Terrorist Strategy And Global Economic Implications

Abstract

This paper attempts to show that Al Qaeda leaders follow a basic model of utility maximization constrained by their available resources. Their resource constraints led to what appears to be a relatively flat transnational organizational model design in an attempt to challenge the U.S. military pyramid and free market American system. It is suggested that the 911 attacks were meant to serve as a catalyst to induce the U.S. to respond in a manner that might move the terrorists closer to their objectives. That may not have occurred but the 911 attacks were cost effective in creating large dollar costs on the U.S. and global economy. The direct costs of the attacks for the U.S. were much less important than the cumulative costs accruing to the U.S. and global economy from, in part, the post 911 U.S. response to the attacks.

Longer run expected economic costs of 911 attacks range from increased private and public sector expenditures, a slowing of growth in global trade, to expected adverse effects on potential output and increased volatility of business cycles. The U.S. response to terrorist activity in terms of increased outlays and tighter security measures appears to be based on the assumption that terrorists may plan to use weapons of mass destruction at some point and/or the U.S. is extrapolating an annual terrorist event of a magnitude equivalent to the 911 casualties and costs. Otherwise, historical civilian casualty numbers resulting from terrorist actions over the past several decades may not warrant this sizeable U.S. response. But U.S. consumers and taxpayers seem willing to pay higher costs to reduce the threat of terrorist attacks in the U.S. Other countries, in comparison, seem to rely more on historical civilian casualties in formulating their response. Of course, free-rider benefits do accrue to our Allies from U.S. military actions abroad.