May 22, 2013
Truthdig Radio: Helen Caldicott, Mr. Fish on Ice
Posted on Mar 31, 2011
Peter Scheer: You said one-third of the terror economy is generated by legitimate businesses. What sorts of businesses are those?
Loretta Napoleoni: Well, before 9/11, one of the most important businesses was actually the investment portfolios of individuals. We are talking about general financial investments, for example, of individuals, who are sponsors of terrorist activity. Now, we’re talking primarily of the so-called Islamic terrorism. So people that were funding Osama bin Laden, training camps, but also people that were funding the mujahedeen, or people that were funding individuals fighting in Bosnia. So that was the primary source of revenue. Now, today, the situation is very different because of course, you know, today we have a different type of terrorism. So we do not have an international network anymore in place, as was al-Qaida before 9/11. But we have sort of homegrown groups, which self-fund themselves, and the primary source of revenue for these groups is actually their salary, or money that they receive from friends. So the best example of this is the July 7 bombers in London, which raised the money entirely, entirely through their own salaries and contributions from friends.
Josh Scheer: And how do you track all this money? I mean, this is something that confounds reporters, police, FBI, everybody. How do you track all of this information?
Loretta Napoleoni: Well, it’s a lot of work done on this field. Unfortunately, it’s very hard to stitch it all together. So the way I track the money is basically by stitching different pieces together, and checking and double-checking that we’re not calculating the same money twice. But there is a lot of information out there. In fact, to a certain extent, there is too much information out there.
Loretta Napoleoni: It has grown, actually. It has grown because the terrorist activity today is actually more spread, I would say, internationally. So before 9/11, you know, we actually had terrorist activities in Europe, for example, which was related to the IRA and ETA, but they were really at the very tail end of their life. The IRA was negotiating a cease-fire, and ETA was basically almost being defeated by the Spaniards. In the Middle East, of course, there was the problem with Palestine and Israel. But then you know, the rest of Asia, virtually there was no terrorism. And look at the picture today. I mean, you can see Iraq, you can see Afghanistan. So, I mean, there has been…Indonesia…so there has been, really, the birth of new areas where terrorists are particularly a stronger presence. Somalia, the Horn of Africa…even the business of the pirates. I mean, the piracy in the Gulf of Aden is very much related to terrorist activity, because you know, these armed organizations are in business with criminal organizations, and together they do joint ventures. So I would say that 9/11, and the response to 9/11, was what caused this booming industry of terrorism.
Peter Scheer: So do you have a definition for… parameters of how you describe terrorism?
Loretta Napoleoni: There is, unfortunately—and that’s a very, very good question—because unfortunately we do not have a definition which is accepted in the world; there are thousands and thousands of definitions of terrorism. The one I use is actually, it’s a crime with war aims. So you actually do commit a crime, which can be hard; you know, doing business with criminal activity, to fund terrorism, or just to commit a crime such as, for example, an attack that produces deaths among civilians, or even among the police or even soldiers, as is the case of Afghanistan. But the aim of this crime is not the traditional aim of criminal activity, which is, of course, making money. The aim is political. So the aim is, as in the case of a war, to change an existing regime or to fight an existing regime.
Josh Scheer: Loretta, this is Josh again. I want to talk about the Internet, because you talk about it like it’s a double-edged sword, and you call it a safe haven for rogue groups. And, one, let’s start with—what are rogue groups? So we can explain…and that’s from your book “Rogue Economics,” which is another one of your many books. And then what is, why is it such a safe haven?
Loretta Napoleoni: Well, the Internet is a safe haven because it’s not regulated. So…and also, it’s very…it’s impossible to regulate it. I mean, how do you patrol the Internet? I mean, how do you check…I know that the Chinese have done quite a lot of work in order to contain information on the Internet, but all this work, for example, has been done only in Chinese. So even at the height of the Google confrontation with the Chinese government, you could have gone on Google in English and found everything you wanted about Tiananmen or any of these other topics that the Chinese government actually doesn’t want you to know about. So I think that the Internet is a place where you can have rogue entrepreneurs moving freely and reaching people that, in the past, of course, they could not have reached. Now, I’m thinking pornography, pedophiles, all of this is a good example. But, you know, there are outside examples; for example, gambling. I mean, you can actually…an online gambling outlet can reach people everywhere. So in the U.S., for example, gambling is allowed only in certain states, but through the Internet you can gamble from your sitting room. So this is what I mean about being the ideal environment for these rogue entrepreneurs.
Peter Scheer: We’re speaking with Loretta Napoleoni, who is an economist and best-selling author who has calculated the size of the terror economy.
Josh Scheer: I want to jump in again, because we just talked about the size of the terror economy, and we haven’t talked about that yet. And you put the number at four trillion, right? And you’ve said we can’t afford this, so…right?
Loretta Napoleoni: Yeah. Yeah, at one point five trillion was the number. And no, yes, of course we can’t afford it. But you know, this is part of our economy. I mean, the truth is that these are moneys that move within our economy. Sometimes we do business with these individuals without knowing. People that buy drugs, for example; in reality, they’re not only doing business with the criminals; they’re also doing business with the terrorists. And the same thing is for counterfeit products; sometimes we buy something, you know, a fake handbag. And you don’t know that in the production of this fake handbag, or in the smuggling of this fake handbag, there are armed organizations involved. So you end up doing business with the terrorists. So that’s…this is what is, I think, scary about the globalized economy, is that you cannot really track the origins of most of the goods or services that you’re buying.
Peter Scheer: Speaking of unintended consequences, can you tell us how the Patriot Act and other reactions to terrorism have affected the black market economy?
Loretta Napoleoni: Yes. The Patriot Act, which was introduced in October of 2001, was a sort of anti-money-laundering legislation; I mean, I’m talking about the financial section of the Patriot Act. So what happened was that, all of a sudden, the money-laundering activities which before were taking place in the U.S. and in U.S. dollars, migrated to Europe. And that transformed the euro into the most popular currency used by criminal organizations and also terrorist organizations. Now, the consequences on the U.S. dollar I think is what is mostly interesting, and that also gives you an idea of the interdependency between our world and their world. So the U.S. dollar started falling, vis-à-vis the euro, right after the introduction of the Patriot Act. Now, this is because a massive amount of funds migrated from the U.S. to Europe, or to out of this nation. So one reason, of course, was the money laundering, anti-money-laundering legislation. Another reason was the fact that the Patriot Act allowed the U.S. authorities to monitor dollar transactions everywhere in the world. So a lot of legitimate businesses decided to switch from the dollar to the euro. Because really, nobody wants the U.S. monetary authorities to monitor all the transactions taking place. And the same thing is for international banks; the Patriot Act was very, very ill-received by international banks. Of course they don’t want the U.S. monetary authorities to see what they’re doing for their clients. So this produced a massive outflow from the dollar…which prompted the fall of the U.S. dollar. And the dollar, in reality, hasn’t recovered ever since.
Peter Scheer: So, speaking of this interrelatedness, how has the terror economy been affected by the global meltdown, and vice-versa?
Loretta Napoleoni: Well, really, the terror economy has not been affected by the global meltdown too…because things have changed. So if the global meltdown had taken place in 2001, yes, I think the terror economy would have suffered because a large section of this economy was represented by sponsors. And these sponsors, of course, had portfolios, and the portfolios were invested in the West. But if you see what’s happened after the Patriot Act, so after 9/11, a lot of money of Muslim investors—some of which, of course, were sponsors of Osama bin Laden and other groups—moved away from the U.S. We’re talking about an outflow of about $900 billion taking place in the six months following 9/11. And this money went, mostly, to Islamic banks or Islamic financial institutions in Malaysia, in Dubai. So they basically moved out of the international Western system, where we can monitor what’s happened, and they entered another system, which of course was greatly boosted by this massive outflow from the dollar and inflow into their currencies. So I would say that in 2008, when it took place, because it didn’t have any impact on the Islamic finance too…because of course, Islamic finance was not involved in the subprime bubble. Because they can’t invest in any business that has the interest rate, because the interest rate is considered to be prohibited. So it was totally shielded by the meltdown. So I would say that from this point of view, the impact was minimal.
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