Three Monkeys Online

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What they don’t teach you at Harvard Business School – or the Economics of Terrorism. Loretta Napoleoni in interview.

The Economic Models of Terrorism

“I think there was a reluctance to accept a book like this because at that certain moment, after 9/11 what they wanted to push forward was the religious argument. That it was a bunch of religious fanatics, whereas this book is saying the opposite”. Loretta Napoleoni is talking about the initial resistance from publishers to take on her book, that looks away from the ideological concerns of terrorism and focuses on the bottom line, the economics.

It’s an argument that Napoleoni has been interested in for a number of years. Having grown up in an Italy that was all too familiar with terrorism, during the so- called ‘Anni di Piombo’ [years of lead]. Indeed one of her friends, it turned out subsequently, was heavily involved in the Red Brigades. Napoleoni was never asked to join, as she was seen as too independent minded, but she did later manage to interview a number of the imprisoned leaders of one of Europe’s most notorious terrorist organisations, giving her unique insights into the business side of terror.

The idea for her book came to her well before 9/11, but, predictably, it generated little interest. European terrorism in the late 90s seemed to be fading, and who could be bothered with studying the economic models behind it. In the wake of 9/11 however the phone started ringing and most major publishing houses took an interest. In several cases they went as far as preparing a deal, only to pull out at the last minute. The book, it seems, upset people at the upper levels of all the publishing companies. For a variety of reasons, but the key one seems to remain the fact that the focus was on finance, and connections that are all too close to our western world, rather than the relatively more acceptable idea that this was an attack by a strange religion, culturally, geographically, and financially far, far away. “I think that in the US people were truly shell-shocked as well, so they couldn’t publish a book like this, or commission a book like this. In fact all the books that came out immediately after 9/11 are all books about Religion, and even today this is the only book written on the economics of the situation. It’s extraordinary”.

In a stark section entitled ‘A Cost-Benefit Analysis of Suicide Bombers’, we’re shown that 9/11 cost as little as $500,000, while its impact in financial terms will be in excess of $135 billion dollars.

Napoleoni is adamant that one of the key failures in the so-called ‘war on terrorism’ is this inability to recognise the enemy and their financial basis. “I think it’s vital for us to see Al-Qaeda as sophisticated, because we have been given an image of Al-Qaeda which is not the true image. This image is one that these guys are sitting in the middle of Afghanistan, in caves. If you read Bin Laden’s early discourses, you can discover a very high degree of sophistication and analysis. This is a guy, clearly, who had the skills to understand economics, but also he has a skill to interpret economic events. And of course, this is not how he’s presented to us”. This is borne out by the examples, given in her book, of the financial exploitation of oil and money markets by Al-Qaeda in the run up to and aftermath of Al-Qaeda. Stocks and shares were bought and sold, with the ultimate in grisly insider trading. The organisation has been shown as well to have converted many of its resources into more liquid forms, such as gold and diamonds, in the knowledge that there would be a certain financial crackdown post 9/11.

Her study of how terrorism works is fascinating. Napoleoni outlines three developmental steps in the terror economy, that have scary parallels to our own traditional economies. The first is the State sponsored terrorism, so widespread during the cold war, where terrorist organisations received funding and training from State sponsors, be they the United States, the U.S.S.R. or countries like Libya or Saudi Arabia. The second stage is the privatised stage, where organisations gain, through necessity or choice, an independence, setting up what she describes as shell states, no-go areas where all the resources are controlled, on a war economy footing, by the terrorists. Examples of these are in Chechnya, Afghanistan, and, less highlighted, closer to home in Bosnia and Albania. The third, and most sophisticated stage, is that of the globalised terror organisation, a stage that Al-Qaeda shows itself to be readily adapted to, where terrorism uses global financial markets, and takes advantage of trade-enhancing liberalised border controls, of the loosening of investment regulations, all to enhance its war coffers.

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