Lair !1 Makayla Lair Rachel Porter ENG 1201.

B52 24 April 2014 Economic Terrorism: What it is and What it Does In the film, Jack Ryan: Shadow Recruit, Jack, who works for the CIA investigates an economic terrorist attack planned on the United States by the Russians. In the movie, the investigation of shady stock market activity leads to the discovery of a bomb planned for the business industry in Manhattan. Of course, the narrative of the movie is very dramatic and ultimately leads to a very close prevention of the attack. While it is an exciting story, you may be skeptical of how much is realistic. I was, until I learned about economic terrorism and the very real threat it is to the United states. This led me to ask two questions: first, did economic terrorism play a role in the September 11, 2001 attacks, and how has that affected our economy in the long term? Second, is economic terrorism a relevant threat to our nation, and should the US government be doing more to protect against that threat? After a significant amount of research into the many different ways that the economy and terrorism are related, I have come to believe that economic terrorism is a threat to the United States economy because it has the ability to severely hurt the stock market and discourage consumer confidence. Because of that the United States Federal government would be wise to invest more time and resources into protecting against this type of attack. Economic terrorism is any type of activity designed to destabilize the economy of a state or nation, done for political or religious purposes. This can take a couple different forms. First, any traditional terrorist attack, such as 9/11, or the Oklahoma City Bombings in 1995, has a detrimental effect on the economy because it decreases consumer confidence in the market. And when the attack occurs near a major business center, such as the world trade center, it can completely shut down operations, like the 9/11 attacks shut down the stock market for 4 days. The second form economic terrorism can have is not usually visible to the naked eye. These are usually manipulative stock market transactions, both legal and illegal that bring financial gain to the company or individual behind them, and have a detrimental effect on the economy.

Lair !2 The first historical event to look at in relation to economic terrorism is the plane hijackings on September 11, 2001. We know this was an act of terror on the United States by radical Islamists. The question here is, could the 9/11 attacks be considered economic terrorism? Nick Danto says in a Congressional Research Report that, The 9/11 attacks were part of Al Qaedas strategy to disrupt Western economies and impose both direct and secondary costs on the United States and other nations. Simply looking back over the last 12+ years, one can see that this objective was achieved. Kimberly Armadeo backs up this theory saying, The 9/11 attacks had both immediate and long-term economic impacts, some of which continue to this day. These effects range in significance, but all were detrimental to the United States economy, and some even negatively effected the world economy. The first impact the September 11, 2001 attacks had on the economy was the close of the stock market for four trading days after the attacks. When the market reopened, the Dow dropped 7.13%, one of the worst drops in history. This initially looks like a short term effect, but this drop certainly did not help the economy suffering from the recession that started in March 2001, and may have contributed to the 2002 recession (Armadeo). When the stock market drops in value, it simply means that people have stopped investing because there is extremely low-to-no return on investments. This in turn means economic growth slows and the downward spiral begins. When the Dow dropped almost 25% in the 1920s it sent the United States into the Great Depression, which lasted 10 years. Obviously 7% isnt close to 25%, but the effects remain the same. Another, more long-term effect the World Trade Center attacks had was the extremely costly War on Terror. Even while the economy was in a recession, President Bush launched the War on Terror. On September 21, 2001 Bush addressed the United States saying, Our war on terror begins with al Qaeda, but it does not end there. It will not end until every terrorist group of global reach has been found, stopped and defeated. He was right, 12 1/2 years later we are still fighting this war. Hundreds of thousands of men and women have devoted and even sacrificed their lives to end terrorism and protect our homeland. Not only have lives been given, but the War has cost the United States trillions of dollars. The War on Terror has increased the federal debt by at least $1.5 trillion over the past 12+ years, not to mention the harm it has brought to the economy overall. (Armadeo)

Lair !3 These two impacts of the 9/11 attacks are only a few of many that these attacks had on the United States economy. Clearly these attacks preformed by Al Qaeda on the United States had a detrimental effect on the economy and can be considered economic terrorism. However, there are other acts of economic warfare that are executed without violent attacks. Not only do acts of terror such as 9/11 have negative economic effects, but in his book, Secret Weapon: How Economic Terrorism Brought Down the U.S. Stock Market and Why it Can Happen Again. Kevin Freeman argues that the 2008 market crash was an unofficial act of war on the United States. The United States fell into another recession at the end of 2007. This era of economic downturn became known as the Great Recession, with unemployment rates reaching 9.5% by the end of the recession in 2009 (Recession). There were also many other economic catastrophes that either contributed to or resulted from this recession, such as the burst of the housing market bubble. The question is, what caused this event? One theory is that economic warfare is responsible. Secret Weapon outlines two phases in which the attack took place. First the oil price run-up that began in 2004, and second the 2008 bear raids on the US stock market. Mr. Freemans analysis, confirmed and supported by others, claims that two companies, Bear Stearns and Lehman Brothers are at the heart of the 2008 economic collapse. A Washington Times article by Bill Gertz outlines the major elements of a 2009 Pentagon report written by Kevin D. Freeman. The article says, The first phase of the economic attack, the report said, was the escalation of oil prices by speculators from 2007 to mid-2008 that coincided with the housing finance crisis. In the second phase, the stock market collapsed by what the report called a bear raid from unidentified sources on Bear Stearns, Lehman Brothers and other Wall Street firms. This produced a complete collapse in credit availability and almost started a global depression, Mr. Freeman said. In the same report, Kevin Freeman also said that radical jihadists are one of the best positioned in the economic battle space to preform these attacks. This is the same enemy who was behind the 9/11 attacks that damaged the United States economy in 2001. If this is the case we have to consider the possibility that this type of economic terrorism is a threat to the United States in the future. Fig. 1. The Dow points from 2000 to 2011, showing the crashes after 9/11 and the Great Recession. (The Dow)

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Mr. Freeman strongly believes that there is still a third part of the economic war on the United States, and that we should be doing more to defend against this threat. The third phase is what Mr. Freeman states in the report was the main source of the economic systems vulnerability. We have taken on massive public debt as the government was the only party who could access capital markets in late 2008 and early 2009, he said, placing the U.S. dollars global reserve currency status at grave risk. This is the end game if the goal is to destroy America, Mr. Freeman said. (Gertz, 2011). With even the possibility of a threat such as this, the United States should be doing as much as they can to protect against it, and investigate the possibility of an attack. Mr. Freeman said, The new battle space is the economy We spend hundreds of billions of dollars on weapons systems each year. But a relatively small amount of money focused against our financial markets though leveraged derivatives or cyber efforts can result in trillions of dollars in losses. And the perpetrators can remain undiscovered. This is especially true with The Pentagon, Treasury Department and U.S. Intelligence agencies, who are not aggressively studying the threats to the United States posed by economic warfare and financial terrorism. Nobody wants to go there one official said (Gertz, 2011). With the War on Terror still ongoing, and the terrorists behind the attacks that started this war, it is obvious that the United States should be using this new battle space, the economy, to protect the United States against an economic attack of greater measures than we have seen before.

Lair !5 Some would argue that economic terrorism is not a threat, nor does terrorism have a detrimental effects on the economy. While this directly contradicts what can be seen in real life, and in the evidence, it is wise to explore these opinions. Olivia Jackson, PhD, writes in the Journal of 9/11 Studies that while there may be post-9/11- related policy implications, the September 2001 terrorist attacks did not cause the economy to worsen or deepen the recession. This paper supports the theory that the economy was not crippled by 9/11 and that, while there were costs to the economy, to some extent the economy may have accrued some benefits as a result of these events. The paper explores six areas in which the 9/11 terrorist attacks had an effect. 1. The impact on the U.S. stock market, by looking at stock market activity after other major terrorist attacks, and stock market activity before and after 9/11. Specifically with airline and insurance stock companies. 2. The impact on the U.S. economic growth. Jackson posits that the overall effect on economic growth was short term, and mainly limited to New York City. Overall the United States, and the world economy proved to be as resilient as it has at times prior to 9/11. 3. The impact on consumer confidence in the form of spending. Ms. Jackson attributes the low levels of consumer confidence around September 2001, to the 2001 recession that started earlier in the year. 4. The impact on foreign direct investment in the United States. The main point here is that profit, not terrorism, is the biggest factor in foreign investment in the United States, and that while foreign investors may have become more cautious, the September 11, 2001, attacks did not negatively affect foreign investment. 5. The impact of fiscal policy and budgetary resources. In this last point we find the only long term effect of the September 11, 2001, attacks according to Olivia Jackson, is the War on Terror. As it cannot be denied that a war costs money, she acknowledges that the federal deficit reflects the US governments response to the attacks. However, the article still concludes to support the thesis that although the attacks were horrendous, the United States once again proved its resilience in the wake of 9/11. I think we can all agree that the United States is resilient. After all, this country has made it thorough many wars and other crises. However, today we face a new enemy: new in nature, that holds a completely new threat to the United States. Economic terrorism is a threat to the United States economy because it has the ability to severely hurt the stock market and discourage consumer confidence. And because of that the United States Federal government would be wise to invest more time and resources

Lair !6 into protecting against this type of attack. One can make excuses for the financial travesty that 9/11 caused, or at least played a part in, or try to come up with other reasons for the Great Recession, but the fact of the matter is that we must look at the evidence. The evidence shows us that this country faces a new threat, and that there should be more done to protect against the damage an attack on the economy could cause. No one wants another Great Depression, even the possibility of such a disaster should be enough to take any measure to protect against this threat. In the movie, Jack Ryan: Shadow Recruit, Jack is a hero to the United States for finding and thwarting an economic threat to the United States. The United States is full of real life heroes, some of whom have physically fought to end terrorism worldwide. There are other heroes who understand the stock market and financial industry. To both of these heroes, the United States government should be giving the resources to protect this country from another disaster.

Lair !7 Works Cited Armadeo, Kimberly. "How the 9/11 Attacks Still Affect the Economy Today." About.com US Economy. About.com, 4 Apr. 2014. Web. 05 Apr. 2014. The Dow. 2014. Chart. The U.S. Economy Since 9/11 Kiplinger. Web. 23 April 2014. <http:// www.kiplinger.com/slideshow/business/T019-S001-the-u-s-economy-since-9-11/> Freeman, Kevin D. Secret Weapon: How Economic Terrorism Brought Down the U.S. Stock Market and Why it Can Happen Again. Washington, D.C.: Regnery Pub., 2012. Print. Gertz, Bill. "Financial Terrorism Suspected in 2008 Economic Crash." Washington Times. The Washington Times, 28 Feb. 2011. Web. 05 Apr. 2014. Jackson, Olivia A., PhD. "The Impact of the 9/11 Terrorist Attacks on the US Economy." Journal of 9/11 Studies (2008): 1-27. 3 Mar. 2008. Web. 4 Apr. 2014. Nanto, Dick K. "9/11 Terrorism: Global Economic Costs: RS21937." Congressional Research Service: Report (2004): 1. International Security & Counter Terrorism Reference Center. Web. 5 Apr. 2014. Recession of 2007-2009. Rep. Bureau of Labor Statistics, Feb. 2012. Web. 16 Apr. 2014. "Text of George Bush's Speech." Theguardian.com. Guardian News and Media, 21 Sept. 2001. Web. 16 Apr. 2014.