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Guided by an invisible hand

The bank meltdown marks a turning point in our thinking about how the world works writes the Nobel L

Make no mistake: we are witnessing the biggest crisis since the Great Depression. In some ways it is worse than the Great Depression, because the latter did not involve these very complicated instruments - the derivatives that Warren Buffett has referred to as financial weapons of mass destruction; and we did not have anything close to the magnitude of today's cross-border finance.

The events of these weeks will be to market fundamentalism what the fall of the Berlin Wall was to communism. Last month in the United States almost 160,000 jobs were shed - making more than three-quarters of a million this year. My guess is that things will get considerably worse. I have been predicting this for some time, and so far, unfortunately, I have been right.

There are several reasons for my pessimism. The extreme credit crunch is a result of the banks having lost a lot of capital. And there is still uncertainty about the value of the toxic mortgages and other complex products on their balance sheets. The US economy has been fuelled by a consumption binge. With average savings at zero, many people borrowed to live beyond their means. When you cut off that credit you reduce consumption. This, in turn, will dampen the US economy, which helps keep the global economy growing. The American consumer has not only sustained the US economy, he has sustained the global economy. The richest country in the world has been living beyond its means and telling the rest of the world it should be thankful because America fuelled global economic growth.

There are further reasons for my pessimism about short-term economic prospects, in America and Europe. In the second quarter of this year, growth in the US would have been negative were it not for the growth in exports. But with the slowdown in Europe and problems in Asia it is difficult to see how we can maintain net export growth. The strengthening of the dollar - due not to greater confidence in the US but to reduced confidence in Europe - will make matters worse. The fall of energy prices will help a little, but not enough.

Treasury Secretary Hank Paulson has now come up with a new bailout scheme. The original plan - buying up the thousands of "troubled assets" (read: bad loans and complex products based on them that Wall Street created) - was badly designed and rife with problems. How would they have been priced? Call in the same Wall Street experts who got us into the mess and mispriced risk before? It is a heads I win, tails you lose situation.

The worry is that the taxpayer will be left holding the short end of the stick.

The British approach, which Paulson seems to be following, is far better, involving capital injections into banks, with preferred shares to protect against losses and warrants to share in some of the upside potential. This is the approach that I - along with most US economists and people with good street sense, like George Soros - had been saying America should adopt.

Ironically, though Paulson wouldn't listen to us, he seems to have listened to Gordon Brown.

Many of the problems our economy faces today are the result of the use of misguided models. Unfortunately, too many took the overly simplistic models of courses in the principles of economics (which typically assume perfect information) and assumed they could use them as a basis for economic policy. Many central banks use the notion of inflation targeting - that they should focus exclusively on inflation, raising interest rates when inflation increases. But I would argue that central banks have a broader responsibility; they are supposed to ensure the stability of a country's economy. While monetary authorities in the US and elsewhere focused on price stability, they allowed the financial system to undertake risks that put the whole economy in jeopardy.

This crisis is a turning point, not only in the economy, but in our thinking about economics. Adam Smith, the father of modern economists, argued that the pursuit of self-interest (profit-making by competitive firms) would lead, as if by an invisible hand, to general well-being. But for over a quarter of a century, we have known that Smith's conclusions do not hold when there is imperfect information - and all markets, especially financial markets, are characterised by information imperfections. The reason the invisible hand often seems invisible is that it is not there. The pursuit of self-interest by Enron and WorldCom did not lead to societal well-being; and the pursuit of self-interest by those in the financial industry has brought our economy to the brink of the abyss.

No modern economy can function well without the government playing an important role. Even free marketeers are now turning to the government. But would it not have been better to have taken action to prevent this meltdown? This is a new kind of public-private partnership - the financial sector walked off with the profits, the public was left with the losses. We need a new balance between market and government.

Professor Joseph E Stiglitz is chair of the Brooks World Poverty Institute at the University of Manchester and a 2001 Nobel prizewinner

This article first appeared in the 20 October 2008 issue of the New Statesman, My year with Obama

André Carrilho
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The army of one

How the writings of an al-Qaeda strategist inspired the spate of small-cell terror attacks in Britain and other Western countries.

Again. The attack on London Bridge and Borough Market on  3 June has claimed seven lives, with many more people still receiving intensive care for critical injuries. Within hours of the terrorist attack – the third within as many months in England – Islamic State released a statement claiming responsibility, as it did for the two outrages in the UK that immediately preceded it. At least one of the three attackers, Khuram Butt, had a long history of extremist activism and associations in Britain. He was a member of one of the Islamist networks that emerged during the 1990s and then proliferated after the al-Qaeda attacks of 11 September 2001. Although most of the preachers who founded these groups – such as Omar Bakri Muhammad, in the case of Butt and al-Muhajiroun – are no longer in the country, their legacy endures.

Bakri founded al-Muhajiroun (meaning “the emigrants”) in 1996. Now outlawed, it was a radical group committed to the re-establishment of a caliphate. After Bakri was finally excluded from the UK in 2005 (he is now in prison in Lebanon), he was succeeded by Anjem Choudary, the well-known British jihadist who assumed leadership of the network. From its inception, al-Muhajiroun embraced ever greater extremism, declaring support for Osama Bin Laden, for the 9/11 attacks and for al-Qaeda. Scores of its members have been convicted of terrorist offences. Choudary was sentenced to five and a half years in prison in September 2016 for supporting IS.

Several individuals from his network have travelled to Syria in recent years. Among them are Abu Rahin Aziz, originally from Luton, who became involved in active attack planning for IS operations against the West. He was killed in a US drone strike on Raqqa in 2015. Another prominent member of the group, Abu Rumaysah from London, moved his wife and five children to IS-held territory. Along with another British member of the group, Mohammad Ridha Alhak, Rumaysah is believed to have appeared in execution videos for IS.

Those who have remained at home can be found on the edges of terrorist plots. Butt, a 27-year-old British national born in Pakistan, was featured in a recent Channel 4 documentary about British supporters of Islamic State. He glorified and revelled in the barbarism of IS.

Butt will not be the last British jihadist to carry out a terrorist outrage in this country. The London Bridge attack may have seemed chaotic and amateurish but that is the jihadists’ purpose. And behind even the most unsophisticated attack is a considered strategic theory of global jihad, the antecedents of which are long and extend from Afghanistan into Yemen and Syria.

***

Al-Qaeda concentrated on carrying out the 11 September 2001 attacks with such tunnel vision that it gave little consideration to what might come next. The group reasoned that the US would be forced to respond to the atrocity, as Bill Clinton had done in 1998 after groups affiliated with Osama Bin Laden bombed US embassies in Tanzania and Kenya. The Clinton administration launched a series of retaliatory cruise missile strikes against sites associated with Bin Laden in Sudan and Afghanistan. But the response was otherwise muted.

Nonetheless, al-Qaeda had learned an important lesson. Push the US hard enough and the president will be forced to act – which is what al-Qaeda wanted. What the group had not anticipated was the ferocity of American resolve.

As the Taliban melted away after the US invasion of Afghanistan in late 2001 – and with much of its leadership captured, or killed, or on the run – al-Qaeda feared it had overreached. What good had the 9/11 attacks achieved if the global jihad movement would now crumble?

This provoked an intense debate within the movement about its future. Two competing schools of thought arose, which were considered mutually exclusive until Islamic State’s emergence brought them together.

The first view came from a theorist called Abu Bakr Naji (this is a pen name). Naji argued that al-Qaeda should promote an asymmetry of fear by adopting especially brutal and gruesome tactics. He believed Western societies were ultimately weak and lacked the resolve to endure the long war. Instead, he reasoned, jihadists should continue to escalate their depravity and barbarism. This would in turn allow them to re-establish formal control over territory as the Taliban had done, creating safe havens and launchpads for future attacks.

Naji’s view was robustly opposed by another theorist, Abu Musab al-Suri (a nom de guerre for Mustafa Setmariam Nasar, a Syrian strategist within al-Qaeda). He argued that the American response to 9/11 was too severe and that the group would never be able to regain the freedom it had enjoyed under the Taliban. The global jihadi movement would have to embrace the new reality.

According to the Norwegian scholar Brynjar Lia, who has written an authoritative biography of Suri, he opposed the 9/11 attacks precisely because he feared al-Qaeda would be unable to withstand the ferocity of the US response. When it eventually came, Suri felt vindicated.

It reaffirmed a long-standing view of his that the global jihad movement could succeed only if it was decentralised. Suri had begun to advocate decentralisation in the early 1990s, arguing that formal hierarchies did not well serve the jihadist cause. At the time, militant groups were being rounded up in Egypt, Libya and Algeria because their members congregated in large structures.

The most formative influence on Suri’s views, however, was the uprising led by the Muslim Brotherhood in the Syrian city of Hama in the late 1970s and early 1980s. He wrote about the experience in a 900-page book, The Islamic Jihadi Revolution in ­Syria. The uprising was brutally repressed by President Hafez al-Assad, father of Bashar al-Assad. Too much centralisation and formal structuring had caused the revolution to be lost, Suri reasoned. What the movement needed was smaller and more autonomous cells, which could wage a form of low-intensity guerrilla warfare, grinding down the local populations.

Although Suri had been formulating his ideas since the early 1990s, it was only after 9/11 that they coalesced into a coherent theory. Towards the end of 2004, he published his seminal work, The Global Islamic Resistance Call, which outlined his vision for the future of the global jihad movement.

Suri took a more strategic view of terrorism and its outcomes than Bin Laden or his al-Qaeda network. They obsessed about “spectacular”, large-scale attacks such as the 1998 twin embassy bombings, 9/11, the Madrid bombings, or the 7 July 2005 attacks in London. Suri welcomed the successful execution of these attacks but above all what he wanted was continuous, low-level action of the kind we are now experiencing in Britain. Despite overt displays of resilience and camaraderie, these have succeeded in making the public more fearful and angry.

“The jihad of individual or cell terrorism, using the methods of urban or rural guerrilla warfare, is fundamental for exhausting the enemy and causing him to collapse and withdraw,” Suri wrote in The Global Islamic Resistance Call.

To justify indiscriminate attacks on civilians, he invoked verse 8:60 of the Quran, which states: “And prepare against them whatever you are able of power and of steeds of war by which you may terrify the enemy of Allah and your enemy and others besides them.” The passage is often invoked by jihadi theorists to rationalise acts of mass and indiscriminate terror. “This generous verse has ordered preparation for the purpose of terrorising the assailants’ and God’s enemies among the infidels and their servants,” Suri wrote.

He interpreted its invocation to “terrify the enemy” broadly, arguing that “terrorism is a religious duty, and assassination is a Prophetic tradition”.

This is what is known as the doctrine of the “army of one”. The idea is simple: individuals are empowered to carry out deadly and destructive attacks without an overriding command-and-control structure. Having no command structure makes their attacks harder to intercept and oppress. The reality is, the antecedents of the threat we face in Britain today were first theorised in the mountains of the Hindu Kush more than a decade ago.

***

Al-Qaeda’s central leadership favoured Suri’s doctrine, believing that Naji’s approach was too fantastical. What Suri offered was a simpler, more tangible vision of how the global jihad movement should proceed.

However, it was al-Qaeda’s branch in Yemen (known as AQAP) that capitalised most on this doctrine. Under the spiritual tutelage of Anwar al-Awlaki, a Yemeni-American cleric who was eventually killed in an US drone strike, an aggressive doctrine of global jihad was launched.

What made Awlaki so dangerous was not just his charismatic appeal, but his experience of living in the West. He understood the motivation of Western Muslims and knew how to radicalise them.

AQAP published a magazine called Inspire, a precursor to the glossy IS magazine Dabiq, which has glorified as well as inspired attacks against the West. Inspire published Abu Musab al-Suri in English translation. Much of his work is untranslated and remains lost in Arabic texts, making it inaccessible to many Western Muslims. AQAP changed this by bringing the most devastating sections of his writing directly to readers in the West.

Most importantly, Inspire created and promoted a programme of Open Source Jihad (OSJ), which is the strategy of inspiring lone-actor attacks. It offered simple instructions for launching unsophisticated attacks on civilians: pipe bombs, stabbings and vehicle-based assaults.

The impact was considerable. According to original research by Alexander Meleagrou-Hitchens in his forthcoming book on Awlaki, between 2009 and 2016, of a total 212 terrorism cases in the United States, 66 plots could be directly linked to the cleric in one form or another. Put another way, Awlaki was responsible for or inspired almost one-third of all terrorism cases in the US over a seven-year period.

“In this section, the OSJ [Open Source Jihad], we give our readers suggestions on how to wage their individual jihad,” is how Inspire magazine described its OSJ programme. “It allows Muslims to train at home instead of risking [sic] a dangerous travel abroad.” Awlaki explained that this was “a disaster for the repressive imperialistic nations . . . America’s worst nightmare”.

Its effects were felt not only in the United States. In May 2010, Roshonara Choudhry, a then 21-year-old university dropout, attempted to murder Stephen Timms, the Labour MP for East Ham at his constituency surgery in London, because he had voted in favour of the Western war in Iraq. During her trial, Choudhry explained how she had been motivated to stab Timms during a constituency surgery after she became a devotee of Awlaki and his OSJ programme.

The murder of Fusilier Lee Rigby by Michael Adebolajo and Michael Adebowale in May 2013 was another Awlaki-inspired plot. Rigby was attacked on the streets of Woolwich, south-east London. His attackers first rammed him with a vehicle and then stabbed him with knives.

Documents seized by the United States following the raid in which Osama Bin Laden was killed show that the al-Qaeda leader was uneasy about AQAP’s strategy. He felt that attacks using vehicles against civilians were wrong as well as amateurish. And he believed they were so brutal that they would reduce support for violent jihad.

***

Islamic State has never worried about public opinion. It emerged in 2003 after the invasion of Iraq, in a period when the murderous Abu Musab al-Zarqawi, a Jordanian, was leading the organisation. Unlike al-Qaeda’s central leadership, which found itself on the defensive in Afghanistan, Zarqawi, who revelled in barbarism, was presented with an opportunity to confront some of the group’s biggest enemies – America and Britain – in the heart of the Arab world.

In these circumstances, he favoured Naji’s nihilistic doctrine of brutality. His methods have been played out in Syria and Iraq, producing especially egregious acts of barbarism against the local populations over which IS has ruled. Yet, for the group’s attacks in the West, it continues to embrace Suri’s model of decentralisation.

IS has produced significant amounts of literature promoting gruesome attacks in its followers’ home countries. In its Rumiyah (Rome) magazine, one infographic promotes truck attacks, describing their use as “just terror”. It advises readers to acquire a vehicle that is “large in size, heavy in weight” and which has a “slightly raised chassis and bumper”. Among its suggested targets are “congested streets, outdoor markets and large outdoor festivals”.

Another infographic disseminated by the group on social media advises supporters to “kill the civilians of the crusaders, run over them by vehicles [sic]”.

The Nice attack in 2016 which killed 86 people demonstrated just how effective a relatively unsophisticated plot carried out by a lone actor can be. This is one of the ways in which terrorism works: a successful attack gives confidence to others, inspiring and emboldening imitators. The wave of terrorism that is now sweeping the UK is born of this.

Terrorists will take encouragement from others and we have seen comparable spikes in attacks across the European continent, with the French and Germans enduring periods of similar activity.

***

None of this occurs in a vacuum. For many years we allowed radical preachers such as Omar Bakri Muhammad, Anjem Choudary, Abu Hamza and others to preach on the streets and in the mosques of Britain. They spread a deadly message of separateness, telling young Muslims not to identify as British. In many cases, they invoked the very same verses of the Quran as al-Qaeda theorists such as Abu Musab al-Suri in order to spread their message.

A leaflet produced and distributed in 2006 by the same network from which Khuram Butt emerged brazenly glorified terrorism of the kind he unleashed in London. “Jihad against the Kuffar [infidels], the enemies of Allah, puts fear in their hearts and terrifies them,” it stated. “This will give Islam victory, humiliate its enemy and put happiness into the hearts of believers.”

Al-Muhajiroun frequently celebrated terrorist atrocities at home and abroad. What we have, therefore, is a culture in which young men are growing up in Britain who are divorced from our society and its values. They are invested in the fortunes of foreign conflicts instead, exposing us to the turbulence of distant wars. Once it was Yemen and Anwar al-Awlaki who posed the greatest threat to Britain, when al-Qaeda regrouped and established a base there. Yet the potency of his message sharply tailed off after he was killed in 2011.

There is a lesson to learn. The message of leaders and movements, however ideological, still requires them to have an active presence. When they are killed, or pushed back through military action, their potency is much reduced.

In recent times, Islamic State has been able to project a message of momentum and success. Now that the group is suffering significant setbacks in Mosul – where it has practically lost the entire city – its prestige is diminished. Its de facto capital in Raqqa, Syria, is also being slowly encircled by coalition troops.

As with the efforts in Iraq, reclaiming the city will be difficult and dangerous, but Raqqa will fall. In the meantime, attacks from the “army of one” will only intensify and increase in frequency, yet this is a critical phase through which we must pass if the overall threat from IS and other such groups is to be defeated decisively. Our security can only be built over their ruins.

Shiraz Maher is a contributing writer for the New Statesman and a senior research fellow at King’s College London’s International Centre for the Study of Radicalisation.

This article first appeared in the 08 June 2017 issue of the New Statesman, Election special

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