May 20, 2002

What Can an Economist Say About 911? McKenna Lecture at Claremont-McKenna College, April 30, 2002

What--if anything--does a professional economist have to say about September 11, 2001? The terror-attack on the World Trade Center, its destruction, and the loss of life in the atrocity are the domain of political scientists, military strategists, students of religious fundamentalisms, and of researchers into psychological pathology. What does an economist--this economist--have to add?

I think that an economist does have something to add. I do not necessarily think that a professional economist's point of view is the most important point of view, or even an especially important point of view. But it does look at September 11 and what came before and after from a different perspective. And there is value in looking even at something very well known from a different perspective, and seeing what comes out.

First, however, I want to say a word about what the danger that threatened us on September 11, 2001, and continues to threaten us today, is. The big danger is not terrorism defined as the acts of a few crazed madmen armed with dangerous explosives or other weapons. The big danger is made up of nation-state governments that have or will come to power, state governments backed by wide (if shallow) popular support, state governments that believe that Americans--and/or Canadians, Britons, Frenchmen, Germans, Bosnians, Jews, capitalists, Indian Hindus, Indian Muslims, et cetera--are their enemies, and that many of their enemies--young and old, rich and poor, men, women and children--must die. Terrorists come from many backgrounds and are motivated by many causes. They become a danger only when they are the tip of a much larger spear.

In the course of the twentieth century, we have seen many governments and the people of many nations decide that others are their enemies, and must die. Think of the French preparing for war against Germany to recover the provinces of Alsace and Lorraine back before World War I. Think of the tremendous enthusiasm with which Germans volunteered for war when World War I broke out. Think of Nazi Germany. Think of Stalin's Russia, Mao's China, and Pol Pot's Cambodia--and remember that those four genocidal governments do not exhaust the twentieth-century list, and that they were even more dangerous to their own subjects than to outsiders.

Now let me move on to the way that those of us who served in the Clinton administration thought of these threats to world peace in the 1990s, and to how the grand strategy of the Clinton administration was tuned to deal with them. After that, I will discuss how our image of the world turned out to be grossly inadequate come September 11, 2001. And then I will discuss what our grand strategy should be in the aftermath of 911--for God alone knows what our current grand strategy in fact is.

Begin with the fact that the grand march toward political democracy and economic prosperity is not at all assured. We have a limited competence in managing economic growth. Times of economic distress are times of political danger for all countries. And the process of industrialization--the move from farmwork to factory and office work, from the country to the city, from a time when your life is very much like your grandparents' was to a time when each generation's experiences really are new--is bound to create considerable economic distress no matter how good its management, and can create immense distress when things go wrong, as they did back in the Great Depression.

Such times of economic distress in an economy and society caught halfway between agriculture and industry, between tradition and modernity, are times when people are prone to find solutions--to economic problems, to status anxiety, to uncertainty about who they in fact are--in allegiance to political movements that we might as well call fascist. It is a good word. "Fascism" has a number of earmarks, present in different proportions in different episodes, including: (i) a strong, authoritarian leader, (ii) a profound distaste for the disgusting compromises of interest-group parliamentary coalitions, (iii) a belief that society's goals are not chosen by the will of the people but imposed by the will of the leader, (iv) a belief that the most important aims are the collective ones of national or "racial" strength, (v) a belief that life is a hard struggle against mortal enemies, among which are (vii) some despised and relatively powerless group--usually Jews, but in Latin America usually "leftists," and (ironically) in India today Muslims.

Germany and Japan went through their high-fascist episodes in the first half of the twentieth century and in the process turned the world into an abattoir. History does not repeat itself, but it does rhyme. Will the emerging powers of the developing world--Russia, Brazil, China, and India--go through similar fascist episodes over the next half century? And if they do will they be as dangerous to their neighbors and the world as National Socialist Germany was?

The view of the Clinton administration was, "Let's not find out." Let's do whatever we can at all costs to avoid the emergence of a Weimar Russia, or a National Socialist China. Let's do whatever we can to maximize the rate of economic growth in the developing world, for it was the Great Depression that gave Hitler his chance in Germany and the militarist-fascists their chance in Japan. Let's hope that in fifty years the process of industrialization in the emerging great powers of the developing world--Russia, Brazil, China, and India--will be completed, and it will be as unthinkable that one of them will embark on a fascist-nationalist campaign of conquest against its neighbors as a death struggle between France and Italy, or America and Canada, is unthinkable today. Let's push for as much democratization as possible as fast as possible, not because democracies are never aggressive--consider France on the eve of World War I--but because your odds that societal goals will be peaceful are greater if they well up from the people than if they are imposed by a dictator.

And that was the grand strategy of the Clinton administration: world peace through world trade, world technology transfer, and world law. Naive? Yes. But better than the alternatives of, say, trying to keep the Chinese as poor as possible as long as possible that would virtually guarantee the emergence of an aggressive, expansionist China with National Socialist characteristics.

But those who thought up the grand strategy of the Clinton administration forgot about religion. Specifically, they forgot about the dangerously explosive interaction between (i) rapidly-rising literacy rates found in an urban middle class, and (ii) a religion based on a Holy Book that few in previous generations could read.

What happens? Bad things. On August 24, 1572, St. Bartholomew's Day, the Huguenots, the Protestants of Paris, were massacred by the soldiers of the French crown, by the nobles of the Guise faction, and by their own neighbors. The death toll reportedly ran into the tens of thousands. The then-Pope had a medal struck to celebrate and commemorate the downfall of the Huguenots. In public, at least, the Vatican then showed the same glee over the megadeaths as Osama bin Laden and his lieutenants showed over the mass-murder of more than 5000 people who happened to be in the World Trade Center at the wrong time.

Of course, there were the systematic atrocities on the other side: consider the systematic slaughter by Protestant English garrisons in Ireland of castaways from the wreck of the Spanish Armada of 1588; consider the rapes and murders committed by the largely Protestant landsknechts in 1527 during the sack of Rome; consider the Protestant Roundhead soldiers who used the stained-glass windows of Canterbury Cathedral for target practice--spiritual brothers of the members of the Taliban who destroyed the more than a millennium-old Buddhist rock sculptures of Bamiyan for sport.

If we have thought about it, we have given thanks that we have been spared the burden of living in the Age of the Protestant Reformation. But now we fear that we have been doomed, instead, to live in the Age of the Islamic Reformation. The parallels are striking: a dominant clergy and aristocracy that seem to have lost their way and succumbed to materialism; a rising literate middle class; the mass distribution of personal copies of the Holy Book so that people can read it and think for themselves; and then terror delivered not by isolated mad individuals but by those who have the approval and support of wide groups of "believers", as those who have convinced themselves that they bear the will of God take action, and people fight and die.

In Europe it--the Wars of the Reformation--lasted for more than 120 years--with one third of the population of Germany dying in the 30 Years War--before nearly everyone learned that reading ones private copy of the Holy Book did not make one the vessel of the will of God, and that waging Holy War was not a way to save the souls of others, but a way to lose ones own.

So what can be done to accelerate the process of social learning? If the parallel with Europe's Reformation holds true, it will take four full generations before the Islamic Reformation now being born will burn itself out. What can be done so that it will take onlyone generation before those who would otherwise become our latter-day Puritans and terrorists recognize that the ideology of "Believe in a loving God, infidel, or die!" is no way to approach the world? The U.S. and other governments seek to establish the principle that governments that sponsor wholesale terrorism that creates megadeaths do not long survive. This is a principle worth establishing, but to properly establish it requires military power and intervention forces that can carry out their missions with minimal cost in civilian lives.

All governments are stepping up their systems of surveillance and security, trying to guard and shield those places in our societies that are particularly vulnerable to mass terror. All governments should seek to diminish potential flashpoints: if there were only 1/10 as many Israeli settlers on the wrong side of the 1967 border, there would be fewer potential suicide bombers--1/100? 1/10? 1/3?--and the pit out of which we must climb would be less deep. But to those who know that the will of God requires the abolition of Israel as well as of the successor states of the Ottoman Empire, the root offense would remain. Thus military and political solutions--which must be pursued--are unlikely to be complete or comprehensive. Osama bin Laden is probably correct to think that his struggle will outlast him, and that there are dozens if not hundreds prepared to step into his shoes.

In the final analysis, the same forces will bring an end to the current atrocities that brought an end to the atrocities of the Age of the Reformation in Europe: despair at the awful consequences of the past generation of religious war, contact with others who think differently to bring about a recognition that ones own interpretation of the Holy Book is quite probably wrong, and is surely not cause to kill anyone, growing economic prosperity, and wise and tolerant leadership.

On the political side, it is not clear what we have. I don't know what the grand strategy of the Bush administration is. I don't even know what the strategy of the Bush administration is.

Colin Powell tries to isolate Iraq through diplomacy. Karl Rove, drafting the State-of-the-Union address, wins Iraq two new allies--North Korea and Iran, one of which, Iran, hated Iraq more than anything else up until the State-of-the-Union address gave them powerful interests in common. Colin Powell persuades Bush to call for Israeli withdrawal from the West Bank. Donald Rumsfeld blocks Bush's words from being backed by any deeds to put more than verbal pressure on Ariel Sharon. Karl Rove pushes the nice rhetorical line that the sponsors of terror are as guility of it and are as much enemies of the United States as the terrorists themselves. Donald Rumsfeld points out that the Saudis who financed Al-Qaeda and who finance Hamas today are necessary allies in any campaign against Iraq.

Maximizing world economic growth through free trade is not on the Bush administration's radar screen. Neither is getting people out of the Madrassas and into industry and commerce by dropping our import quotas that hobble Pakistan's textile industry.

On the political side it is clear what we need. We need an Italian Prime Minister who will remember the role played by Medieval Islam in the development and transmission of the knowledge of Classical Antiquity. We need a U.S. president who will remember the root meaning of "crusade" before he uses the word, and will have a wiser approach to dealing with the aftermath and consequences of U.S. military operations than that contained in the offhand remark that "we don't do nation-building." Political and military action needs to prevent future atrocities, punish criminals, and deter states, but not to declare war on entire peoples or to wage crusades.

On the economic side it is equally clear what we need. In Europe, the descendants of the fanatics of the Reformation and Counter-Reformation were offered a stake in a developing, more prosperous, expanding world. The more tolerant states were magnets drawing migrant craftsmen and merchants in. The less tolerant lost productive workers and entrepreneurs by the hundreds of thousands with the expulsion of the Jews and Moriscos from Spain, and of the Huguenots from France. As Albert Hirschman has pointed out, the eighteenth century was full of observations from Voltaire, Johnson, and others that increasing commerce made people "sweet"--that it led to a broadness of mind and a focus on how each could benefit from successful trade, a broadness of mind that did not fit with the denial of others' humanity necessary to wage holy war. And as generations passed, the places where narrow-mindedness and intolerance ruled became backward, poor, and unattractive even to their own subjects.

Today, however, it is not clear to many just how they benefit from the world's economic and political order. The gaps between rich and poor across the world are far greater than in any previous generation, and there are only a few muddied indications that the world will draw together over the next few generations. It is conventional in the industrial core today to blame development failures on the corruption and the incompetence of developing-country governments, and possibly on cultures badly aligned with the requirements of modern machine production. But this is at best a half-truth. Developing-country governments have on balance done a very bad job of climbing the cliff, but the industrial core has not let down many ropes for them to grasp.

For example, consider that in the 1970s Bangladesh was viewed by many as a country whose economic development was bound to be unsuccessful. By the start of the 1980s, however, Bangladesh had a thriving and rapidly-growing export-oriented textile industry. How long did it take before the Reagan administration slapped quotas on the importation of textile from Bangladesh? Five years. Today--fifteen years later--the economic development of Bangladesh, Pakistan, and many others continues to be hobbled by first-world quotas on textile exports that create unemployment and depress incomes.

As WTO head Michael Moore said more than a year ago, it is now the turn of the industrial core to deliver on its promises of market access to the developing world. The industrial core has obtained the safeguards for overseas investment, the rights of its firms to national treatment, and the protection of its intellectual property that it sought. Now it must fulfill its part of the deal: to provide demand for the products of the farms factories of the rest of the world world as it develops.

That, however, has been slow in coming. Where is the willingness of the industrial core to accept--to encourage--the large-scale imports of agricultural and textile products necessary for economic development to succeed in the next generation, and not four generations from now? Where is the recognition that the successful economic development of the world is essential for the long-run national security of even the strongest nation in the industrial core?

When governments cannot provide the very basics--law and order, education, hospitals, famine relief, the promise of a job, the promise of a standard of living better than ones parents saw--false prophets who promise a Puritan paradise and the imminent arrival of the reign of God have an easy time finding followers for their message. Nation-building cannot be something we "don't do." Nation-building and economy-building must be something that we "do do"--at the very heart of the long-run enterprise.

As Harvard's Jessica Stern put it in her testimony last September in front of the U.S. House of Representatives Committee on Governmental Reform: "When we talk about Pearl Harbor, we should also be thinking of a Marshall Plan."

Posted by DeLong at May 20, 2002 02:35 PM | TrackBack


A fine and thoughtful speech, Brad. I couldn't agree with most of your sentiments more. But let me ask a rude question: if abolishing textile tariffs and barriers to agricultural products is such a fine and wonderful thing, why didn't your man Clinton do it?

Posted by: Ian McGugan on February 20, 2003 12:03 PM
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