The issue of terrorism is often viewed through the prism of political, religious and ideological connotations. However, a closer look at the cause and effect of terrorism would reveal the inherent economic issues related with it. The force of hunger alone has the potential to transform into a destructive force of anger directed against an illusionary enemy, with innocent people and institutions being the victims. As Prof Samuel Huntington puts it, terrorism is not a mere war between religions, regions or even civilizations but the battle between the haves and the have-nots. Most often, the places that generate and breed terrorism and other related criminal activities such as drug & narcotics trafficking, money laundering, extortion, etc. are the economically and politically instable regions where poverty, hunger and isolation have resulted in terrorism and violence.
In the era of transnational economies, the incidents of terror not only unleash immediate fear and panic but a spiraling wave of economic recession across the globe causing irrecoverable loss and damage. This again creates a vicious cycle of poverty, economic backwardness and political instability in poorer regions leaving them a fertile ground for terrorism and other organized criminal activities. The incidents like 9/11 in the US and the most recent 7/7 in UK have proved that the tentacles of terrorism have reached the rich nations as well.
This global phenomenon and its huge economic fall-outs have added a new dimension to the analysis of economic development and necessitate wide range of discussions and deliberations. The major areas of contemplation would be; the huge spending on security and anti-terrorism activities, impact on the international trade and trading costs, influence on business and market environment and the changing insurance sector.
The methods that terrorists use create havoc have changed and adapted rapidly to exploit and make use of different sections of the world community. Therfore the response to terrorism must adapt too. Building bigger walls and having bigger guns is a very short term an unsustainable solution. We need to try and halt the desire of people from believing that they have nothing to live for in the first place. Economics has a major part to play in this respect. However, this is not in the interests of the "rich old men" who need a large pool of poor, disillusioned and disenfranchised young men to draw on... in order to further their own particular agenda.