Lecture 7: Economic Dimensions

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Lecture 7 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

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1. Economics as Motivation

• 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 . . .

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Economics as Motivation

• 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)

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Economics as Motivation

• 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

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Economics as Motivation

• 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

Demands/Grievances
Power to enact change
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Economics as Motivation

• Political-Economic Grievances
• Government revenues in oil-producing 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.)

Demands/Grievances
Power to enact change
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Economics as Motivation

• Al Qaidas 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.)

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Economics as Motivation

• 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

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2. Economics as Facilitator

• 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

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2. Economics as Facilitator

• 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.

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3. Economic Impacts

• 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

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Summary

• 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

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Economic Impact of 9/11
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 2529 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)

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Economic Impact of 9/11

• 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

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Economic Impact of 9/11

• 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 SP 500 index had bounced
  back to its pre-September 11th level

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Economic Impact of 9/11

• 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)

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Questions?