Effects of Terrorism on Economic Growth
INS 322 Literature Review Assignment
Prompt: An analytical and critical investigation on the specialized literature on a selected topic
in political economy. You will be asked early in the semester to select a specific topic. These
topics could range from very broad, like the effect of regime-type on economic growth to very
specific such as with papers on specific international organizations. You will then write an
analytical and critical essay about the subject matter, origins, argument, findings, and
implications found within a minimum of 10 academic sources. You should pay particularly
close attention to the arguments and implications, as well as any potential problems you have
with the literature. In doing so, you should gain a greater perspective on a topic that interests you
while providing yourself with experience doing academic research. Each paper should be
approximately 8-10 pages of text double-spaced with 12 point times New Roman font and 1”
margins. You are expected to properly cite all of your sources and will be counted off if you do
not do so. As part of this assignment, you are to turn in an annotated bibliography on October 4
and a completed rough draft on November 1.
TOPIC : Effects of terrorism anf Narco terrorism on Economic growth/Development
Picking a Topic: Pick a topic that interests you that covers one of the various concepts covered
in class. Browse through the textbook and articles to find the topic. You might start with a broad
topic like economic development. If so, it is not enough to say you pick economic development
to write about though. You are only at the beginning of selecting your topic. Now you must
decide what it is about development you are interested in. Foreign aid on development?
Colonization on development? Regime type and development? In selecting your topic you must
start broad but you then must continually narrow down your topic to a manageable
concept/case/interest. The topic is due in class on September 18.
To help you do this, you must do a number of things. First, you must ensure that scholars have
asked questions about your topic. If there is no literature on your topic then it will be impossible
for you to write a literature review on that topic. It is thus important to select a topic where
scholars have asked questions, where they have tried to figure out cause and effect. This is
apparent if there is some sort of debate going on in the literature. One scholar argues that
economic development is because of this factor, but another scholar argues that economic
development is because of this other factor. Your task would then be to outline and assess the
literature on the competing claims. By selecting a topic with some sort of question or debate
within it, you are better able to frame your paper and most importantly, to provide an analysis of
the state of the literature.
You do not want to pick a topic in which you will simply provide a historical profile. Providing
background to make a point (through the lens of the literature) is fine, but if your entire paper is
historical, that is a history paper and not a political science paper. If, for example, you want to
write on the IMF, it is perfectly fine to write on “what effect the IMF had on development”. It is
not appropriate if you give me a paper outlining the history of the IMF from its creation to today.
This paper would lack analysis and would receive a poor grade.
Annotated Bibliography: You are expected to submit to me an annotated bibliography on
October 4. The annotated bibliography is a bibliography consisting of a minimum of eight
sources, all properly cited in an accepted citation style. The annotated bibliography consists of
three things per article: 1. A proper citation of the article; 2. An abstract of the article or
chapter’s findings (one that you wrote yourself, not copied and pasted from the article); 3. A
short description of how you will use the article in your paper. This assignment is worth 5% of
your total grade.
Sources: You must use sources from academic, peer-reviewed journals, books, or chapters.
Examples of political economy journals include Review of International Organizations,
International Organizations, and Review of International Political Economy. You do not need to
select articles solely from these journals. You will be able to access journals through google
scholar or the AUS library.
Solution
Introduction
Terrorism is the premature use of violence by individuals or groups to achieve a political
or social purpose by intimidating a wider public (Hadhek, Hamida & Lassoued, 2018).
Therefore, terrorism isassociated with the act of violence that affects the normal happenings of
society hence affecting the economic growth in various ways. The acts of terrorism mainly aim
to increase public anxiety by exploiting perceived weaknesses and perceived values hence
affecting the countries institutions, citizens and policies. Terrorism can potentially affect
economic growth in short-term policies through several channels where such crimes can increase
doubt, which would limit investment and divert foreign direct investment (FDI). For developing
countries, FDI is a major source of savings for financing investments hence terrorism delay
growth by raising the cost of high wages, privileged insurance quality and improved security
costs resulting in lower profits and, thus, lower returns on investment (Meierrieks, & Gries,
2013).
Effects of Terrorism on Economic Growth
Economic development is determined by various factors such as the per capita income
that is affected by the stock results and the technological changes in a country. Convergence of
the countries production functions and transition equations differ based on the initial per capita
income levels which can be affected by investments and shares. Çinar, (2017) explains that
developed countries are able to resist the effects of terrorism on the economy since they
experience a few macroeconomic consequences; therefore, such countries are able to win
peoples trust easily by the restoration of security policies. Nevertheless, in developing countries
terrorism, have broad effects on the market since the attacks on the social policies impact on the
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investor's trust and confidence in the countries to protect their stocks since the share of
investment in GDP is a key determinant of per capita income. Higher stock results in greater
capital accumulation, which promotes capital growth and fixed technological change.
Additionally, trade openness, as measured by the ratio of the sum of exports and imports to GDP
is the determinant for market stability. Therefore, when investors and stakeholders reduce their
number of assets based on the effects of terrorism and the inability of a country to provide
adequate security the per capita income levels decrease hence economic growth is crippled based
on the budget openness of the reduced GDP (Shah, Bakar, &Azam, 2016).
According to Das (2018), the protection of a country from foreign invasion, maintenance
of peace and stabilization of border tensions are among the roles of the military hence military
expenditure is inevitable. Therefore, the government spends a huge amount of money when
funding such operations hence reducing the number of funds that are allocated to other social
operations such as education and health. Military operations affect the economy of developing
countries through the crowding out of investments that opt to be generating employment and
reduction of poverty in the country. Moreover, military expenditure leads to income inequality
since social and economic developments are based on the distribution of income in the country
since security maintenance requires more resources compared to the other amenities hence the
army earn more than other practitioners.
The war on terror majorly started after the 9/11 attack which affected the entire globe
including the Middle east and South Asian regions. The United States and its allies have also
indulged on the war against terrorism that is led by the Al-Qaeda and the Afghanistan’s Taliban
which have resulted not only to loss of human lives but also have impacted negatively on the
economy of Pakistan which is a developing country (Gries, Krieger&Meierrieks, 2011).
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Therefore, based on the effects of terrorism in Pakistan which is a representation of developing
countries it indicates that developing countries are affected the most by terrorism. Terrorism
leads to the destruction of infrastructure, death of security personnel, and displacement of people
from their homes, reduction in investment activities and a decrease in production and subsequent
employment hence expanding the financial shortfall and barricading economic growth. Based on
the factors that result from terrorism they increase the challenges of economic development
through the reduction of trade flows and increased poverty due to unemployment and refugee
camps.
In accordance with Richardson, Gordon, & Moore, (2007), the effects of terrorism are not
gauged by the internal war only but also the civil war on neighboring countries affect an
economy. The effects of terrorism affect the neighboring countries economy due to the allocation
of funds to the military for border security and the increase in immigrants who are refugees and
require the government support to get back on their bases in life. Moreover, terrorism growth has
a limiting effect on the affected economy in the short-term and long-term development goals but
also affected neighboring economies. Moreover, low economic growth causes terrorism due to
the increase in the negative impact of terrorism that affect the accrual and allocation of resources
across the country. The impact of terrorism or civil war in neighboring countries also affects the
trade flow through import and exports that impact negatively on the economy.
According to Lassoued,Hamida and Hadhek (2018), the concept of terrorism mainly
originates from the fact that countries are in constant disagreement and more so some citizens
disagree with the government ideologies such as the Bocoharam of Nigeria. Therefore, a link
between terrorism and government incentives affect trade tariffs trade. Moreover, Drug
trafficking is categorized as terrorism since it attracts terror groups and cartels who manipulate
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the economic growth of a country. The illegal sale of narcotics interferes with legal economic
activities and the consequences stem largely from the direct and indirect influences of the large
amounts of money generated by the illicit trade. A large amount of money needs to be 'cleaned'
hence impacting on the economy that leads to losses for legitimate business and with increased
corruption associated with the drug trade. The cases that are related to the drug trade impact on
the economy negatively despite the businesses attracting a large amount of money.
The international drug trade involves different criminal activity such as arms trade,
human trafficking, racketeering which create security issues in a country hence investors shun
from financing hence reducing the economic development impact. Among the negative impacts
of drug trafficking that leads to terrorism activities on the economic development is corruption
since the drug traffickers mainly require a ground to legitimize their money hence they indulge
in bribing of officers and seek to use legitimate business to facilitate their activities such as the
shipment of their products. Moreover, the acts of drug trade attract large proceeds of illegal
activities that majorly impact negatively on the economy such as money laundering which
involves transferring large amounts of money through legitimate businesses for them to be used
in official purposes. In addition, the illegal drug trade uses the legal economy resources that are
not taxed by challenging firms despite the fragile backgrounds of an economy causing a flaw in
the economy liquidity. The drug trade also causes political and social stability which are the
major determinants of economic development since the drug cartels manipulate the political
arena and social institutions (Duplantis, 2010).
Coping and Managing Terrorism
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Reuveny, & Thompson, (2010) argues that through the analysis of acts of terrorism
understanding the empirical data and securities involved in prevention and solution to terrorism
is determined by the public outrage. Therefore, the public is responsible for the prevention
measures of countering terrorism as an epidemic that cripples the economy of many developing
nations. Terrorism should be regarded as an international crisis hence making countries to
become allies in fighting this menace. Moreover through the development of special counter-
terrorism departments terrorism can be easily dealt with making thus reducing the possibility of
numerous terror activities. The way terrorism is represented in the media also determines the fate
of terrorism activities and engaging social scientists to determine the causes of terrorism and
ensure the right steps are taken in preventing terrorism. Additionally, reviewing and exposing the
individual who aims to profit from acts of terror is among the steps necessary for ensuring the
issue is dealt with full authority based on the guidelines of the constitution hence these efforts
will allow the government to focus on specific groups to defeating terrorism.
The war on substance use is also another step that counters drug trafficking and prevents
the decrease in economic development since many people are under addiction and are deemed
not fit for employment and labor. The people who are under the influence of drugs according to
research are the large percentage that are involved in terror activities and inhumane acts such as
murder therefore drug trafficking is terrorism on its own. Moreover, by characterizing domestic
interests that prevent domestic insurgents such as the drug cartels in Colombia enable the
government to obtain external military resources in fighting terrorism through border alliance. In
addition, internationalization of a domestic conflict can gain the government more resources
however it can be a challenge for the government to have negotiation grounds with the
opposition. Additionally, the introduction of terrorist insurance act (TRIA) increases the
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commercial coverage for terrorist acts hence allowing the victim country to share losses of a
terrorist attack with victims, insurers, all commercial policyholders and taxpayers ensuring the
stability and the continued growth of the country’s economy (Rana, 2013).
Conclusion
Terrorism is among the factors that affect economic development through the fact that
‘war on drugs’ and ‘war on terror’ have found common ground in countering the threat of
economic development. Consequently, terrorism impacts economic development negatively by
influencing the decision making of investors who fear to lose their assets due to civil war.
Furthermore, the fight against terrorism attracts extra expenses for the government whom
focuses on the military operations to ensure security for the country making economic growth
slow. Additionally, terrorism leads to the destruction of infrastructure, death of security
personnel, and displacement of people from their homes, reduction in investment activities and a
decrease in production and subsequent employment hence expanding the financial shortfall and
obstructing economic growth.
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