In face of Paris terror attacks -- job of business is to carry on
What is the cost of terrorism? In the aftermath of the recent killings in France, Lebanon and Mali the understandable immediate reaction has been to count the cost in terms of human lives.
Assessing the cost in terms of dollars and cents may appear to be heartless yet the corollary of simply shrugging and saying yes there is an economic price but now is not the time to make this calculation gives succor to the terrorists who yearn to set a highly disruptive agenda and make it hard for business to carry on as usual.
Thankfully this agenda remains largely unrealized because humans are resilient creatures and consistently demonstrate that they have what it takes to pick up the pieces and move on. This is why the terrorist’s worst intentions are thwarted in every store that has reopened in Paris, with every plane departing from Beirut’s international airport and every visitor returning to Mali.
Moreover evidence from more recent large scale terrorist attacks is that people are learning to move on more quickly. Or maybe they have come to understand that terrible as these attacks are they are not going to undermine the fundamental business of business.
Stock markets, in their typically crude way, reflect this thinking. In the wake of the 9/11 terrorist attacks US stock exchanges were forced to close and re-opened on September 17. The immediate response was a record plunge of 617 points or 7.1 per cent, there were subsequent dips but by the end of the year the S&P 500 was up by some 5 per cent from its 10 September close.
Terrorist attacks in Mumbai, India (2008), London, UK (2005) and Madrid, Spain (2004) saw the local stock markets react in a similar fashion, although Indian investors were markedly less panicky. What followed was not just share price recovery but market rises within months.
Fast forward to the impact of the terrorist outrage in Paris this month where France’s CAC-40 barely faltered in the immediate aftermath of the attack, Germany’s DAX index actually inched up, while London FTSE-100 slipped 1 per cent. In other words investors kept their heads, understanding that business as usual was not fundamentally undermined by these killings.
Yet there is an economic cost. An OECD report calculated that the cost of the 9/11 attacks could be measured as being US$16.2 billion in terms of destroyed assets. Added to this were rescue, clean up and related costs coming in at $11 billion. Business confidence also took a big hit and, according to these calculations, the cumulative economic impact of the aftermath was to drag 5 percentage points off GDP growth in the period from 2011 to the end of 2013.
Inevitably, in the wake of these attacks, there are losers as well as winners in the business world. Rather obviously terrorist attacks give a boost to the defence and security industries and the insurance industry benefits although it has to pay out but also draws in a great deal of new business. The biggest losers tend to be businesses connected with travel and tourism while the atmosphere of fear and gloom also impacts on retail sales and can hit the property market.
However most businesses are not affected. They simply carry on as usual, were it to be otherwise the terrorists would be handed a considerable victory. Indeed there is no reason for normal business to be disrupted yet public perceptions tend to suggest that the negative impact has been much greater. This is fueled by the opportunist posturing of politicians and others in public life who speak of being in a state war and talk wildly of retaliation causing more death and mayhem.
Moderate voices are not welcomed in these circumstances, while calls for cool reflection are derided as cowardly or defeatist talk. The people who insist that terrorism will not be allowed to disrupt their way of life, the flourishing of a civilised society and the rule of law seem to be out of sync with the popular mood.
Yet businesses have an important stabilising role to play. They ensure that people are fed and clothed and even entertained to take their minds off the carnage. This is rarely mentioned because of fears that business will be accused of profiting from the misery of others. However think of the consequences were companies to panic and cease to function properly.
The reality is that the business has a responsibility not to panic; most of the adult population spends their days working away, earning a buck or several and yearns for life to continue without these dramatic interruptions. By and large this is how things are but there is a major disconnect between the reality of pursuing business as usual and the panicky screams coming from off stage.
Stephen Vines runs food companies in the food sector and moonlights as a journalist and a broadcaster