Web Of Terror An Economic Stranglehold

By Jon Talton
Originally published Saturday, May 7, 2011 at 10:00 PM
Courtesy Of "The Seattle Times"

Osama bin Laden is the face of terrorism to Americans, but we ignore terror's economic roots and branches at our peril. They won't wither away because of bin Laden's demise.

This is not to reduce every force of history to mere human action in the market. Bin Laden may have hoped to bankrupt the United States by causing it to overreact to the 9/11 attacks, as The Washington Post's Ezra Klein has written. But he saw himself as a holy warrior, as well as a rebel against his wealthy Saudi family's business empire.

His key grudge, however, leads back to economics. U.S. troops were and remain in the Middle East primarily to protect the free flow of the largest oil reserves in the world. To help ensure cheap oil, America has closely allied itself with repressive regimes, particularly in Saudi Arabia.

During the decade of the so-called War on Terror, the United States has done nothing to wean itself off imported oil or extreme car dependency. In 2006, President George W. Bush acknowledged this issue, saying, "Problem is, we get oil from some parts of the world and they simply don't like us."

Nor has much progress been made in addressing the dire poverty, lack of opportunity and armies of unemployed young men that help fuel resentment against America and the West; these men become potent recruitment tools for terror groups. An Arab spring may or may not bring democracy to some of these nations, but the harsher and more dangerous reality remains operative for now.

(Speaking of terrorism, some 35,000 people have died in drug-related killings in Mexico during the four years of President Felipe Calderón's battle with the cartels. As with oil, a root cause is uncomfortable but true: American appetites.)

The failed states and dictatorships, and even large, barely governed chunks of other developing nations, are chaotically separated from the globalized economy that most Americans take for granted.

At the same time, globalization is both a conduit for terror and at grave risk from it. Terror groups amass and move money internationally; they cross borders and operate networks and subsidiaries like malign corporations. Authorities in the U.S. and elsewhere still struggle to cut off their funding sources.

The 9/11 attacks challenged globalization but didn't stop it. Increasing security, for example, added costs and delays to the maritime industry. The Port of Seattle spent $41.4 million on additional seaport security after the attacks, much of it from federal sources. But trade quickly rebounded.

That shouldn't make us complacent about the vulnerabilities of our 10,000-mile-supply chain or interconnected financial systems. The first round of modern economic globalization came crashing down with World War I. What happens if terrorists close the world's oil chokepoint at the Strait of Hormuz or detonate a bio-weapon on Wall Street or in the money centers of London or Shanghai?

Some economic modeling suggests it could cause much larger consequences, for example, in capital flight, market uncertainty and depression of investment, than the immediate physical damage of a terror strike. The damage would be magnified further in an America where millions are struggling to recover from the Great Recession.

The event of Sept. 11, 2001, smaller by comparison, pushed the United States into a recession (admittedly with help from the dot-com bust) and briefly shut down the financial markets. The airline, tourism and insurance industries were especially hard hit, with airlines taking years to recover.

To be sure, winners also emerged in defense, security and counterterrorism sectors. Over the decade, the Department of Homeland Security has spent nearly $425 billion (Amtrak gets about $1.5 billion a year). The Obama administration projects spending of $71.6 billion in 2012.

Much heavier costs have come from the wars in Afghanistan and Iraq, sparked directly and indirectly by 9/11. Nobel laureate economist Joseph Stiglitz has estimated the Iraq war alone will cost $3 trillion. The tab for Afghanistan has topped $400 billion with projections of $1 trillion or $2 trillion.

While security may be priceless, it's debatable whether much of this money, most of it borrowed and adding to global imbalances, has actually made America safer. Instead, bin Laden succeeded in making it appear to many people overseas that America was at war with Islam, a costly problem in itself.

Also, spending for war, especially, doesn't add to future productivity or competitiveness, such as spending on education, research and infrastructure. Nor is it sustainable with federal debt and deficits hitting levels not seen since World War II.

So Americans naturally celebrate a murderer of innocent civilians being run to ground. It might also be time to take stock of some of the economic and geopolitical choices we're making that help the would-be Osama bin Ladens of the world operate profitably.