The Bill of Fear

Empty stores, cancelled concerts, deserted hotels — the economic shock wave unleashed by the carnage of Nov. 13 has barely begun. For now, economists don’t know how to integrate it into their scenarios. “For the moment, our forecast remains the same … ” Past examples on which they build their diagrams reveal an ambiguous message. A very fatal and very visible terrorist act has a major effect on the sector it touches. After Sept. 11, 2001, the number of passengers on American domestic flights fell by 10 percent, and even more on international flights operated by American companies. The 2008 Mumbai attacks, with nearly 200 victims, impacted tourism in India. In some of his last research published before his death in 2014, the Nobel Prize winner in economics, Gary Becker, had calculated that an explosion on a bus in Israel causes the number of travelers to fall by 30 percent in the days following the event. Therefore, a terrorist act can seriously impact activities in certain sectors for days, even years.

But, at the macroeconomic level, this impact is hardly noticeable. At the end of 2001, many economists maintained that the Sept. 11 attacks were going to throw America into a recession … while in fact it was coming out of one, and the dramatic events seemed to have little influence on its trajectory. Things change completely when the attacks are repeated at close intervals. Then, the bill of fear must be paid. Research on the Basque region, which was subjected to continual terrorist acts for 30 years (with more than 800 victims) showed an estimated 10 percent loss of revenue per capita. The multiple attacks in Egypt and Tunisia obviously cut down the growth potential of these two countries. But, these results still cannot be extrapolated to France, initially because there’s no proof right now that France will be subjected to a series of attacks as appalling as those suffered by the Basques or the Tunisians. And because, as Becker’s work indicates, it’s the occasional activities that are most impacted by terrorist acts (and tourism is at best an occasional activity). Frequent bar customers continue to go to the bar after terrorist attacks as if nothing has happened. There’s room for discussion as to whether France is at war militarily or politically. But economically, that’s not the case. Its production rate cannot be affected by more than 10 percent per year, as it was during the last war. On the other hand, the attacks are likely to reinforce the main tendency at the moment: the wait-and-see policy.