The Impact of Terrorism on Our Productivity

A recent decision of a pilot to return to base wasnormal shift from one category to another. In the
perhaps not a precedent but marks very well thesecond case, we will have to pay for it by higher
economical problems we are facing with terrorism.(future) taxes. If government expenditure
If we assume that there is only one box ofincreases, the (long term) interest rate will have
money, then the (extra) amount that is spend onto rise to attract more capital with which the
security will diminish the amount that will bedeficit could be closed or narrowed.
available for normal production.If private companies (airlines) will also increase
Airports are (semi) private organizations but thetheir security measures we (citizens) will be
security level is maintained by the government.impacted again by an increase in consumer prices.
Investment and expenditure for a higher securityThis will leave us with a lower purchasing power,
level will therefore have to be reserved from taxwhich will in the end affect the national production
income. This means that there will be less moneylevel.
available for other governmental expenditures. Or,We should hope, with these two small effects
in the case that the government will increase itstogether with the increase of the oil price over
spending on extra security and leaving the otherthe last period, that the war on terror will end
categories in tact, then we citizens will be directlysoon. We should also think about a strategy to
influenced by this shift.face this challenge and evaluate previous used
In the first case, where governmentalstrategies. Because this is only the economical side
expenditures remain the same, other categorieseffect of terrorism.
like healthcare will receive less budget. It is a