Book Review: Terrorism and the Economy - How the War on Terror is Bankrupting the World

by Thomas Kollmann

With no end in sight to U.S./U.K. operations in Afghanistan, an incisive review of how the much-hyped international
events of the last nine years led us there is as welcome as ever. Economist Loretta Napoleoni is renowned for
throwing light on the murky and promiscuous world of the financing of terrorist groups and, with the publication of her
two previous books covering this ground, Terror Incorporated (2005) and Rogue Economics (2008), has acquired
something of a cult status in European media. Her editorial commentaries on the role of the criminal economy
(unregulated dumping of toxic waste, prostitution, various forms of piracy, etc) in globalization are published in
national papers across Europe.
At a crisp 152 pages, Terrorism and the Economy expands on some of the material from her previous work and
updates the relentlessly miserable picture of the world drawn she has drawn to the current economic recession.
Napoleoni has a canny narrative style to establishing historical context and her telling of how, after 9/11, Dubai
exploded from a quiet hub for pearl fishers into a centre of Islamic finance and jihadi funding is engrossing. Of more
interest to British readers though, will be the grimly absurd details of ʻglobalizationʼs moneyed diasporaʼ in London, a
city which has been transformed into ʻa tax haven of the nouveau richeʼ. As the monitoring requirements of the U.S.
Patriot Act took effect - a crucial event in Napoleoniʼs assessment - a flurry of criminal money left the hobbled
Caribbean tax havens for European and Middle Eastern money-laundering destinations. This aided Tony Blairʼs
efforts at courting global financiers to do more of their business in London. A bonus for Blair's endeavours was a
Victorian tax law - one that Harold Wilson tried and failed to abolish - which was intended to allow West Indian
plantation owners to maintain residency in England while being domiciled abroad. This greased the palms of a new
class of rich migrants to the capital, Russian oligarchs and other unsavoury characters. But it blew up in New
Labourʼs face when the credit crunch set in as Britain became the hardest hit of major industrial countries.
A central theme that emerges from the book is the use of the fear of terrorism by politicians and corporate managers
to deal with an array of crises and opportunities since 9/11. Just how wildly out of proportion the fear of terrorism in
Western countries has become is evinced by some of the economic indicators of this fear cited by Napoleoni. One
such example is the growth of the academic terrorism industry. Before 2001 international experts on terrorism were
thin on the ground. In the U.S. there were a mere five university courses on the subject, while today there are over
40, 000. This swollen brain trust endorsed, fed on and spread the histrionic atmosphere of panic created by
government propaganda throughout the past decade, and was a concomitant of such wasteful security measures as
additional checks at airports and on occasion, tanks at Heathrow.
In the midst of all this fitful alarmism, Napoleoni reminds us that we are more likely to be hit by lightning than die in a
terrorist attack. Citing MIPT-RAND data on terrorism, she shows that the fatal effects of Western state terrorism in
the Middle East in the same period were greater by many orders of magnitude, rising from 50 prior to 9/11 to 4, 800
in 2006, with deaths from terrorism in the region leaping from less than a hundred to 9, 800.
What, asks Napoleoni, lies behind the credulous passivity of Western publics in the face of this scare-mongering? To
get to the root of it, she asserts, one has to examine the U.S. ʻpolitics of cheap and easy creditʼ that developed under
presidents Bush Sr.; Bill Clinton and Bush Jr. The deflationary economic policies of Federal Reserve chairman Alan
Greenspan, begun during the tenure of G.H.W. Bush and continued after 9/11, ʻeased Western financeʼs colonization
of the global economyʼ and made Greenspan a master of the that economy, effectively more powerful in economic
affairs than Bill Clinton. In this setting, Napoleoni argues, the state gradually delegated its responsibilities for
management of the economy to the financial markets. This de facto policy magnified various structural problems -
“toxic assets”; the housing bubble - and postponed the day of reckoning that came in 2008 with the bankruptcy of the
not-too-big-to-fail Lehman Brothers. A consequent development of this negligence was the loss of control by the
citizenry over economic affairs as low taxes and easy credit effectively made the stateʼs financial policy seem like
something outside the realm of politics, “as the state became less fiscally transparent, the public became less
vigilant”, she observes.
As is so often the case with books offering world-scale political analysis the author is long on artfully succinct
diagnoses followed by an inevitably short list of prescriptions, which really deserve a book of their own. Old school
conservative and moderately liberal critics will find much to agree with in her apt suggestions for putting the global
economy on a firmer footing by anchoring it in the productive sectors: abolishing credit default swaps and financial
speculation based on indices, as in Shariʼa law; using unemployment insurance to restructure the labour force; heavy
investment in infrastructure and a long-term plan for converting industry to clean energy. Libertarians and some
anarchists, however, wonʼt be at all pleased with her claim that a ʻstrong stateʼ, albeit one oriented towards
Keynesianism, will be crucial to carrying out these policies.
Napoleoni is not apparently concerned with trying to discern the motivations of, for example, the neoconservatives.
She takes for granted the sincerity of George W. Bushʼs democracy promotion enterprise. Nor does she take into
account the environmental perils of a world in which societies are committed to economic growth, but her analysis is
a consistently moral one, both in tone and in its overarching aim - urging the reform of global capitalism by bringing it
under more transparent, popular control - and it is directed as much at the average, indebted consumer as at the
governors of international finance and politics.

Terrorism and the Economy - How the War on Terror is Bankrupting the World, Loretta Napoleoni, Seven Stories
Press, pp176, rrp£9.99