The second round of terrorist attacks on London’s transport system Thursday raised a disturbing spectacle of continued, albeit low level, terrorist attacks in the world’s major cities. Such attacks, even taken together, might produce fewer casualties than a single huge outrage such as that of September 11, 2001, but could have more pernicious long term economic consequences.

Let us assume, for the sake of argument that border controls are ineffective at preventing cross-border migration of potential terrorists, or alternatively that cities with high populations of Moslem immigrants, such as London, Paris and New York, already have large enough populations of alienated radical Islamists that border controls, however stringent, are unable to prevent continued outrages. Assume further that there are no huge attacks, like 9/11, let alone nuclear or major biological warfare outbreaks, but that moderate sized terrorist outrages continue in a steady stream, killing a few hundred people a year.

This is an assumption, not of Armageddon or anything close to it, nor of a situation resembling outright war, but simply of an ongoing level of disturbance similar to that undergone by Israel in the last few years since the Palestinian Intifada resumed in 2000 (Israeli civilian casualties in this period totaled around 1,000.) Under it, the economy is not put on a war footing, military and security expenditures are increased but only by moderate amounts, and for any random individual, the additional chance of sudden death remains slight (for example, Britain loses 3,500 people per annum from road accidents; the assumed casualty level from ongoing terrorism is thus a fraction of that figure.) Rationally speaking, this assumption is not particularly pessimistic, and thus should have only a modest economic effect. The economy, being composed of fallible humanity, is not particularly rational.

A lengthy series of small terrorist attacks would have their greatest effect if concentrated on a single nexus, such as the public transport systems of the cities concerned. Numerous commentators have explained in the last two weeks how impossible it is to provide effective protection against terrorist attacks in surface public transport, because of the number of buses and subway trains involved, and the number of passengers. A lengthy series of such attacks will make commuters take to their cars, thus increasing urban congestion and pollution. More immediately, it will be reflected in an increased unwillingness by the heavily unionized workforce of the major public transport systems to operate them. This is particularly likely to be a problem in Paris, where wildcat union action is a national tradition, and in London, where London Transport’s unions are among the most militant and uncompromising on earth.

Before engaging in outraged middle class denunciation of militant trades unions, it is worth reflecting on the reality that London Transport workers may be facing. If, as seems likely, Al Qaeda’s militants have targeted London’s transportation system as a particularly attractive field for their activities, London Transport employees will be facing the possibility of terrorist attacks, not merely on their way to work but throughout their working day. Further, they will be aware that their place of work has been targeted by a ruthless terrorist organization as uniquely attractive to attack. To expect in those circumstances London Transport employees to continue carrying out their duties is unrealistic; if they had wanted to display extraordinary courage as an essential component of their working day, they would have joined the Special Air Service. The analogy with the Blitz is unfair; Hitler did not target London’s transportation system in particular, and indeed the Underground was deemed to be especially safe against the Luftwaffe’s efforts in 1940-41, and against the “flying bombs” in 1944. The average London Transport employee may thus feel that it is his union’s obligation to ensure that he has safe working conditions, and that the terrorism problem of society as a whole should not be solved at his expense.

Industrial action on London’s transportation system would quickly become very damaging. Whereas other cities that have been subjected to continuing low level terrorism, such as Tel Aviv, have road and street networks that are adequate even when commuters are avoiding public transportation, London conspicuously lacks such networks. Without the London Underground, the major commuter routes into London would quickly become impassable. Hence major disruption of London’s underground system would cause a very severe disruption to the British economy. Housing in areas such as Islington (for the City) Mile End (for Docklands) and Bayswater (for the West End) would increase somewhat in value, as those neighborhoods are within walking distance of potential high level employment. Other areas, such as Clapham and Hampstead, which rely on public transportation or clogged roads to deliver commuters, and have little viable employment nearby, would collapse. The huge 19th century expansion in London’s size, caused by the Underground and improved bus services would thus be reversed. Overall, there would be a severe depopulation of central London, and yet another major move by London’s high-end service sectors to the outer suburbs and the country, where employees would not be so dependent on dangerous and unreliable public transport services.

London would not be alone in these effects. They would also be seen in other cities where terrorist attacks were ongoing, such as Paris, New York or Washington. However the results in London would be an order of magnitude more intense, because of London’s excessive dependence on the Underground and lack of adequate roads infrastructure. Fifty years of leftist resentment of the private automobile would thus extract a huge price, not from the leftist politicians themselves, but primarily from their long suffering fellow Londoners.

The other major economic effect of continued low level terrorism would be on London’s tourist trade, and to a lesser extent that of Britain as a whole. Tourists to London already suffer substantial harassment; the city has some of the most expensive bad hotels in the world, true fleapits that are a disgrace to the country’s reputation (the poor quality and high price of most London hotels is due to draconian planning restrictions, which prevented the industry from expanding adequately to meet the jet-age tourist boom.) However, these, and the general surliness of London’s population, have proved inadequate to deter the hordes of tourists that add so much to the British economy.

What filth and hostility have not achieved, sustained low level terrorism may. Travel on U.S. airlines dropped by 32 percent in the months after September 11, in spite of the fact that by any rational calculation the risks of air travel remained low and primarily concentrated in the ageing fleet and the overstretched air traffic control system. A similar drop in tourism to Britain would be inevitable if tourists see continued terrorism even at a low level. Such a drop would improve the service in London hotels, certainly, but it would also provide a huge blow to Britain’s balance of payments which, like that of the United States, is already heavily and probably unsustainably in deficit. The effect on the country’s tax base would also be onerous; the Labor government’s public spending plans are already close to unfinanceable, and a substantial drop in tourism would undoubtedly push them over the edge.

Finally if, as seems unfortunately likely, low level terrorism in London is continuing in 2012, when the Olympics arrive, the result will be chaos and severe danger both for the athletes and the world’s spectators. The solution, which will have to be adopted several years before 2012, will be to move the Olympics somewhere else, with better transportation and less strategic importance. Moving the Olympics will be violently opposed on the grounds that it would mean “the terrorists have won.” In reality, it will simply be a victory for sheer stupidity in inviting the Olympics to a city with completely inadequate transportation and no need whatever for the additional publicity that the Olympics bring.

A continued low level terrorist campaign in London is likely to kill and injure fewer people per annum than suffered in the World Trade Center, and do less direct property damage. Its economic effect however would be far greater.

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(The Bear’s Lair is a weekly column that is intended to appear each Monday, an appropriately gloomy day of the week. Its rationale is that the proportion of “sell” recommendations put out by Wall Street houses remains far below that of “buy” recommendations. Accordingly, investors have an excess of positive information and very little negative information. The column thus takes the ursine view of life and the market, in the hope that it may be usefully different from what investors see elsewhere.)

This article originally appeared on United Press International.