The phoney war and the real crisis

Issue 
A central theme that emerges from the book is the use of the fear of terrorism by politicians and corporate managers to deal wit

Terrorism and the Economy — How the War on Terror is Bankrupting the World
By Loretta Napoleoni
Seven Stories Press, 176 pages

Review by Thomas Kollmann

With no end in sight to operations in Afghanistan, an incisive review of how the much-hyped international events of the last nine years have led us there is very welcome.

Economist Loretta Napoleoni is renowned for throwing light on the murky world of the financing of terrorist groups.

Her two previous books covering this ground, Terror Incorporated (2005) and Rogue Economics (2008), have given her something of a cult status in European media.

Her editorial commentaries on the role of the illegal economy (from unregulated dumping of toxic waste to piracy) in globalisation are published in national papers across Europe.

As the monitoring requirements of the US Patriot Act took effect — a crucial event in Napoleoni’s assessment — a flurry of criminal money left the hobbled Caribbean tax havens for European and Middle Eastern money-laundering destinations. This aided then British PM Tony Blair’s efforts to court global financiers to do more business in London.

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 shown by some of the economic indicators cited by Napoleoni.

One example is the growth of the academic terrorism industry. Before 2001 international experts on terrorism were thin on the ground.

In the US, there were just five university courses on the subject. Today there are more than 40,000.

This swollen brain trust endorsed, fed on and spread the alarmist atmosphere of panic created by government propaganda throughout the past decade, and went together with 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 post-9/11 period were greater by many orders of magnitude than terrorism in Western countries.

Meanwhile, 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.

As is often the case with books offering world-wide 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, 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, won’t be at all pleased with her claim that a “strong state”, 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. Bush’s democracy promotion enterprise.

She also fails to take into account the environmental perils of a world in which societies are committed to economic growth.

[Abridged from New Left Project]