International Terrorism

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The World Economy (2008) doi: 10.1111/j.1467-9701.2007.01089.x

G. BIRD, International Original S. XXX © 2008 Articles 0378-5920 Terrorism World UK Author BLOMBERG AND © D. HESS TWECEconomy Oxford, The BROCKJournal compilation G. Blackwell Publishers Ltd. 2008 Blackwell Publishing Ltd

International Terrorism: Causes, Consequences and Cures
Graham Bird 1, S. Brock Blomberg2 and Gregory D. Hess 2
1

University of Surrey, UK, and 2 Claremont McKenna College, USA

1. INTRODUCTION

T

HERE can be little doubt that a complete understanding of international terrorism requires a multidisciplinary approach. Individual disciplines such as psychology, sociology, political science, international relations and religious studies can all make important contributions. Having said this, international terrorism has also been receiving closer attention from economists, and it is from this perspective that we examine it in this paper. What are the trends in terrorism? What causes it? What are the consequences? And what may be done to abate it? It may be helpful to organise our discussion of these questions around the views of the typical ‘person in the street’ (the PITS). Although not based on a scientific study, we characterise this view in the following way. The PITS view is that terrorism is on the increase; that it is undertaken by extremists who are often religiously motivated; that it has important adverse economic consequences; and that, to paraphrase Tony Blair’s statement about crime when he was the UK’s shadow Home Secretary, policy needs to be ‘tough on terrorism’ and ‘tough on the causes of terrorism’. The remainder of this paper assesses the accuracy of the PITS view. The paper is structured as follows. Section 2 examines trends in terrorism and the general perception that it is increasing. Section 3 investigates the geographical distribution of terrorist incidents. Section 4 constructs a simple theory of terrorism building on the existing literature, and examines the extent to which the available evidence is consistent with this theory. Section 5 goes on to consider the economic consequences of international terrorism, both in principle and in practice. These are subdivided into micro, macro and global categories. Section 6 discusses the policies that may be adopted in an attempt to offset the effects of

The authors are grateful to two anonymous referees for their comments and suggestions. The usual disclaimer applies. © 2008 The Authors Journal compilation © 2008 Blackwell Publishing Ltd, 9600 Garsington Road, Oxford, OX4 2DQ, UK and 350 Main Street, Malden, MA 02148, USA

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terrorism and the difficulties involved, while Section 7 looks at the measures that may be used to combat it. In conclusion, Section 8 returns to reassess the typical PITS view in the light of the foregoing analysis.

2. TRENDS IN TERRORISM

Making use of the ITERATE dataset (International Terrorism: Attributes of Terrorist Events; see Mickolus et al., 2005), Figure 1 records the number of international terrorist events for the period from the late 1960s to the early 2000s.1 An initial glance at the figure suggests that terrorism rose in the first part of the period up to the mid-1980s but that it has generally fallen in the subsequent period. On a per capita basis, the trend away from terrorism is even larger than that depicted in Figure 1.2 Given the downward trend since the early 1990s, why might there be a wide perception that terrorism is increasing? First, it may be that people’s perceptions FIGURE 1 Transnational Terrorist Incidents, 1968–2003

Blomberg and Hess (2008a) provide a detailed description and assessment of the various datasets on terrorism and explain the advantages of the ITERATE dataset as compared with the other contenders. Further discussion of trends in terrorism may be found in Anderton and Carter (2006) and in Enders and Sandler (2006a). 2 It is also...
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