Economic Warfare
Mr. Robinson’s talk to the Collegiate Network detailed a new way to fight countries that support terrorism. Using the financial prowess of the United States to discourage countries from supporting terrorism is an excellent idea which may give policy makers an alternative to conventional warfare. At present, Mr. Robinson’s ideas are based on free market values, encouraging companies to divest in corporations that are based in, or do substantial business in, terrorist-sponsoring states with the assumption that these companies will be naturally more volatile and have a greater risk of collapse.
The problems with this economic argument are twofold. First, it is based upon the assumption that the random walk theory is incorrect. This is an enormous assuption that has been widely proven through empirical evidence. If the current market assumptions, however, do not take the risk of terrorism into account, then Mr. Robinson’s arguments would be correct. Secondly, Mr. Robinson does not present a valid sample size for his volatility argument. Simply put, there have not been enough companies exposed to the risk of unstable, terrorist-sponsoring states in order to argue that they are unduly risky.
In many ways, Mr. Robinson’s method does have the potential to be a very successful way to fight terrorism. If the United States made a cohesive effort to punish companies dealing with terrorist states, it could force them into non-existence. An enormous percentage of the world’s resources flow through the financial institutions of the United States, even if these institutions are mere third parties in the transaction. In fact, the United States directly controls over 40 percent of the world’s usable capital. Furthermore, if these companies were labeled as risk assets by the SEC, corporations would have to divulge their holdings in these companies, alerting share holders to their presence.
If the strategy of financial warfare is to be used successfully, it must be done on as large of a scale as possible. Companies must divest,the United States must deny use of its financial institutions, and the treasury may take additional action, such as releasing currency reserves to drive up that nation’s inflation. In this way, the terrorist nation will experience a shock that will result in the downfall of its national economy within a matter of weeks or months. This would cause minimal damage to the civilian population, and allow the economy to quickly recover once reforms are in place. On the whole, Mr. Robinson’s idea presents much promise, but still has to be defined further if it is to reach maturity.
