Dr. Walter Enders, whose research into the connection between economic conditions and terrorist activity has garnered national attention, says Americans can expect a reduction in the number of terrorists incident directed against the United States in the coming years, but the attacks that do occur will likely be more deadly.

"My research indicates that from 1990 to 2000, the proportion of transnational incidents with casualties rose from 20 percent to more than 40 percent. This substitution towards fewer, but more deadly, incidents will continue," said Enders, the Lee Bidgood Professor of Economics at The University of Alabama.

"On average, there has been one extremely hideous incident every year. In addition to 9/11, examples include the first attack on the World Trade Center in 1993 and the simultaneous attacks on our embassies in Kenya and Tanzania in 1998. Unfortunately, transnational terrorists have the resources and the motivation to conduct another such attack."

Enders said in addition to the loss of life and property, the attacks on the World Trade Center and the Pentagon on Sept. 11, 2001 resulted in profound economic and social consequences for the United States. With the economy on the brink of recession, the unemployment rate rose from 5 percent to 6 percent and has not returned to its former level. Wall Street closed for a week, the airline industry was temporarily shut down, the tourism industry was especially hard-hit, and several airlines never recovered.

Enders predicts during 2003 the unemployment rate will return to the 5 percent range and that stock prices will remain low relative to their pre-9/11 levels. "It is not very likely that the Dow Jones Industrial Average will close above 10,000," he said. He predicts the consumer confidence index will be close to the pre-9/11 level. He said the airline industry would remain unsettled.

"The worldwide response to fighting terrorism has been dramatic. The U.S.-led coalition known as 'Operation Enduring Freedom' quickly achieved its aim of eliminating the Taliban regime in Afghanistan. Seventeen nations contributed more than 16,500 troops to the initial operation. On Nov. 25, 2002, President Bush signed the ‘Homeland Security Act of 2002' into law. The defense bill rose by more than a $37 billion increase from fiscal year 2002. Undoubtedly, a massive anti-terrorist campaign will reduce the overall level of terrorism."

Nevertheless, Enders said, anti-terrorism policies can have an "income effect" or "substitution effect" or both. The income effect involves the overall level of available resources — e.g., freezing terrorists' assets reduces their "war chest" and their overall ability to conduct a campaign of terror. The substitution effect provides an inducement for terrorists to substitute into some less costly operation that achieves a similar outcome at less cost. For example, the installation of screening devices in U.S. airports in January 1973 made skyjackings more difficult, thus encouraging terrorists to substitute into other kinds of hostage missions or to stage a skyjacking from an airport outside of the United States.

Educated Guesses 2003 | Full Listing