Terrorist attacks in Paris and elsewhere will have lasting corrosive consequences for Europe’s economies and the foundations of its democracies.
After the bombings in Madrid in 2004 and London in 2005, consumer spending and tourism dipped temporarily but quickly rebounded. Similarly, when an Islamic gunman was subdued on a Belgium train in August, confidence was largely undisturbed.
This time it will be different—Europe is under siege by a faceless and merciless army.
It is now apparent that many European cities with large Muslim populations are infested with terrorists and recruiters who radicalize disaffected youth, and national security officials are at a loss to effectively respond.
They go undetected in marginalized neighborhoods like Molenbeek in Brussel and Saint-Denis on the outskirts of Paris, where they plan horrendous attacks, acquire weapons and coordinate activities across the continent. From fear or indignation about perceived discrimination, many Muslims unaffiliated with radical activities are unwilling to cooperate with authorities to stem recruitment and ferret out attackers before they strike.
Short of shutting down cities—for example, as in Brussels this past weekend—authorities are unable to guarantee safety to tourists, foreign businesses and their own citizens.
Multinational corporations already require a higher risk premium to do business on the continent and their wariness will grow further. Tourists will become reluctant to visit, and Europe could be thrown into a debilitating depression.
The success of the European Union was built, fundamentally, on the free movement of goods and people across borders without customs or immigration checks.
Prior to the creation of the European Union, multinationals like Proctor and Gamble had manufacturing and warehousing spread across many European countries to supply customers. Open borders permitted them to consolidate and realize efficiencies in production, distribution and marketing rivaling those accomplished in the United States and China.
The tidal wave of refugees from Syria has strained public support for open borders, as they enter Europe, for example through Hungary, to eventually overwhelm Austria and Germany. And terrorists can easily pass among those legitimately seeking safe haven—one of the Paris attackers entered undetected through Greece, where border security is lax.
If wealthier European nations are compelled to reinstitute border controls, then the cost of doing business in Europe will rise dramatically—imagine how much customs and immigration posts at the Lincoln Tunnel would curb traffic and commerce between New York and New Jersey. European businesses would redistribute offices, production and warehousing to limit hassles but costs and unemployment would rise dramatically and Europeans would become profoundly poorer.
In the wake of recent attacks, government spending on police and national security will surge. That will give domestic economies some boost, but it will hardly compensate for the costs imposed by pervasive public fear and a Balkanized European economy.
Moreover, the very cultural premise of Europe’s most prosperous democracies is challenged.
Throughout Western Europe, many Muslims and other immigrants have integrated with indigenous populations, because to varying degrees the larger, more advanced economies—Germany, France and the United Kingdom—have learned to assimilate immigrants to offset declining birthrates.
Among the businesses attacked by gunmen in Paris were those with Muslims, Jews and Christians working side-by-side, illustrating France’s capacity for diversity. As in the United States, citizenship in France is not based on genetic origins but rather on the willingness of those born on its soil or who enter legally to embrace the founding principles of the republic—freedom and equality.
Europe has millions of Muslims and other immigrants within its borders, living, working and building. Europeans cannot afford to embrace the pernicious prescriptions of politicians peddling cultural purity and expect to prosper or sustain social cohesion.
Terrorism, if left unchecked, will beget fear that undermines the very foundations of Europe’s economies and democracies.
Peter Morici is an economist and business professor at the University of Maryland, and a national columnist. He tweets @pmorici1.