Combating Terrorism: A Socio-Economic Strategy
The increased risks and uncertainties of terrorism
reduce consumer willingness to spend, particularly on discretionary
items and major consumer durables, thereby reducing investment in
consumer goods industries and depressing
growth. The travel, tourism, accommodation, restaurant, postal services,
and insurance industries are particularly susceptible. Regions and
economies where these industries are concentrated suffer most, both
in falling output and employment, but the threat of terrorism reduces
overall investment and retards economic growth across the board.
While uncontained terrorism is costly for all
economies, it could impose a disproportionate cost in trade and
income growth in Asia-Pacific countries. Most developing economies
in the region depend heavily on trade flows, particularly with the
United States. Many of these economies rely on foreign direct investment
inflows. Insurance companies may impose higher premiums on cargoes
and vessels traveling to and from these countries due to the inadequacy
of local security. For instance, Lloyd's of London recently increased
its premiums on ships traveling through the Malacca Strait. Currency
exchange rate volatility can devastate the whole region's economy.
A case in point is the Asian financial crisis in 1997, initiated
by a sudden Thai bhatt depreciation.
New counterterrorism measures require one-time
investments, which lead to short- to mid-term increases in the costs
of doing business. These costs should be viewed as an investment
that will pay dividends through reduced risk premiums and increased
trade efficiency. In addition to the advantages of reducing exposure
to terrorism, technological advances that enhance security are likely
to boost the efficiency of cargo handling and people movement, lowering
trade costs and making trade flows more efficient. The benefit of
preventing reduced trade flows and encouraging investment is continued
regional and global economic growth.
Expansion and prosperity would enable nations
and organizations to fund economic development policies and activities,
which would create opportunities and expand a new middle class in
communities that have traditionally supported terrorist groups.
As the population recognizes the economic benefits of peace, they
hopefully will work to inhibit local support for terrorist activities.
Sound economic development policies can be one element to fulfill
the 9/11 Commission's recommendations of identifying potential terrorist
sanctuaries and preventing them from becoming operational spaces
for the actors of terror.1
A comprehensive U.S. counterterrorism strategy
should include economic policies that encourage development, more
open societies, and opportunities for better living. Igniting and
sustaining economic growth in the poorest areas require creativity
and cooperation. Regional stakeholder nations and organizations
should pool resources and capabilities to address this challenge.
Cooperation among cross-disciplinary organizations such as the United
Nations Development Program, governmental aid agencies and militaries,
nongovernmental organizations (NGOs), and private businesses is
vital. Although economic development can inhibit terrorism, it alone
cannot eliminate the problem.
The Bottom of the Pyramid
In the words of General Charles F. Wald, USAF,
Deputy Commander, U.S. European Command:
The tools of businesses are often better
suited to diminishing the causes of terrorism and influencing
the democratization of key regions by providing investment and
employment that lead to long-term improvement in quality of life.2
"Eradicating poverty through profits"
involves finding a way to alleviate poverty for those at the bottom
of the economic pyramid through collaboration among the poor themselves,
civil organizations, governments, and private firms.3
This approach is widely known as the bottom of the pyramid (BOP)
concept. The successfully built BOP markets are a sustainable way
to improve economic conditions that in turn will alleviate poverty.
As C.K. Prahalad states:
Historically, governments, aid agencies,
non-governmental organizations, large firms, and the organized
business sector all seem to have reached an implicit agreement:
Market-based solutions cannot lead to poverty reduction and economic
development. The dominant logic of each group is different, but
the conclusions are similar.4
The private sector's increased participation
in a BOP-oriented market is dismantling this old paradigm. Such
U.S. business institutions as the University of Michigan Ross School
of Business, University of North Carolina Kenan-Flagler Business
School, and Cornell University Johnson School of Management are
actively monitoring and tracking case studies associated with sustainable
enterprises servicing and operating at the bottom of the economic
pyramid. These schools are extracting and developing lessons learned,
best practices, and business principles that make these enterprises
successful and teaching this thinking to a new generation of undergraduate
and graduate students.
What are the incentives for the private sector
and large firms to service the BOP? According to Prahalad, "The
BOP market potential is huge: 4 to 5 billion (80 percent of humanity)
underserved people and an economy of more than $13 trillion PPP
[purchasing power parity]."5
Studies show that traditional products, services,
and management processes do not work. The firms must be innovative
to succeed in this sector. For multinational corporations, BOP operations
can become a source of innovations for developed markets as well.
In today's increasingly competitive business environment, these
corporations must continuously maintain their competitive advantage.
Therefore, experimenting in BOP markets is becoming a compulsory
rather than a philanthropic activity. Companies beginning to operate
successfully in the BOP include:6
• Proctor & Gamble: Nutristar, Nutridelight
(nutritional drink), Pur (water purifier)
• Unilever: Hindustan Lever (detergent
for the poor in India and Brazil), Annapurna (iodized salt for the
• Shell: affordable solar power in India
n ABN-AMRO: Banco Real (microcredit in Brazil)
• Hewlett-Packard: solar powered digital
cameras in India and community information systems
• Coca Cola: program in South Africa
to help entrepreneurs enter the supply chain and profit from new
• Suez: "Water for All" program
to periurban areas in Brazil.
Perceptions of incompatibility between NGOs
and for-profit companies are disappearing. Recognition that all
mankind depends on the same limited resource pool, and that most
share the same hopes for a better future, is causing the gradual
breakdown of the cultural barriers that prevented unlike organizations
from working together in the past.
Few are aware that the U.S. military conducts
a variety of humanitarian assistance and civic action projects around
the globe. In fiscal year 2005, U.S. Pacific Command (USPACOM) alone
budgeted $5.5 million in humanitarian and civic funding. Projects
include building schools, hospitals, roads, and community centers;
digging wells and irrigation ditches; conducting water sanitation
projects; providing rudimentary health care; and training local
medical personnel. The military also furnishes disaster preparedness
mitigation assessments for many countries throughout the Asia-Pacific
region and relief efforts in areas prone to natural disaster such
as Bangladesh-the most recent being for the 2004 tsunami. The rapid
tsunami response was possible in part because an Army civil affairs
team was in the Banda Aceh area conducting an assessment for water
During the tsunami relief effort, the military
worked hand in hand with the Office of Foreign Disaster Assistance,
an arm of the U.S. Agency for International Development (USAID),
the lead agency for helping countries to recover from disaster,
fight poverty, and initiate democratic reform. The agency supports
long-term and equitable economic growth and advances foreign policy
objectives by supporting economic growth, agriculture and trade,
health, democracy, conflict prevention, and humanitarian assistance.
The combined effort during the tsunami relief demonstrated the significant
benefits derived from interagency coordination, combination of resources,
and applying differing core competencies toward a common problem.
U.S. Pacific Command sought to create a formal
partnership with USAID to synchronize humanitarian and civic activities
at a strategic level in January 2004. As the command began to realize
the importance of environmental aspects of the war on terror, it
saw routine activities as a partial solution (that is, providing
some basic needs for the local populace). Moreover, command efforts
were isolated, one-time occurrences in these communities. For example,
the command constructed a school in a remote village, but it remained
empty because the villagers could not afford supplies, teachers,
or building maintenance. Therefore, the local populace failed to
benefit. USPACOM approached USAID, with its long-term vision and
expertise in building community and development programs. Admiral
William Fallon, Commander, U.S. Pacific Command, stated in a congressional
hearing on March 8, 2005, "We are working to build a relationship
with the U.S. Agency for International Development...with the intent
to coordinate our civil affairs activities with USAID programs."
On March 30, 2005, USAID announced that it
had created the Office of Military Affairs (OMA) to synchronize
with the military. Until then, the agency was ambivalent about such
coordination due to the differing organizational cultures and a
perceived ideological gulf. The dominant logic in the past was that
military activities were incompatible with USAID humanitarian efforts.
However, the creation of the OMA and Admiral Fallon's statement
point toward the loosening of the mindsets within these two organizations.
Based on the new cooperation between the Armed
Forces and USAID, the Economic Advisor's Office at USPACOM now recognizes
an opportunity to alleviate poverty and create sustainable economic
growth in areas that are vulnerable to terrorist influence. Ways
must be found to consolidate and synchronize command efforts, USAID
programs, NGO charitable contributions, and the private sector's
need for new markets to improve economic conditions at the BOP in
areas vulnerable to terrorist recruitment, such as Bangladesh, Indonesia,
and the Philippines. This will require fresh thinking by all parties.
The 9/11 Commission criticized U.S. government agencies for their
lack of imagination prior to the attacks in New York and Washington.
In the post-9/11 world, we have no choice but to think creatively
if we are to win the fight against rising terrorist threats.
The military faces significant challenges to
fostering innovative thinking. It suffers from all the obstacles
that most bureaucratic organizations confront in regard to systems,
structures, entrepreneurial thinking, policies and procedures, people,
and culture. The current organization has rigid systems, top-down
management, absence of innovation goals, long and complex approval
cycles, short-term orientation due to frequent personnel turnover,
and paralysis resulting from a risk-free culture within the ranks
Systems. Military organizations have a rigid
formal planning system with long cycles in combination with inflexible
budgeting systems. Once a plan is approved, it is difficult to change.
Budgets are set at least 2 years in advance, and redirection is
close to impossible. Funding streams and categories are based on
congressional budget allocations, so funds designated for specific
purposes cannot be redirected without congressional approval. For
example, USPACOM staff components have been struggling to change
the way humanitarian assistance funds can be utilized. It is a congressional
mandate that the moneys are only for disaster mitigation purposes.
In the Asia-Pacific region, the staff believed the funds would have
greater longterm effect if they were put toward capacity-building
Structures. Military tradition usually dictates
that those at the top make policies and those below implement them.
It is difficult for action officers to get their points across to
those at the decisionmaking level. Several layers of screening,
review, and approval must be crossed. Therefore, many ideas get
snuffed out early. As Williamson Murray stated, "Rigidity is
undoubtedly a fact of life in many military organizations-one which
has exercised a consistent and baleful influence over institutional
capacity to innovate."7
Inflexible structure combined with rigid culture
has created silos among different segments in the military. The
ability to integrate perspectives and methods across organizations
is severely limited. Common phrases include "It's out of my
lane" or "You are in my lane." Rigidly led organizations
typically shut off alternative paths that might ease the way for
Entrepreneurial Thinking. There is a general
lack of commitment to the principle of institutionalized entrepreneurship
because most senior leaders lack experience beyond the military
or government environment, which is not known for entrepreneurial
thinking. This creates leadership that is "typically cautious,
suspicious, or completely unaware of efforts to break with tradition
and capitalize on opportunity."8
Since middle- and lower-level leaders take
their cues from the top, the careful leadership style permeates
the organization, creating influencers who are well versed in the
art of survival and self-advancement, but not in taking the necessary
risks to further organizational objectives.
Policies and Procedures. Within the military,
policies and procedures are aimed at bringing order and consistency
to the everyday operational needs of the organization. The approval
cycles are long and require many managerial layers. Action officers
at USPACOM often complain that they spend much time presenting what
they plan to do and obtaining approval from various layers of management
and little time actually accomplishing goals. Therefore, initiatives
to fight a new kind of war, such as the war on terror, get bogged
down by existing policies and procedures. Short windows of opportunity
are easily missed.
People. Generally, military personnel have
a short-term perspective because most rotate every 2 to 3 years.
Not only is it costly to destabilize an organization purposefully,
but it also causes individuals to favor objectives that will show
concrete results during the time of their assignments. Accordingly,
it is difficult for the military to focus its people on such long-range
concerns as shaping the environment or confronting the underlying
causes of terrorism.
Culture. Across the U.S. government, every
agency, including the military, is acknowledging that innovation
is needed. The military clearly recognizes that the nontraditional
counterterrorism tools required to "deny sanctuary" and
"diminish underlying conditions" are nonmilitary. According
to General Richard Myers, former Chairman of the Joint Chiefs of
Staff, we must:
transform our military competencies from
joint operations to integrated operations that reflect the new
partners we must coordinate with to defeat terrorists, such as
other U.S. agencies, allied militaries and governments, nongovernmental
organizations, and private industry.9
General Wald recognizes that a nontraditional
military solution to the root causes of terrorism, while "outside
the military's lane," is necessary to fight the war on terror.10
Yet the military is not willing to use it, reflecting a mindset
and culture that prevent thinking outside the box.
Other examples could be given under each of
these categories of obstacles. The bottom line is that the Armed
Forces have an uphill battle to initiate the search for ways for
a nontraditional/nonmilitary partnership to address the environmental
and other conditions that are the root causes of terrorism.
Using the BOP Concept
Until now, the U.S. government has not tapped
into the power and capabilities of the private sector in the war
on terror. Indeed, most businesses are unlikely to engage in any
activities unconnected with profits. Yet a handful of companies
such as FedEx, Western Union, America Online, and Wal-Mart have
been voluntarily assisting Federal agencies since the 9/11 attacks.
For example, FedEx has mobilized its 250,000 employees to watch
for threats, developed an internal computer system to report suspicious
activity directly to the Department of Homeland Security, installed
radiation detectors to sniff for dirty bombs at overseas facilities,
and opened its vast international shipping database to the U.S.
Customs Service. If three more such companies participated, a million
more people would be actively looking for threats.
Aguas de Amazonas, a subsidiary of Suez Environnement,
a world leader in water-related services, teamed up with French
and Brazilian NGOs for a pilot project called Water for All to demonstrate
that the company can serve poor communities and grow its customer
base at the same time. Raising the community's awareness of the
need for safe water was the key social dimension of the project.
The NGOs' experience with the community and understanding of the
local social structure and culture proved essential in achieving
this objective. The NGOs showed that they could bring value to the
company as facilitators in the process of adapting water services
to the specific characteristics of low-income communities.11
The company's goal was to provide water and
sanitation services to the 1.5 million inhabitants of the remote
city of Manaus, Brazil. That was considered an ambitious goal, considering
that 60 percent of the people live in "informal settlement"
on an income of less than $1 per day. Most lacked access to clean
water, while some used treated water from pirated connections. Leveraging
the core competencies of partner NGOs, the company worked with the
targeted communities, assessing the needs as well as the ability
and willingness of the populace to pay for services. Considerable
effort was made to help people understand the value of treated water
and to appreciate that paying for legal connections would ensure
a reliable supply at lower prices than they paid to independent
The success of the project largely depended
on the genuine mobilization of the inhabitants in favor of the initiative
and the development of effective community management of water services.
The results were surprisingly good both for the community and the
company: 74 percent of the targeted 5,000 households were connected
to a water network. There was an 80 percent bill collection rate,
compared to 54 percent for the rest of Manaus.
The U.S. military could easily fit into a similar
project. Civil affairs units are conducting well construction and
water sanitation projects in remote villages in Indonesia, the Philippines,
and Bangladesh. With innovative thinking and imagination, the partnership
among the private sector, NGOs, USAID, and the military could work
together in targeted areas that are vulnerable to terrorist recruiting
to improve living conditions, provide foundations for a sustainable
economic stability and growth, and create hope and opportunities.
Such partnership with businesses can provide continuity to many
aid and humanitarian projects and hinder terrorist recruiting over
the long term.
The above case studies show that teaming up
with unlikely partners such as the private sector can be an effective
component of the war on terror strategy.
The Way Ahead
The military must mobilize to seize opportunities
in the private sector. Companies need not take drastic and proactive
actions like the FedEx exercise; they can simply do what they do
best-create products, services, and jobs. Leveraging the emerging
BOP concepts and the multinational corporations' need to expand
their markets could inspire the business sector to operate in areas
where economic development is desperately needed.
Government agencies, including the military,
should participate in business association meetings and conferences.
Civil affairs and USAID personnel must be educated regarding these
emerging concepts and trends in the business sector. Conversely,
the military should invite business leaders and decisionmakers to
counterterrorism conferences and seminars.
For instance, USPACOM cosponsored a conference
with the U.S. Army War College and the National Intelligence Council
in June 2005 to explore ways for Federal agencies and the private
sector to address the underlying causes of terrorism. Stuart Hart,
an expert on the BOP, introduced the concept and explained how it
can help address the underlying conditions of terrorism by providing
sustainable, grassroots-level economic development.
U.S. Pacific Command plans to continue exploring
this concept in counterterrorism conferences and other forums. The
command will invite business leaders to spawn new thinking throughout
the military and among decisionmakers about the connection between
the war on terror and the private sector. The private sector must
understand that the U.S. government and the international community
need their business expertise in creating products, services, and
jobs for those at the bottom of the economic pyramid.
As businesses become more aware of how their
efforts at operating successfully in the BOP arena could contribute
to fighting terror, we will be able to mobilize this untapped opportunity.
The business sector can provide grassroots-level, sustainable microeconomic
development and create a needed force multiplier
1. The 9/11 Commission Report: Final Report of the
National Commission on Terrorist Attacks Upon the United States
(New York: W.W. Norton, 2004), 367.
2. Charles F. Wald, "U.S. European Command
and Transformation," Joint Force Quarterly 37 (2d Quarter 2005),
3. C.K. Prahalad, The Fortune at the Bottom
of the Pyramid: Eradicating Poverty through Profits (Philadelphia:
Wharton School Publishing, 2005), 4.
4. Ibid, 9.
5. Ibid., 21, 61.
6. Stuart L. Hart, "Addressing the Underlying
Conditions that Foster Terrorism: Lifting the Base of the Pyramid"
(Carlisle Barracks, PA: U.S. Army War College, June 9, 2005).
7. Williamson R. Murray, ed., Military Innovation
in the Interwar Period (Cambridge: Cambridge University Press, 1996),
8. Michael H. Morris and Donald F. Kuratko,
Corporate Entrepreneurship: Entrepreneurial Development within Organizations
(Mason, OH: SouthWestern, 2002), 175.
9. Richard B. Myers, "A Word from the
Chairman," Joint Force Quarterly 37 (2d Quarter 2005), 5.
10. Wald, 26.
11. "Suez-Aguas de Amazonas Water
for All in Brazil," Case Study, World Business Council for
Sustainable Development, available at <www.wbcsd.org/web/publications/case/aguas.pdf>.
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