Download Economic Dimensions


The relationship between economics and terrorism
is far more complicated than many have suggested
(e.g., “combat terrorism through poverty
eradication”)

At least 3 dimensions to the relationship between
economics and terrorism:
 Economic conditions as motivation for terrorist violence
 Economic conditions as facilitator of terrorist violence
 Economic conditions as result of terrorist violence

Plato and Aristotle:
“Economic factors are fundamental in the outbreak
of violence.”

Marxism:
“War is a mechanism for maintaining inequalities in
a struggle for control of raw materials and markets.”
 Violence is an inevitable outcome of capitalism

What role do economic grievances play in
motivating terrorist groups?
 Well, it depends . . .
• Structural economic
challenges:
– Expectations and hopes vs.
limited opportunities for a
better life
– Unemployment & poverty,
particularly in oil-wealthy
country
– High inflation for necessities
(food, shelter, fuel, etc.)
– Ethnic favoritism (e.g., limited
opportunities for Tamils in Sri
Lanka)
• Structural economic challenge: Socio-demographic pressures
(youth bulge)
• Age composition of populations in developing countries affects:
– Resource consumption
– Prices
– Government revenues and expenditures
– Demand for jobs
– Labor wages, etc.
• “Current and projected demographic and socioeconomic conditions
in many nations throughout the Middle East, South Central, and
Southeast Asia could lead to the emergence of more terrorism and
terrorists for many decades to come . . .” National Intelligence Council
• Political-Economic
Grievances:
– Authoritarian/repressive
regimes providing limited or
no power to enact change
– Corruption/resource
centralization among elites
– Political instability leading to
market chaos
• Political-Economic
Grievances:
– Government revenues in oilproducing countries are
vulnerable to global price
fluctuations
– Lack of government
investment in education,
public infrastructure (esp. in
oil-rich countries like Saudi
Arabia, Nigeria, etc.)

Al Qaida’s leaders have consistently highlighted
economic grievances in their anti-Western ideology,
including:
 Stealing oil from the Muslim world (e.g., keeping the price of oil
at artificially low prices)
 Preventing economic advancement of the Muslim world by
supporting corrupt, apostate regimes
 Economically disadvantaging poorer, underdeveloped countries
by subsidizing domestic producers of certain goods
 Imposing harsh economic sanctions on important Muslim
countries (Iran, Syria, Iraq pre-2003, etc.)

AQ leaders have also encouraged attacks against economic
targets in the U.S. and other Western nations

Primary strategic objective: to “bleed” (exhaust) the
United States economically and militarily both by directly
causing inordinate economic losses and forcing the U.S.
to spend excessive amounts of money to protect its vast
infrastructure.
 United States derives its considerable military power and political
influence from its superior economy
 Thus, disrupting the American economy will in turn defeat the U.S.
as an opponent and end its military hegemony and presence
overseas
 9/11 attacks against WTC, global financial center, as prime example
Local Dimensions

Impoverished communities vulnerable to exploitation by
criminal networks, militias, etc. – some of whom provide
social and economic programs that fill needs unmet by
official government

For example:
 Hizballah in Lebanon
 Hamas in the Palestinian Territories

Underpaid law enforcement, border security, etc. can
facilitate corruption, criminal or extremist sympathies
 significant concern in some African countries
Regional and Global Dimensions

Globalization (reduction in barriers to global transportation, shipping,
asset transfers)

Arms trafficking (ease of access to AK47s)

Trafficking in drugs, humans, diamonds, etc. (revenue streams)

Global energy dependence facilitates funding streams for violent
groups
 Oil-rich Gulf states providing support to Mujahideen in Afghanistan during
1980s and beyond, as well as to Palestinian “freedom fighters”, etc.

Disruptions in commerce, transportation, tourism, financial
markets

Increases in insurance premiums
 If govt. subsidizes, it discourages self-protection while the public
bears the increased costs

Severe tightening of border controls can constrain trade
and increases costs

Increase in public spending on security, military operations

Economic conditions, like poverty, by themselves do not
produce terrorism, but can be a contributing
environmental condition
 Particularly blocked social mobility, political repression and relative
socioeconomic deprivation

Economic conditions can help facilitate terrorist activities

Economic targets (oil pipelines, financial centers, Western
hotels, etc.) can be a prominent type of target for terrorist
attacks; such attacks can have significant economic
impacts
Various estimates . . .
•
NY City Economic Impact
– “Total Loss $83 billion”
(NYC partnership & Chamber of
Commerce: Nov 2001)
– “Total Cost $54 billion”
(NY Governor: Oct 2001)
– “WTC Replacement Cost &
Cleanup $25~29 billion”
(FEB NY: April 2002)
– “Total Cost $83 billion (quoting
NYCP-COC) but $67 billion
covered by Insurance
(US GAO: May 2002)
•
NY City Jobs Lost
– 108,500, 115,300, 105,200,
125,000, 84,000, 78,200,
129,000….
•
NY State Jobs Lost
– “99,000 in 2001, 78,000 in 2002,
77,000 in 2003”
(NYS Senate Finance Committee:
DRI-WEFA: January 2002)
– “Resulted at peak loss of 78,200”
(DRI-WEFA: March 2002)
– “50,000 immediately, 70,000 in 4th
Quarter” “Much of this loss is likely
linked to WTC attack”
(FEB NY: April 2002)
Immediate and Short-Term Economic Impacts

Financial Sector
 40% of WTC casualties
 NYSE, NYME closed

Aviation Sector
 planes grounded for a week or more
 20% drop in passengers
 100,000 jobs lost; several airlines went bankrupt

Insurance Sector
 loss of life and property estimated at $40-$50 billion

Other industries: hotels (higher vacancy rates, layoffs), tourism,
automobile rentals, travel agents, and civilian aircraft manufactures
Longer-Term Economic Impacts

Federal Reserve cut interest rates aggressively

Special financing incentives offered by the automobile companies led to
record motor vehicle sales for October 2001

Securities market was only closed for four days, opening again after the
telecommunications network in lower Manhattan became operational.

Stock market re-opened on September 17th; within 19 trading days, the
S&P 500 index had bounced back to its pre-September 11th level
Longer-Term Economic Impacts

Severe and immediate physical damage to all businesses, government
offices, and other organizations located in and around the WTC complex.

Thousands of dead, injured, missing, physically displaced and traumatized
employees; losses of data, information, and institutional knowledge

Nationwide, however, the economic impact of 9/11 over the long-term has
been most significant in the $ billions spent on new homeland security
initiatives, military deployments, etc.
 Department of Homeland Security, TSA
 Afghanistan, Iraq, (other countries, especially Special Forces)