers’ perceptions of whether they have some control over the odds of becoming a casualty in the case of a terror attack. Then, when individuals perceive their control to be low, they change their preferences and consumptions, disrupting their normal buying habits drastically as shopping in stores and malls and migrate to online buying.[xii]
The consequences of a jihadist attack on EU citizens
In the EU the number of terrorist attacks (not only jihadist) fell to 119 in 2019, the fewest number of attacks in years. Thus, even though terrorism still remains a global security threat, the EU is recording its lowest number of incidents since 2012.[xiii]
Nonetheless, since 2004, attacks in Madrid, London, Paris, Brussels, Nice, Berlin, Vienna, and other European cities, combined with the extensive coverage of terrorist attacks through media and social media channels, has led to an exponential growth of eyewitnesses of terror attacks. So, even those EU citizens not directly involved in attacks may be psychologically affected and likely to assume the abovementioned consumption patterns.[xiv]
In this context, a paper produced by RAND Corporation at the request of the European Parliamentary Research Service (EPRS)[xv] reports that consumer purchasing habits remained relatively stable across the EU and sometimes even increased in the aftermath of a terrorist attack that occurred on European soil.
However, although there is no clear indication of the mechanisms behind this increase, it is believed that terrorist attacks may heighten awareness of mortality,[xvi] generating, same as reported after 9/11 in the US, an impulse to acquire and collect materialistic possessions. In this regard, studies have found that materialistic behavior leads to negative psychological effects on individuals, emphasizing stinginess, and jealousy. Moreover, this tendency to overspend is likely to increase people’s debts.[xvii]
Regarding the consumption variations, research of 1999 “Terror Management and Marketing: He Who Dies With the Most Toys Wins”[xviii], demonstrated that luxury items are evaluated more favorably by individuals who are subtly reminded of their own impending mortality. This reaction, in general, is related to a trend towards saving less and consume more in the present time, inducing a distortion of consumers’ choices on investment, savings, and consumption.
In these terms, the research by RAND Corporation found that individuals tend to report lower levels of all the abovementioned variables in European countries that experience relatively more terrorism and last only in the short term.
Nonetheless, these consequences can be amplified in terms of duration or negative economic impact due to counter-terrorism measures applied in the aftermath of a terrorist attack.
In fact, besides the sense of mortality, the consumption growth is also related to the positive correlation between terrorist acts and people’s life satisfaction, happiness, trust in other people,[xix] as well as in communities and national political institutions. In this regard, CT measures can give the perception of a limitation to personal freedom and, in some cases, bring a detrimental impact on the fundamental rights of suspects, particular groups and communities, and society at large.
Then, even with less evidence, from this perspective, there are reasons to consider how these variations can decrease labour productivity and ethnic-gaps in labor markets, impacting negatively on social and labour market improvements.
Another aspect related to the workforce is that workers affected by the attacks have to go on sick leave during a certain period of time, causing important wage losses that, apart from being compensated by social benefits, should be taken into account when assessing the costs of the terrorist acts[xx].
In these terms, the total costs related to fatalities and injuries caused by terrorism in the EU from 2004 to 2019, expressed as the average income per worker, multiplied by the average life expectancy, is estimated to be about €4.7 billion. More than half the cost of fatalities and injuries occurred since 2013 until 2019 (about €2.5 billion).
Strengthen social resilience by including targets of jihadist attacks in the focus
In this context, direct or indirect consequences of terrorist activity on citizens are likely to disrupt in the short term crucial production inputs like capital and labour, while the effects of increasing risks and fear seem to affect a number of industries and sectors of the economy.
So, understand the negative impact on the population is crucial to prevent the micro- and macro-economic effects of jihad on the private sector.
In the counter-terrorism field, improving the knowledge on the economic repercussion of terrorism in the EU could enlarge the range of effectiveness of security measures in both the short and long-term.
Beyond resulting in more relevant, coherent, effective, and efficient action in the fight against terrorism, this point of view, by taking care of those affected directly or indirectly by terrorism, reduces the material and immaterial impacts of jihad, aiding the dissipation of fear in the short term, while preventing ethnic social divisions, which is one of the long-term outcomes of jihadist terrorist attacks, stepping toward a resilient pan-European path of social inclusion.
[i] H. Warrell, S. Jones, E. Solomon, W. Mallet (November 6, 2020) Deadly attacks heighten fears of new European terror wave. The Financial Times. https://www.ft.com/content/076e1b00-2d54-449a-bab5-09920a10f4f7
[ii] GLOBAL TERRORISM INDEX 2019 BRIEFING. https://www.visionofhumanity.org/wp-content/uploads/2020/10/GTI-2019-briefingweb.pdf
[iii] I. H. Indridason (March 2018) Does Terrorism Influence Domestic Politics? Coalition Formation and Terrorist Incidents. Journal of Peace Research (JPR). https://journals.sagepub.com/doi/10.1177/0022343307087183
[iv] Z. Brzezinski (March 25, 2007) Terrorized by ‘War on Terror’. The Washington Post. https://www.washingtonpost.com/wp-dyn/content/article/2007/03/23/AR2007032301613.html
[v] European Council – Council of the European Union. Response to the terrorist threat and recent terrorist attacks in Europe. https://www.consilium.europa.eu/en/policies/fight-against-terrorism/response-terrorist-threat/
[vi] T. Brück, F. Schneider, M. Karaisl (June 30, 2007) A Survey on the Economics of Security with Particular Focus on the Possibility to Create a Network of Experts on the Economic Analysis of Terrorism and Anti-Terror Policies and on the Interplay between the Costs of Terrorism and of Anti-Terror Measures – the State of Play of Research. DIW Berlin For the European Commission, Directorate General Justice, Freedom and Security. https://ec.europa.eu/home-affairs/sites/homeaffairs/files/doc_centre/terrorism/docs/sececon_full_report_en.pdf
[vii] T. Krieger, D. Meierrieks (January 2019) The Economic Consequences of Terrorism for the European Union. Albert-Ludwigs-Universität Freiburg https://www.econstor.eu/bitstream/10419/191637/1/104712761X.pdf
[viii] J. Karaian (November 26, 2015) The Paris attacks will cost the French economy more than $2 billion. Quarttz. https://qz.com/559902/the-paris-attacks-will-cost-the-french-economy-more-than-2-billion/
[ix] U. Dholakia (December 1, 2015) How Terrorist Attacks Influence Consumer Behaviors. Psychology Today. https://www.psychologytoday.com/us/blog/the-science-behind-behavior/201512/how-terrorist-attacks-influence-consumer-behaviors
[x] M.B. Perrine, K.E. Schroder, R. Forester, P. McGonagle-Moulton, F. Huessy (2004) The impact of the 11 September 2001, terrorist attacks on alcohol consumption and distress: Reactions to a national trauma 300 miles from Ground Zero. Journal of Studies on Alcohol and Drugs. https://www.jsad.com/doi/abs/10.15288/jsa.2004.65.5
[xi] J. Chartier (September 11, 2002) Goodbye, cocoon boom?. CNN Money. https://money.cnn.com/2002/08/26/news/9-11retail/
[xii] M. Herzenstein, S. Horsky, S. Posavac (2015) Living with Terrorism or Withdrawing in Terror: Perceived Control and Consumer Avoidance. Journal of Consumer Behaviour. https://ssrn.com/abstract=2663516
[xiii] (2019) Number of failed, foiled or completed terrorist attacks in the European Union (EU) from 2010 to 2019, by affiliation. Statista. https://www.statista.com/statistics/746562/number-of-arrested-terror-suspects-in-the-european-union-eu/
[xiv] M. Hafner, E. Disley, S. Grand-Clement, K. Cox, B. Baruch. The cost of terrorism in Europe. RAND Corporation. https://www.rand.org/randeurope/research/projects/the-cost-of-terrorism-in-europe.html
[xv] P. Bakowski, W. Van Ballegooij (May 2018) The Fight Against Terrorism: Cost of Non-Europe Report . RAND Corporation at the request of European Parliamentary Research Service (EPRS) https://www.europarl.europa.eu/RegData/etudes/STUD/2018/621817/EPRS_STU(2018)621817_EN.pdf
[xvi] E.C. Hirschman (June 1990) Secular Immortality and the American Ideology of Affluence. Journal of Consumer Research. https://www.jstor.org/stable/2626822?seq=1
[xvii] M.L.Richins (September 2011) Materialism, transformation expectations, and spending: Implications for credit use. Journal of Public Policy Marketing. https://journals.sagepub.com/doi/full/10.1509/jppm.30.2.141?casa_token=IDn3TGYpXxwAAAAA%3AUWhrmlXfc5I-inzJkjnUFh5hxS6EiWfTU58pIIGqC0kEgc9Pef6bWgBwymIuWAl6kVr1mLMr8yHr
[xviii] N. Mandel, S.J. Heine (1999) Terror Management and Marketing: He Who Dies With the Most Toys Wins. Advances in Consumer Research Volume 26. https://www.acrwebsite.org/volumes/8314/volumes/v26/NA-26
[xix] A. E. Clark, O. Doyle, E. Stancanelli (August 25, 2017) The Impact of Terrorism on Well-being: Evidence from the Boston Marathon Bombing. UCD GEARY INSTITUTE FOR PUBLIC POLICY DISCUSSION PAPER SERIES. https://www.ucd.ie/geary/static/publications/workingpapers/gearywp201708.pdf
[xx] M. Buesa, A. Valino, J. Heijs, T. Baumert, J. Gonzalez Gomez (February 2006) THE ECONOMIC COST OF MARCH 11: MEASURING THE DIRECT ECONOMIC COST OF THE TERRORIST ATTACK ON MARCH 11, 2004 IN MADRID. Instituto de Análisis Industrial y Financiero. Universidad Complutense de Madrid. http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.319.8266&rep=rep1&type=pdf