American businesses play critical and costly role in global war on terrorism

The private enterprise system plays a vital but not widely appreciated role in the war on terrorism, suggests Murray Weidenbaum, Ph.D., the Mallinckrodt Distinguished University Professor at Washington University in St. Louis.

“The role of businesses takes many forms and the effects are numerous and often indirect,” says Weidenbaum, former chief economic advisor to President Reagan and member of the 2001 task force on terrorism at the Center for Strategic and International Studies in Washington, DC.

Murray Weidenbaum
Murray Weidenbaum

“In time, business is likely to develop more effective and less costly ways of responding to the concerns generated by terrorists threats. Nevertheless, the ongoing activities of international terrorist groups will continue, in effect, to levy a hidden tax on American businesses in the form of added costs of operation.”

Weidenbaum’s comments above are excerpted from his recent article, “The Role of Business in Fighting Terrorism,” published in the journal Business Horizons. The article, which explores the hidden costs and benefits to private enterprise of the global war on terrorism, is available online in full text as a pdf document.

Weidenbaum has researched and written extensively on economics of the defense industry, including “Small Wars, Big Defense,” judged the outstanding economics book of 1992 by the Association of American Publishers. In fall 2003, he published a paper on “The Changing Structure of the U.S. Defense Industry” in Orbis, the journal of the Foreign Policy Research Institute.

Weidenbaum is available to the media for further discussion of perspectives offered in the article, including those highlighted below:

On Cutting Off The Flow Of Money To Terrorists:

“Banks are not the only companies participating in the effort to stem the flow of money promoting terrorism. The anti-terrorist regulations extend to many other types of financial ‘intermediaries,’ including brokerage firms, mutual funds, casinos, and wire transfer services. From September 2001 to May 2002, $34 million in terrorist assets were frozen in the United States…another $70 million of assets in known terrorist organizations were blocked by 161 other nations….”

On New Business Opportunities:

“Although the continuing struggle against international terrorism imposes significant costs on society in general and on business in particular, it is also a source of new or expanded market opportunities for some companies. The rise of terrorist threats also influences business decision making in other important ways. These latter effects range from locational decisions and changes in procurement patterns to a far more fundamental shift in emphasis away from enhancing productivity via new investments and toward controlling rapidly mounting overhead costs.”

On The Expense:

“From the viewpoint of the individual enterprise, heightened security measures are basically an expense. A bigger outlay for these overhead items raises the cost of production. For the economy as a whole, as a general proposition, this means producing the same output with more input – which results in a decline in productivity and a downward force on the national standard of living. These new costs are numerous: security services, personnel investigations, protective equipment, higher insurance premiums, more inventory to protect against delays in delivery, and the acquisition of teleconferencing equipment and services to replace travel.”