Economics of Terrorism & Civil Wars

Some distinct features of almost every ISIS, Al-Qaeda, Al-Shabaab, and Boko Haram video are convoys of Toyota and other international brand trucks stretching for miles, All-Terrain vehicles, military-grade assault rifles like AK-47s and 49s, assorted models of AR 15s and M-16s, and heavy machine guns of the M 60 and M 134D caliber. Accompanying these guns are rows of ammunition clips and belts, shoulder grenade launchers, hand grenades, walkie-talkies or ham radios and other communication gears. All of these equipment run into hundreds of millions of dollars’ worth of business every year

Since almost all the terrorist organizations lack the capacity to manufacture these vehicles, weapons and their accessories, where and how do they acquire them, given the restrictions of the international community? This essay will explore the sources of these and other resources, the reason for their continued flow into the hands of the terrorists, and the economic and social benefits of terrorism activities and civil wars both within the immediate vicinity and the extended regions of the world.

Sources of Revenue

Terrorist and guerilla groups, like Boko Haram in Nigeria, Al-Shabaab in Somalia and parts of Kenya, Al-Qaeda in the Sahel region of Mali, Niger, and Chad, Joseph Kony’s Lord Resistance Army, the Taliban in Afghanistan and parts of Pakistan, and the Janjaweed in the Sudan, engage in market raids, sea piracy, kidnaping, human trafficking, and bank robberies to finance their organizations. Others, especially those based in the Congo like the Allied Democratic Front, Sudan, MEND in the Nigerian Niger Delta, and Somalia dabble into illegal mining of their nation’s natural resources and poaching of rhinos in the wildlife parks of neighboring countries of the Southeastern African region. Up north, the many guerilla groups, or rebels, specialize in human trafficking of desperate African migrants to Europe for both prostitution and menial labor.

While the jury is still out on all the sources of revenue for the newest and most vicious terror group in the world, ISIS, three sources are certain: illegal crude oil sales, bank raids in captured territories, and kidnapping for ransom. There are allegations that the organization collects all kinds of taxes from the residents of its controlled territories in parts of Iraq and Syria, but how much is still up for debate. However, the significant portion of its estimated $2m monthly revenue comes from crude oil and ransom from kidnapping. Rumors and videos of rehabilitated young women also point to arranged prostitution of teenagers. 

The Taliban is said to control the opium trade in most of Afghanistan and the Pakistani Northwest frontier province, and most of their over $300m annual revenue comes from the sale and distribution of this product around world. In addition to its involvement in the opium business, the Taliban is believed to be engaged in other legitimate businesses, including banking, using fronts to camouflage its real ownership.

All these natural resources find their ways into meeting the needs of consumers in the mainstream economies of nations across the continents of the world, where they support local and international business prop up their profits, local and city governments provide social services, and help provide basic needs of millions of families all over the world.

Why the continued availability?

Where there is demand, there is always supply. The truth is that terrorist organizations, guerilla, and rebel groups need weapons, communication gear, mobility, literature, food and other basic daily needs to sustain their course and make their case to the world, or their immediate locality. On the other side of the divide are legitimate and shadow companies who need the business to keep their companies afloat and in the black; employees who need to provide for their families; and governments who need the tax revenues to render social services to the people.

For example, suppose ISIS needs 40 Toyota Hilux trucks, preferred for its ruggedness and longevity in rough terrains, it is not likely to walk into a Toyota dealership or plant to place an order; also, a Toyota plant or dealership somewhere in Europe, on the verge of closing and laying off staff, would appreciate an order for 40 Toyota Hilux truck.  Procuring the 40 trucks will mean ISIS employing 40 drivers and service/repair personnel who will be able to sustain their families with whatever meager salaries the terror group pays them. Also, keeping the plant or dealership operational, and retaining the employees, will ensure a continued flow of tax revenues to the host community, and provision of livelihood for the families of these employees; in addition, parts manufacturers and distributors will have a reason to stay in business a little longer. Obviously, Toyota cannot sell directly to ISIS or any other terror group for that matter. So, how does one meet the needs of both the terror group and the automobile Plant/dealership? Through a network of middlemen, and legitimate firms as fronts scattered all over the world.

The same scenario applies to purchases of high caliber weaponry, armored personnel carriers, communication equipment, military uniforms, and maintaining an effective social media link through which they espouse their beliefs and doctrine geared towards recruiting members. After the fall of the former Soviet Union, especially because of the uncoordinated way the Union disintegrated, many of the Eastern European countries like Poland, Estonia, Lithuania, and Latvia, ended up with huge arsenal of military-grade weapons which ended up in the possession of rouge senior army officials who retired along with their cache; the same scenario played out in Romania, then East Germany, Georgia, and even within Russia itself. Eventually, the region was awash with weapons, leading to a huge unregulated private arms business. Gradually, state-sanctioned weapons manufacturers tapped into this market to dispose of their excess production, and oil the service and repairs segment of this business enterprise.

All of these mean job creation and re-training opportunities in different fields and professions for the large population of jobless youths in the countries of the former Soviet Union. Weapons repairs, cleaning, logistics, agency and middle men services, couriers, tailors and milliners, etc., all of which provide needed income for breadwinners to cater for their families, pay college tuitions, or smugglers for a passage to Western Europe. With strong demands from rebels and guerilla groups in Africa, Asia, and Central America, and terror organizations in the Middle East, a permanent stream of revenue flow to arms and related services dealers, and these revenues find their ways back to legitimate weapons manufacturing corporations in one way or the other. Thereby, adding to their profits and, by extension, to government coffers as tax revenues, just like those of the truck dealers and manufacturers.

Economic & Social Benefits

Terrorism provides opportunities to governments and companies for research and development in weapons technology like unmanned drones, stealth weapons, bunker busters, and image sensors; it provides opportunity for construction and reconstruction of infrastructure, like roads, bridges, air and sea ports, and railroads with modern and better construction technology and materials. It creates opportunities for provision of social services like, clean water, healthcare facilities, and electricity in rural communities destroyed by civil wars. For example, the destruction of most cities and villages in Syria and Iraq by both ISIS and allied forces has created opportunities for a construction boom in the region; the same applies in the Gaza strip and parts of Yemen, Libya and, most recently, Northeastern Nigeria.

All of these reconstruction projects, mostly funded by donors who benefit through dividing up the contracts among their countries’ companies, provide job opportunities not only for the immediate beneficiaries (Syria, Iraq, etc.) but also for the labor force in the donor countries. For example, suppose the US makes a $500m pledge or donation towards reconstructing a major street, hospital, university, or airport in Syria, the contract for most of the materials and technical expertise required for the project will be cornered by US companies. This will create jobs and generate tax revenues both in the US and Syria. The same arrangement applies to any and every country where such situations exist – like Iraq, Yemen, Afghanistan, and African countries in crisis.

Crisis situations also benefit non-governmental agencies, because they provide opportunities for these NGOs to generate revenue while providing needed services in affected communities. Typical example is the role of the Red Cross in Haiti which has come under fire recently. The Red Cross raised over $500m from donations to help with the 2010 Haiti earthquake; an estimated 35% of that amount is expected to go to its coffers for administrative purposes, while the remaining 65% will be used to rebuild certain institutions and infrastructure; this will create both permanent and temporary jobs for many Haitians, and provide vocational training for thousands more. Oxfam, Doctors Without Borders, World Vision, International Crisis Group, and many more, all use the opportunity provided by displacements (internal and external) to raise funds to stay in business.

In the African countries of the Congo, Darfur, Southern Sudan, Northeast Nigeria and, most recently, Burundi and Central African Republic where tribal conflicts and struggle for political dominance thrive, young educated but unemployed youths find income-earning opportunities within the existing crisis. A guide who leads the LRA poaching team to the wildlife reserves for rhino horns; the couriers who help transport the said horns to drop-off points for cleaning/processing, and the processors are all in it for the money. The teenagers who work the diamond and copper mines in the Congo; the rouge Nigerian army officers who sell weapons to Boko Haram; the lookouts who signal to the Janjaweed when the UN storage depots are most vulnerable for raids, and the women who provide accessory services, like cooking, cleaning, and localized counter-intelligence at the guerilla camps all have mouths to feed and roofs to maintain over their families’ heads.

Some other unintended economic benefits of social strife, which creates improved economic opportunities, are insecurity, disease, and death. The consequent danger of living or doing business in a terrorist or insecure environment, like Syria, Iraq, Gaza, Libya, Somalia, Nigeria, and Congo DR, requires the services of private security personnel. One tends to notice an increase in firms that engage in such services, either by wholly-indigenous efforts or establishment of branches in these areas by internationally recognized firms. South African private mercenaries, Blackwater, ACADEMI, Northridge Services Group, ICTS International, Prosegur, Knight Security, Rockwall Integrated, and Triple Canopy, all provide different levels of security services to companies, diplomats, government officials, politicians, and private individuals in crisis-torn regions of the world. While some of them may choose to import guards from their home base, others elect to recruit from within the host communities and nations, depending on the level of need and training required for the job. These recruits expect to be kitted and fitted out by their employers, thereby extending earning opportunities to local textile and security uniform providers, local linguists, janitorial service providers, and drycleaners.

Along with security and other forms of business already mentioned, one could add undertaker services. In every crisis situation, lives must be lost and the dead must be buried. These losses mean business opportunities for coffin makers, pastors for hire, professional mourners, burial planners, grave diggers, and other providers of services needed for proper burials. Where acts of genocide appear to have been carried out, like in Rwanda and, most recently, Central African Republic, investigations by the international organizations like the UNHCR, the International Criminal Court, African Union, EU, and/or Amnesty International also provide opportunities for revenue inflow into the affected communities, especially into the coffers of guides, interpreters, casual laborers, and the ever-hovering call girls and prostitutes who expect an increase in service requests from the visiting investigative teams, and poor girls who seize on the opportunity of foreign presence to get themselves pregnant as a means improving their living conditions. This practice was very evident during the Vietnamese and Korean wars which produced a large number of children with American soldiers as fathers. These children, by US law, automatically became US citizens; therefore guaranteeing them a better life than their mothers’

As illegal and condemnable as all these activities may be, they support a large number of economies in communities, states and nations all over the world; therefore, making it impossible for the global community to rid itself of terrorist activities, civil power struggles, and tribal and religious conflicts. Without these conflicts and the underground economy which it supports, the number of migrants across continents in search of much better opportunity than what obtains at home would be twice what it is today.

Economic Impact on Cities and Nations.

So far, the discussion has centered on the activities of terror and rebel groups, and the indirect benefits to international business communities, companies and their employees, and host communities. Next, we take a look at the direct economic and social impact of war against terrorism on nations, states, and cities.

Incidents of terror attacks in cities like what happened in Boston in April 15 of 2013 when the Tsarnaev brothers exploded home-made bombs along the marathon route, results in beefing up of security, engaging in manhunts for the perpetrators, and restrictions on movement which affects business activities. Extra and extended security provisions mean overtime for law enforcement agencies, and the compensation for the overtime has to be sourced from somewhere, meaning a reallocation of resources from other social service like libraries, parks, road repairs, and after-school activities usually subsidized by the state and governments. Though many cities make budget allocations for emergency security incidents, none ever knows what amount would be enough, or what nature the security breach will take. So, no amount of allocation in “peace” time is always adequate for “war” time.

Apart from the extra expenses needed for extra securities in communities like Aurora after the theater shootings, the Newtown school massacre of 2012, Oklahoma City bombing of 1995, the London terror attacks in 2005, the Paris terror attack in January 2015, and the 2013 Westgate mall attack in Nairobi, the drawn-out legal battles to bring the perpetrators to justice take their own economic tolls on city budgets; because almost all the terrorists’ defense tab is usually picked up by the government both in time and resources – including financial. For example, the legal cases for the Aurora theater shooter and the Boston Marathon bomber, which recently ended – barring any appeals –, have both dragged on for over two years, respectively. All kinds of forensic, investigative, and terrorist experts have to be compensated for their services. Heavy, and inconveniencing, daily security presence around the courts hamper business activities, sometimes leading to closure of business facilities around the premises until the trials are overs; this result in loss of tax revenues to the city. A good example is the heavy restriction of activities in New York during the trial of some of the 9/11 terrorists. The government, allegedly, spent about $10m to construct a security pavilion around the federal court house; money that could have been used for improving some of the dilapidated public schools in and around the city, or to hire more teachers and police officers.

In all terror-related activities, there is an economic windfall both for individuals, cities, and states, just as there are security risks. For law enforcement agents, overtime pay; for defense attorneys, revenues for the firm and huge annual bonuses for the attorney; for cities and states, refunds for security expenses, and increased  future security allocations from state and federal governments; and for roadside vendors, increased sales for the duration of these trials. All of these costs and revenues trickle down, in one way or another, through individuals, businesses, families, district, county, city and national activities, to impact the economies of the communities directly affected by the strife. For example, the increased presence of law enforcement agents in Ferguson, Missouri, for the duration of the Michael Brown riots, boosted the local economy through increased spending by the city and state governments.

In conclusion, while pointing out or enumeration certain economic benefits of terrorism and civil strife all over the world, it is instructive to reiterate that such benefits do not in any way accord legitimacy to such violent activities. It is equally important to emphasize that, regardless of the magnitude of such benefits, the collective suffering inflicted on the affected communities, states, and nations are immeasurable, and have much longer lasting effects on society. One does not need to go far to witness the devastating effects of these acts of terror and civil wars; Libya, Iraq, Afghanistan, Somalia and parts of Kenya, Syria, the Gaza Strip, Northeastern Nigeria Congo DR, and Yemen all provide a clear example.

However, we must acknowledge that there is always an economic structure that emerges from, and is fed by, terror activities, civil wars, and riots; those who directly and/or indirectly benefit from the existence of such environment will continue to create and encourage more of such situations around the world.