Apparently, we are at war. The ‘war on terror’ was declared by American President George W. Bush after the terrorist attacks of September 11, 2001, and has so far included the invasions of Afghanistan and Iraq, changed security rules, and introduced a new foreign policy doctrine of pre-emption and proactive intervention. Will this new international dynamic lead to a reduction in liberty? The answer is probably yes. This is not because terrorists will take our freedom from us, but because the West seems determined to give up our liberty voluntarily.
Terrorism does pose a direct threat to liberty. Any action that would deprive people of their rights to life, liberty and the pursuit of happiness is an affront to liberty, and terrorist acts certainly fall into that category. However, by far the greater threat to liberty is that fear will result in bad public policy as some people clamour to give up their freedoms in the hopeless pursuit of perfect safety.
The terrorist threat
To consider what price we should pay (both in liberty and in dollars) for the ‘war on terror’ it is necessary to know what benefits the ‘war’ offers us. As the benefits are presumably a reduction in terrorist attacks against the West, it is instructive to consider just how large the threat of terrorism is.
Chris Leithner points out that ‘during the past ten years terrorist attacks have killed an average of 11 Australians per year and 55 per year during the past two years’.1 If the trend from the last two years were to continue, then the annualised risk of death from terrorism would be about 1 in 333,333.2 Leithner compares this with the rate of death from pesticide poisoning (1 in 200,000), lightning strikes (1 in 30,000), motor vehicle accidents (1 in 60) and disease caused by smoking one packet of cigarettes per day (1 in 6) and concludes that ‘the “terrorist threat” is thus minuscule’.
Another way to consider the threat of terror and the value of the war on terror is to consider what the total benefit would be if all terror could be abolished. To calculate this potential benefit we must make an assumption about how much terror would exist if the countries of the West had decided not to change their pre-9/11 policies.
A reasonable assumption might be that terrorists would successfully carry out one Bali-sized attack against the West (meaning North America, Europe and Australasia) every year. A 2003 report by the Centre for International Economics indicates that the total cost of the Bali bombing was about $3 billion, of which about $0.5 billion accrued to Australia.3 This estimate includes the fatalities, injuries, property damage, increased security spending in response, economic damage and policing costs. If we calculate the total present value of such attacks into the future then the total terror threat amounts to $63 billion.4 That is, the highest potential benefit from the war on terror would be $63 billion in the unlikely scenario that no terror attacks will ever again occur.
It is unlikely that the war on terror will ever entirely eradicate terrorist attacks. While terrorist groups remain determined to produce death and destruction it remains likely that attacks will continue. Indeed, some commentators believe that the war on terror may do more to increase terror (by increasing anti-Western hatred) than it will do to decrease terror (by killing terrorists, making terrorist attacks more difficult and reducing the institutional support of terrorist groups). It will not be possible, without the benefit of hindsight, to determine how effective the war on terror is at reducing terrorist attacks. If it is successful in reducing the costs of terror by 80% for 30 years then the benefits of the war will be about $40 billion.
The politics of fear
More dangerous than the terrorist threat is the threat of bad public policy. Terror creates fear and insecurity which leads people to demand that their government does something to protect them. Irrespective of the costs and the likelihood of success, nothing builds support for government programmes more effectively that the idea that life is not safe. Despite the fact that life is inherently unsafe (and nobody gets out alive), some people are willing to give up their liberty and their money whenever their government promises them some more security. That the promised security is undeliverable, or only temporary, or comes at an excessive cost is not important. It seems that the world has not heeded the warning from Benjamin Franklin when he suggested that people who ‘give up essential liberty to purchase a little temporary safety deserve neither liberty nor safety’.
This reality has been well understood by political agents for a long time and history is full of examples. We fear second-hand smoke, and so we give up our liberty for safety. In a brilliantly written article, Jack Gordon outlines how ‘in the entire state of California there is no saloon with a clientele so reckless and depraved that the law will avert its eyes and permit them to take the insane risk of drinking beer in a building occupied by a person who might smoke a cigarette . . . We’d sacrifice the right to choose what foods to put in our mouths if only the dieticians would settle long enough on which ones are safest.’ 5
The fear of poverty is used to justify large (and largely ineffective) government welfare programmes and the fear of head injuries is used to justify compulsory helmets on bicycles. It was not until after Port Arthur that fear of guns resulted in Australians forgoing some more of their freedom to shoot. Following the insecurity of the Great Depression, Americans were convinced of the need for the New Deal and the dramatic increase in government power that went with it. Following the insecurity of the unstable Weimer Republic, Germans willingly embraced the stable and secure safety of Hitler.6 Most especially in times of war, fear drives people to accept the most burdensome demands on their freedoms and their wallets. Indeed, war is the lifeblood of governments.
While it may well be appropriate for people to give up some liberty for security, the shift between security and liberty seems only to move in one direction. Thomas Jefferson once noted that it was ‘the natural progress of things . . . for liberty to yield and government to gain ground’ and it seems that the primary motivation for this is fear.
Economics teaches us that everything has a cost, including security, and that the government should only intervene when the benefits of their action exceed the costs. However, the rational realisation that some costs can be too high can easily be drowned out by the emotional insistence that safety must be pursued ‘at any cost’. It is in such times that fear can lead to bad public policy - and this is the true danger that terrorism poses for the future of freedom.
The war on terror
In many ways, the war on terror is a totally different type of war. The enemy is undefined, the goals are unclear, the strategy is uncertain and there is no way of determining when the war will be over. But in one way at least this war is the same as all others —it will come at a very high cost. For those who believe that no cost is too high, counting the cost is not relevant. However, for those who believe that government action (including war) can only be justified if the benefits exceed the costs then it is instructive to consider whether the costs of the war on terror exceed the expected benefits.
It has often been observed that the first casualty of war is the truth. A close second must be liberty, and the Western world has paid a relatively high price in liberty in our new quest for safety. Anti-terror laws (such as the Patriot Act in the United States and the ASIO Act in Australia) have curtailed civil liberties and weakened legal protections against potential misuse of state power. Luxuries such as privacy and the right to silence have been removed. While the Australian government has always been able to detain people for questioning without charging them with a crime, the new ASIO powers allow the government to detain people when they are neither being charged nor questioned.
In the United States it is now seen as appropriate to jail people for an indefinite period without charge or trial or legal access, and then justify such actions on the basis of the obvious guilt of the imprisoned. The circularity of an argument that justifies not charging somebody because they are guilty has escaped many, both in the United States and Australia. Various reports in The Economist (a publication which supports the war on terror and supported the invasion of Iraq) outline how US agents have been ‘torturing terrorist suspects, or engaging in practices pretty close to torture’7 and note other instances of unfair arrest and secret trials.8
However, the cost of this war can be measured in more than lost freedoms. It can also be measured in dollars. Many countries of the West have taken the opportunity to significantly increase their spending on defence, but the most expensive element of the war on terror so far has been the invasion of Iraq.
The war on Iraq
The Iraq war perhaps best signifies the link between fear and bad public policy. It is hard for any rational analysis of the war to reveal a net benefit for the ‘coalition of the willing’ and the West in general. It is even harder for some supporters of the war to accept the need for rational analysis of benefits and costs.
Relatively few lives were lost during the invasion of Iraq. The fact that more have died since the end of major hostilities says more about the success of the war than the failure of the peace. However, the financial cost has been huge. According to Yale economist William Nordhaus, the money currently spent or requested by the US government already exceeds the combined (inflation adjusted) costs of the American Revolutionary war, the US-England war of 1812, the US-Mexican war, the US civil war, the US-Spain war and the first Iraq war.
Excluding the cost to American allies, the potential further humanitarian and reconstruction costs and the impact on the economy,9 the Iraq war can be expected to come with a price tag of approximately $440 billion.10 This is more than two and a half times the Australian government’s entire annual budget.11 Putting this value in perspective, the estimated potential benefits of the entire war on terror (including a valuation of the lives saved) was estimated to be about $40 billion.
Not only was the invasion of Iraq bad public policy, it would have been so even if Iraq was the only part of a fully successful war on terror, the benefits were tripled and the already conservative cost estimate was halved.12 Despite this, many people continue to defend the invasion.13 In the light of fear and insecurity, many Australians seem willing to pay any price, suffer any losses and give up any freedoms necessary to reduce their fear. And the government is ready and willing to ‘help’.
Thomas Jefferson is often quoted as saying that the price of liberty is eternal vigilance. The very thing that defenders of freedom must be vigilant against is that people, with the best of intentions, will gradually reduce our freedoms through the promise of safety. Terror is a danger to our freedom primarily because our new found (and somewhat unjustified) fear is a magnet for bad public policy. If we let our fears override rational analysis, then we may well be left with no liberty to defend. If this happens, then even if we win the war against terrorists we will still have lost.
Endnotes
1. C. Leithner, ‘The Terror Trap’, Policy 19:1 (Autumn 2003), p.35.
2. If the trend for the past 10 years were to continue, then the likelihood that an Australian will die from terrorism is 1 in 1,700,000. This data is taken from C. Leithner (see above).
3. CIE, Analysis of the Costs of the Bali bombing (Canberra: Centre for International Economics, 2003).
4. This analysis uses a discount rate of 5%. If we use a discount rate of 10% then the present value of future terror attacks is $33 billion.
5. J. Gordon, ‘Milksop Nation’, 1st prize in the 2002 Shell/The Economist essay competition, available at http://www.shelleconomistprize.com/essays/Milksop_Nation_Jack_Gordon.pdf
6. It is particularly interesting to note that it was a terrorist attack that was used by many to justify the Enabling Act which gave Hitler absolute power in Germany.
7. The Economist, ‘Ends, Means and Barbarity’ (11 January 2003).
8. The Economist, ‘For Whom the Liberty Bell Tolls (31 August 2002).
9. CIE have estimated that the potential economic costs of a short Iraq war (2 weeks) and occupation (1 year) would be approximately 1% of world GDP. Also, including the potential economic costs but still excluding the cost to America’s allies, Yale economist William Nordhaus estimates the war could cost as much as $3 trillion.
10. At the time of writing, the US government had currently spent or requested US$166 billion, of which about $10 billion is for Afghanistan. As the spending is being debt financed, we must add the costs of interest (assumed to be 4% over 10 years). Also, as the spending eventually has to be funded through taxation, we must include the deadweight loss (assumed to be 30%, based on various previous studies). After making these adjustments, the current estimate of the war in Iraq is about US$285 billion. Using an estimated USD/AUD exchange rate of 0.65 the estimated cost is $440 billion.
11. In 2002/03, federal government expenditure totalled $169.2 billion (2002/03 Final Budget Outcome, available at www.budget.gov.au).
12. For the Iraq war to produce a net benefit we must assume that, without the invasion, terrorists would have conducted more than two 9/11-sized attacks every decade and that the Iraq war, by itself, defeated all terror for all time.
13. Some commentators have defended the invasion of Iraq on humanitarian/altruistic grounds, but such a defence doesn’t pass a basic benefit-cost analysis either. Equivalent humanitarian benefits could be achieved elsewhere at significantly lower costs. For example, the money used to invade Iraq could have provided $44,000 to each of the 10 million Africans that are expected to die next year due to poverty.
