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Since the 9/11 attacks on New York and Washington D.C., the fight against international terrorism has been a dominant issue in the political arena. Policy-makers (still) face the challenge to develop sound strategies for fighting this type of terrorist activity. Unfortunately, there is no universal strategy to counter terrorism. This is partly due to the diverse and clandestine nature of terrorist groups, and partly due to misperceptions, lack of precise knowledge as well as divergent interests and prioritization on part of policy-makers. The present chapter aims at providing a systematic overview on how to deal with (international) terrorism, taking on a law and economics perspective. More specifically, we will examine how the rule of law - both nationally and internationally (i.e., in terms of the international law) - interacts with international terrorism and how it can be sustained under the extreme conditions of terrorism.

This contribution examines the role of market-capitalism in anti-American terrorism. It differentiates between level- and rate-of-change-effects associated with market-capitalist development and their respective relationship with anti-U.S. violence. While this contribution argues that higher levels of capitalist development consistent with the capitalist-peace literature coincide with less anti-American terrorism, it also suggests that the process of marketization has inflammatory effects on anti-American terrorism. Using panel data for 149 countries between 1970 and 2007, this contribution indeed finds support for these two hypotheses. The findings are further corroborated by system-level time-series evidence. Considering the findings, it is argued that a higher level of market-capitalism is associated with less anti-American terrorism by creating economic interdependencies and a convergence of pro-peace values and institutions. The destabilizing effects of the marketization process are argued to stem from the violent opposition of various anti-market interest groups to economic, politico-institutional and cultural change initiated by a transition towards a market economy. These interest groups deliberately target the U.S. as the main proponent of modern capitalism, globalization and modernity, where anti-American terrorism serves the purpose of consolidating their respective societal position by means of voicing dissent, rolling back pro-market reforms and limiting the perceived Americanization of their communities. The findings of this contribution suggest that the U.S. may ultimately become a less likely target of transnational terrorism through the establishment of market economies, but should not disregard the disruptive political, economic and cultural effects of the marketization process in non-capitalist societies.

This contribution studies the influence of poor politico-economic factors, unfavorable demographic conditions, state failure, modernization, secularization, globalization and the perceived dependency of the Islamic world from the West on the onset of armed Islamist activity for 155 countries between 1968 and 2007. Its empirical findings show that the onset of militant Islamism is robustly associated with the discrimination of Islamic minorities, state weakness, the presence of large (secular and possibly predatory) governments, military dependence from the U.S., external cultural influences and the availability of a large pool of potential recruits (as indicated by a large, Muslim population). Poor economic conditions, modernization and authoritarianism share no association with the onset of Islamist militancy. The latter findings imply that democratic reforms and economic development while often advocated countering Islamist violence appear to be rather ineffective tools of conflict prevention.

We examine the role of market-capitalism in anti-American terrorism, differentiating between level- and rate-of-change-effects associated with market-capitalist development and their respective relationship with anti-U.S. violence. Using panel data for 149 countries between 1970 and 2007, we find that higher levels of capitalist development - consistent with the capitalist-peace literature - coincide with less anti-American terrorism, while the marketization process has inflammatory effects on anti-American terrorism. These findings are further corroborated by system-level time-series evidence. We argue that a higher level of market-capitalism is associated with less anti-American terrorism by creating economic interdependencies and a convergence of pro-peace values and institutions, while the destabilizing effects of the marketization process may stem from the violent opposition of various anti-market interest groups to economic, politico-institutional and cultural change initiated by a transition towards a market economy. These interest groups deliberately target the U.S. as the main proponent of modern capitalism, globalization and modernity, where anti-American terrorism serves the purpose of consolidating their respective societal position. Our findings that the U.S. may ultimately become a less likely target of transnational terrorism through the establishment of market economies, but should not disregard the disruptive political, economic and cultural effects of the marketization process in noncapitalist societies.

This article analyzes the causal relationship between terrorism and economic growth, running a series of tests for Granger non–causality with panel data for a maximum of 160 countries from 1970 to 2007. The authors find that the causal relationship between terrorism and growth is heterogeneous over time and across space. They argue that the temporal causal heterogeneity can be explained by shifting geographical and ideological patterns in terrorism associated with the end of the Cold War. Different causal mechanics across countries are ascribed to a variety of country–specific factors (the level of politico–economic development, a country's cultural affiliation, the intensity and persistence of terrorist activity, and the level of political instability). These factors govern a country's robustness to shocks from terrorism and the extent to which terrorism is motivated by economic factors. For the Cold War era, economic growth is found to have swayed terrorism for Latin American countries in intermediate development positions that were politically unstable and experienced strong terrorist activity. For the post–Cold War era, terrorism is found to be detrimental to growth for African and Islamic countries with low levels of political openness, high levels of political instability, and strong terrorist activity. The study's findings help to better understand the conflicting evidence on the terrorism–economy nexus and to give more solid counter-terrorism advice.

We provide an overview of empirical evidence on the determinants of terrorism, in particular focusing on the origins and targets of transnational terrorism. We also assemble several broad theoretical families that relate terrorism to, e.g., economic, political and institutional and demographic factors. We provide a critical discussion of the existing empirical evidence and refer to a number of areas of future research before describing some modest policy implications. Adapted from the source document.

This contribution argues that social policies ameliorate poor short-run and long-run socioeconomic conditions (e.g., unemployment, poverty, inequality, and dissatisfaction), thereby indirectly reducing terrorist activity. The authors empirically assess the influence of social policies (indicated by social spending and welfare regime variables) on homegrown terrorism for fifteen Western European countries during the 1980—2003 period. The authors find that higher social spending in certain fields (health, unemployment benefits, and active labor market programs) is associated with a significant reduction in homegrown terrorism, while spending in other fields (e.g., public housing) is not. Moderate evidence furthermore indicates that the different worlds of welfare capitalism differently affect homeland terrorism. Social democratic welfare regimes that create low levels of market dependence are on average less prone to domestic terrorist activity. The findings suggest that homegrown terrorism in Western Europe may also be fought by higher spending in certain fields and more generous welfare regimes.