Poverty and Terror

Glib assertions that poverty breeds terrorism have been tossed around of late. Of course, no simple equation between the two can be drawn. Yet, such statements do contain grains of truth. Poverty may not cause Islamic terrorism, but Islamic terrorists manipulate poverty to their advantage. Thus, any viable strategy to prevent terrorism must address core issues of economic development.

The first issue to be recognized is that development took a wrong turn about 30 years ago, when OPEC imposed two severe oil-shocks on the global economy. Developed countries shifted from promoting growth to fighting inflation. World growth slowed dramatically (except in East Asia) and the growth of world trade was halved.

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OPEC countries grew rich, while the rest of the developing world struggled with unsustainable trade deficits and indebtedness. Most experienced negative growth. During the 1980s and 1990s, half of the IMF's member developing countries endured severe financial crises and were forced to scale back social expenditures so that poverty, inequality and the potential for civil strife increased substantially.

In the wake of this, development policies changed. America, the IMF, and the World Bank began to emphasize globalization by stressing trade liberalization, restrictive macro-economic policies and the institutional strengthening of markets - the policy package known as ``The Washington Consensus.''

International assistance was recast: development loans became ``structural adjustment loans,'' intended to help heavily indebted developing countries avoid default and made conditional upon countries undertaking reforms favored by the Washington Consensus. Aid fatigue set in and, as the Cold War diminished, official aid flows declined as it was no longer necessary to bribe countries to keep them out of the Soviet camp.

For the average developing country the results were stagnation, widened economic inequalities, climbing unemployment, and increased numbers of poor people. Economic modernization and poverty reduction suffered. In Africa, per capita GNP dropped at an average rate of .7% annually between 1970 and 1995. The median rate of growth in developing-country per capita GNP between 1980 and 1998 was 0.0% - no ringing endorsement of Washington Consensus policies. The 1980s became a lost decade for development.

Of course, some bright spots emerged: ``high-development-level'' developing countries - Taiwan, Korea and most of Latin America - became democracies. Between 1970 and 1990, the share of trade in GNP increased and the share of developing country manufactured exports rose, except in oil-countries. Chile, China, India and Vietnam increased their growth rates substantially through labor-intensive export-led growth and market-oriented reforms, albeit at the cost of burgeoning inequality.

But poverty was not the only wound inflicted in these years. Escalating oil-prices created a super-rich feudal aristocracy in the Gulf States. The gaps between the cosmopolitan oil-sheiks and the disaffected, disenfranchised, and nearly hopeless remainder of the population widened.

Economic modernization was practically non-existent. Significant increases in education coupled with little modern-job creation and rapid rural-urban migration added to social and political unrest. The oil-regimes were oppressive, quelled dissent through torture, and were venal and corrupt. Nonetheless, because of oil, they retained US support. Small wonder some Arab youths became radicalized.

A small band of fiery Imams seized upon this youthful discontent. Recalling the achievements of Islamic culture during the Middle Ages, they offered a (self-serving) nostrum for lifting Moslems out of dependence, degradation and misery: the reestablishment of theocratic Islamic States that would be more pure and just than secular ones. Largely unnoticed by the West, they created a fanatical, totalitarian, movement that would stop at nothing, including self-immolation, to achieve its goals.

Who were their enemies? Modernizing secular leaders (Nasser and Sadat in Egypt; the Shah in Iran); intellectuals who preached of a just secular order and exposed the excesses of the fundamentalist movement (Salman Rushdie); the small moderate Moslem middle class; the feudal, secular elites; infidels (moderate Moslems, Christians and Jews); and foreign powers that supported their enemies. For several decades, their activities were largely limited to their own countries. When Arab governments clamped down, they exported violence westward.

For now, the terrorist war is the policy response to the spread of Islamic terrorism. In the long run, something beyond a military response is needed. I believe that the West can learn a great deal about what to do by studying the policies pursued in the world's only two mid-development Moslem states, Tunisia and Indonesia, because each successfully avoided becoming prey to Islamic fundamentalism. Tunisia's achievement is noteworthy given its proximity to violence-prone Algeria.

Both countries combined substantial increases in secular education with rapid job creation in manufacturing jobs; stressed rural development and labor-intensive exports; and pursued rapid, egalitarian development.

Egalitarian development of this sort is the only viable answer to the problems of the Moslem world's mal-development. However, it provides no short-term answer to terrorism for several reasons: it does not supply an ideology compelling enough to compete with fundamentalism, which has captured at least two generations in the Moslem world. Once radicalized, the genie of violence can rarely be put back into his bottle by civilized means.

Violence arises when there is hope rather than when things are hopeless. Note that the terrorist leaders are not the poor and uneducated, and that the usual suspects among countries that sponsor terrorism are not the poorest Arab states. Indeed, 1999, the year before the current Palestinian Intifada erupted, was a good year economically for the West Bank and Gaza.

Sadly, the politics of crackdown appears to be the only immediate answer to terrorist violence. But if peace, once achieved, is to be maintained, genuine development that is more balanced among different aspects of development, which delivers more benefits to the poor and promotes economic convergence among countries, must become the West's goal. While such policies might take decades to lessen Islamic terrorism, they may prevent radicalization in other developing countries.