Guardian

Rapid rise of the economy of terror
The war against groups such as al-Qaida stems from a clash of economic systems, not of religions, argues Loretta Napoleoni

Money is terrorism’s lifeline. Economics, not politics or ideology, is the armed struggle’s universal engine. This is the unexpected and disconcerting scenario unveiled by an economic analysis of modern terrorism.

The fastest growing economy in the world is the new economy of terror, a sophisticated international economic system sustained by terror groups, their sponsors, terror states and various affiliates.

Over the last decade the new economy of terror has merged with the international illegal and criminal economy and together they generate a yearly turnover of $1.5 trillion (£0.89 trillion) equivalent to 5% of world GDP. This elusive economic system is the structure that supports and nurtures global terror.

How did such an economic giant take shape undetected? The answer lies in the economic role of armed organisations since the end of the second world war. There have been three major evolutionary transitions: state sponsorship, privatisation and globalisation.

State sponsorship was a familiar feature of the cold war, when the two superpowers fought wars by proxy along the periphery of their spheres of influence, using armed groups fully funded by each of them.

The next stage, the privatisation of terrorism, took place in the late 1970s and early 1980s, when terrorist organisations such as the PLO and the IRA succeeded in financing themselves.

Motivated by the desire for independence from their sponsors and by the rising costs of running armed organisations, terror groups widened their economic horizon. So in the 1990s, when the deregulation of international markets knocked down financial and economic barriers, they were ripe for the last transition: the globalisation of terrorism. Taking advantages of economic liberalisation, terror groups became transnational entities, raising money and carrying out violent cross-border attacks.

The irony is that the new economy of terror is a product of globalisation, particularly of the globalisation that emerged after the fall of the Berlin Wall. Globalisation allowed non-state entities to promote a variety of liberal causes, social changes and economic advancement but has also facilitated the networking of terrorist movements such as al-Qaida and the growing sophistication of the “terror economy”.

Privatisation, deregulation, openness, the free movement of labour and capital, technological advances – all hailed as key ingredients of economic success in the last 20 years – have been exploited by and adapted into the terror economy in a macabre form of geo-political ju-jitsu: the very strengths of legitimate economies have been turned into double-edged swords.

A further irony is that many of the states the terror economy seeks to displace are themselves the source, directly or indirectly, of arms, logistics, refuge and finance for terror groups. The US dollar, the world’s reserve currency, is the new economy of terror’s main currency. Western and, more recently, Islamic banks are the vehicles through which this currency is transacted. Small, informal, legitimate businesses are often the agents.

One-third of the $500bn generated every year by the new economy of terror is the product of legitimate businesses, some of which are conducted in the west. These are revenues produced primarily by Islamic bankers, traders, merchants – members of the emerging Muslim middle class. They, and not the radical clerics, are the real economic forces behind Islamist terror, and they fuel the Islamist insurgency across the Muslim world.

Economic analysis of the interdependence of east and west unveils another fascinating scenario, reminiscent of the socio-economic landscape of the Christian Crusades. A structural trade imbalance cripples the east: oil, gas and a few other natural resources are the sole export items that flow to the west.

A similar chronic imbalance hindered western Europe for several centuries after the fall of the Roman empire; at that time. exports to the east were limited to swords and Slavonic slaves. Western Europe was, therefore, forced to import gold to cover its trade deficit, a measure which further weakened its economy and contributed to its continued dependence on the Muslim world.

A millennium ago a new class of European bankers, traders and merchants forged a strategic alliance with the church to break the economic hegemony of Islam. Religion was the ideological umbrella under which the third party – the hungry masses of western Europe – was brought into the alliance. Now, in a sort of reversal of the Crusades, the embryo of the Islamic bourgeoisie has teamed up with the radical clerics. Under the umbrella of Wahhabism – an extreme, seventh century interpretation of Islam – the oppressed Muslim masses are encouraged to take up arms against the corrupted, Muslim, oligarchic rulers and their backers, the west. Religion once again is the ideological blanket under which different social groups are able to gather together.

The economic analysis of modern terrorism relegates religion to a mere recruiting instrument while focusing on the growing tension between a dominant western capitalist system and a populous Muslim nation, economically crippled by corruption and deceit. What we are witnessing today, therefore, goes well beyond the motivations of single Islamist armed groups: it is a clash between two economic systems – one dominant, the west, and the other insurgent, Islam.

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