The Economics of Terror
Who Doesn’t Love a Welfare State?
The Economics of Terror
Robin Hood, the English Folk story hero, was a skilled archer, and swordsman, but most of all he was known for being an outlaw. His crime and that of his clan, was robbing from the rich and giving to the poor. The tale of Robin Hood, and particularly his popularity amongst those he helped, stands to teach us much about the economic foundation behind the support of terrorist organizations.
In fact, the story of Robin Hood, shares important characteristics with powerful terrorist organizations of the day. From the FARC in Colombia to the Tamils in Sri Lanka, these organizations have both funded their own efforts, and perhaps more importantly, increased their conscripts and support network, by providing the communities they thrive in with important social benefits. Despite their ideological and historical differences, these terrorist groups have added this socio-economic dimension to complement their military front—and the finding is that this addition is significant in their successes.
According to MIT Professor Eli Berman, author of Radical Religious and Violent: The New Economics of Terrorism, violent radical religious organizations thrive by taking advantage of the absence of the State. By providing communities with important benefits in exchange for their loyalty, and at times their involvement, they are able to develop into highly efficient terrorist organizations. Interestingly, we find that various violent organizations shaping the politics of the Middle East today also rely on this very policy.
The story of Hamas is exemplary in terms of the power that radical religious groups can acquire from the welfare-like provisions they guarantee their “constituents.” The Palestinian group was founded in the 1950’s by the Islamic Brotherhood in Gaza, whose mission in all of their branches included providing social services such as creating a network of clinics, schools, charities and sports clubs. As such, since their inception, Hamas has sponsored an extensive social network. According to the Council on Foreign relations, in addition to its military wing, this has allowed Hamas to develop a tradition in which the majority of its estimated $70 million annual budget is given to an extensive social services network.
By installing their organization as a de facto welfare state, Hamas was largely able to promote its reputation amongst Palestinians as averse to corruption. The Council on Foreign Relations further notes that their ability to exert influence over social institutions in a severely limited environment, partly explains their victory over Fatah in the 2006 legislative vote.
In fact, Israeli scholar Reuven Paz notes that aapproximately 90 percent of Hamas’ work is in social, welfare, cultural, and educational activities. This is especially impressive when the Palestinian Authority fails to provide such services. In other words, the socio-economic benefits provided by similar groups function as an effective public relations strategy in a context where the people’s allegiance is largely based on which group can better function as a state.
Interestingly, however, the welfare aspect that plays a role in the resilience of terrorist organizations is not a one way street. Although these groups provide services, much like the state they aim to replace, they also demand contributions from the communities they protect. While some radical organizations provide us with straight forward examples by asking communities for a “safety tax”, other organizations have a more complex, yet still efficient, relationship with their community that is based on reciprocal support.
Again Hamas is an interesting case for their relationship to Islamic social welfare activism. There are important accusations regarding Hamas that claim the group diverts charitable funds to finance its military infrastructure and violent activities. The International Crisis Group reports that Islamic social welfare institutions affiliated with the organization have ‘incited violence and recruited militants among beneficiaries of their services.’
The use of social welfare activism by violent radical organization is relevant for two reasons. First, it illustrates how the economic foundation of violent organizations can help to foster an efficient system of support for that organization. Secondly, it raises important questions with regards to what types of incentive systems the international community can create so as to support their goals in counter-terrorism.
According to Berman’s research, the link that the use of social welfare activism highlights is that radical groups survive and thrive because they are able to create a system based on mutual aid. This is especially important because these groups are dependent on limiting defection. Like other non-violent mutual aid organizations, terrorist groups worry about free-riders who benefit from their social works but who do not contribute to their organization. However, for terrorist groups, the stakes are higher, as free-riders could easily turn into sources of information for their rivals. Berman’s research, however, has demonstrated that by requiring mutual aid, that is, the significant involvement of their communities in their social works via donations or other means, these groups are better able to ensure that their affiliates are loyal to the organization itself.
Thus, there is an important economic factor that comes into play with regards to the success of violent organizations. These groups are organized in such a way that the relationship to the communities they serve is dependent upon mutual aid. At the same time however, these organizations become increasingly better equipped to provide socio-economic benefits that improves their image and allows them to present themselves as a para-state, in areas that are usually plagued by state-failure.
What does this mean for the economic incentives that the international community can put into place to create effective counter-terrorism strategies? Before addressing this issue, it is important to distinguish the relationship that these organizations establish through mutual aid, from a more simple relationship that implies buying-off supporters.
Although, as in most cases of conflict, there are surely some participants who benefit financially from violence, there is an important difference behind these instances and the reasons for the organizational success of radical organizations that provide communities with social benefits. The greed-grievance debate puts into question whether the true motivations behind violent actors lie in pure economic opportunities they find in situations of conflict—such as drug trafficking in failed states—or whether their violence is really the only means they are able to address the grievances—socioeconomic, political or otherwise—that they face. For the most part, members of violent radical groups support the grievance side of the debate. True, suicide bombers’ families are compensated financially, but analyses demonstrate time and again that many recruits of terrorist organizations come from well-to-do families. The son of a banker, the case of the Nigerian accused in the attempted bombing of the plane headed to Detroit last December, illustrates this trend.
From similar examples one can only gather that even if greed-like incentives play a role in the successful recruitment of members for radical organizations, the extent to which they do is very limited. Instead, it is the welfare-like function of radical organizations that puts them in a position where the communities they work in feel obligated to promote their cause. As such, counter-terrorism strategies aimed at buying off potential terrorists are unlikely to work, as the key aspect behind the success of terrorist organizations is based on the dynamic of reciprocity they create.
Similarly, eradicating the social welfare activism that financially supports the activities of organizations like Hamas is unlikely to impact their military activity. Instead, it would probably lead to the further deterioration of the communities such groups work in, and thus only increase the support they receive from those communities. Yet, the insight provided by the successes of these organizations in providing for their communities, functioning as de facto welfare states, furthers the need of creating strong states.
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