This article aims to explore the inner microeconomic workings of terrorist organizations, as well as the underlying macroeconomics of terrorism as a black market industry.
Before beginning to examine the economics of terrorism in depth, some precursory background information is necessary to establish how the whole geopolitical and economic situation got to the point where it now is today.
The War on Terror
After the radical Islamic terrorist attacks on the World Trade Center buildings on September 11th, President George W. Bush declared war on both Iraq and Afghanistan, thus kicking off the global war on terror. With the new millennium, the world saw a new kind of war tactics, with an enemy not necessarily affiliated with a particular nation-state as had been the standard custom during the past century of war and throughout history for the most part.
At first, President George W. Bush received widespread bipartisan support in waging the global war on terror, but midway through the decade, public opinion on the war changed and the tide gradually began to turn against the war. Now, almost two decades later, American troops are still abroad combating terrorism across the world, but most significantly in the Middle East, and war fatigue from the United States entanglements in the region has set in on the American public.
It appears to some that the United States foreign policy dealing with the Middle East is seemingly stuck in Groundhog Day, with the same misguided plan to liberate people from under totalitarian rule always repeating itself, and always with the same result: a power vacuum which enables various terrorist cells to grow and spread. The primary example of this being the disastrous attempt by the United States to arm insurgent Syrian rebel armies against the uncooperative Syrian dictator, ultimately leading to the inevitable rise to power of the Islamic State (ISIS).
The global war on terror has opened the floodgates to a new era of geopolitical and economic strategy implemented by governments, militaries, non-governmental organizations, and multinational corporations alike. A new type of enemy meant a new type of international relations aimed at keeping the peace in the newly lit fuse of powder keg that is the Middle East.
Even still today, political and military tensions remain higher than ever, with a lot of the region either destabilized beyond repair (such as in the failed state of Libya), or under despotic rule by tyrannical powers – sometimes religious (such as in the theocratic Iran), sometimes monarchic (such as in the kingdom of Saudi Arabia), or even sometimes secular (such as in the tin pot dictatorship of Kazakhstan).
To make matters even further more complicated, the efforts by the Western powers to oust and replace the secular dictator of Syria, Bashar al Assad, has inevitably resulted in one of the worst global humanitarian crises of modern history itself, with not only the Syrian civil war amounting to a country in ruins, but also giving way to the rise of a new sinister enemy in the formidable foe of the Islamic State. What is even more sobering than those atrocities being the millions of people displaced and seeking refuge in Europe and other Western countries, as well as some untold number of deaths on all sides of the conflict.
The Economic Impact of Terrorism
It may seem that the entire Middle East is in total and utter chaos, with terrorist cells reigning supreme over the scorched wastelands left behind by misguided efforts at intervention by the leading Western powers.
According to the Global Terrorism Index, 2014 had the largest increase recorded from year to year in terrorism, adding to a total of 80 per cent increase since 2013. This adds up to 32,685 deaths in a year just due to terrorism.
According to the 2002 Joint Economic Committee of the United States Congress report focusing on the economic consequences of terrorism, terrorist attacks have both short term and long-term effects to economic growth.
Islamic State, Inc.
In their acts of violence against multinational corporations, some terrorist groups have even become a sort of multinational corporation of their own, complete with corporate bureaucracy, business operations, media outlets, and even a public relations wing all of which are the case in the Islamic State.
For example, the Islamic State has taken control of various oil fields and refineries across Iraq and Syria, which it sells on the black market to buyers in Turkey, among other countries.
The infamous terrorist group is not simply looting the oil for profit, but even managing and operating the oil field and refineries on their own. The Brooking Institution told the New York Times that the Islamic State produces somewhere between 25,000 and 40,000 barrels of oil a day.
The U.S. Treasury Department has long struggled to come up with exact figures on the subject, but estimates that the Islamic State takes in millions of dollars every month in profits from black market oil sales around the world. CNN reports that the Islamic State may earn between $1 million and $2 million a day, and the Huffington Post reports that according to United States intelligence officials, the terrorist group may be raking in the upwards of $3 million a day.
In addition to oil revenue, the Islamic State – as well as many other terrorist groups – receives generous contributions from sympathetic governments and wealthy private donors in the Gulf States. Furthermore, the Council on Foreign Relations estimates that the Islamic State receives $8 million a month in “taxes” collected from the territories they control in Iraq and Syria. Most tragically of all, the Islamic State is also believed to be making millions of dollars in the human trafficking industry.
The Islamic State has their own expenses as well, spending massive amounts of money on salaries, weapons, supplies, and even pensions for the families of terrorists killed in the line of fire.
Global terrorism has no doubt grown to become one of the biggest – if not the biggest – political and economic threats of the new millennia. Gone are the old days of states fighting other states as in traditional warfare, with conflicts now settled through military coalitions targeting various terrorist cells who can be partially or even entirely independent of a sanctioned state government. Now battle is down through proxy wars between rebel armies, which has become the new norm in twenty-first century combat.
When dictators are toppled, it seems to only make room for new radical terrorist groups to carry on the reign of terror even more brutal than their predecessors. The enemy is no longer a foreign country’s military, but radicalized individuals online, abroad, and at home, who make up the international terror networks who pose a threat to United States citizens, as well as United States corporations.
Terrorists pose an economic threat to corporations ranging from a direct, physical attack (such as the September 11th attack on the World Trade Center towers) to the less direct seizure of American assets – military and civilian alike (such as the seizure of arms and oil facilities by the Islamic State).