Monday, July 11, 2005

The Economics of the Jihad I - The Jihad as a Firm

The world jihadi movement bears some useful resemblance to a business. Like a business firm, it sells products and faces market constraints. The insights of the theory of business organization can thus be usefully applied. Like all abstraction, it is of course an approach subject to diminishing returns.

The idea of Al Qaeda and its affiliates selling a product undoubtedly seems forced if not ghoulish. But in fact, reduced to its essentials, the jihad does consist of a group of individuals, with a particular organizational structure, trying to sell two products. One is sold to citizens and leaders of Western countries. They must be persuaded to adopt certain policies. The most obvious at the moment is the withdrawal of military forces from the entire Muslim world. At some future point, perhaps, demands related to Muslims in Western countries or even the adoption of the sharia might be “sold” via the techniques of repeated attacks on military, commercial, and purely civilian targets. The other product is the appeal of the jihad, and the target audience is the potentially susceptible subset of the world Muslim community and especially the young men within that group. To close that sale, presumably, more members of these communities must be persuaded to feel an ideological sympathy for the jihad or that the jihad is a movement on the rise. Indeed, the use of simultaneous attacks as a “trademark” is an important way for the Al Qaeda leadership to establish a brand identity, and for independent contractors below them to signal their sympathy.

To increase sales, the firm has divisions across the globe. Unlike, say, the marketing, production and accounting divisions of a large corporation, these divisions each independently engage in most of the firm's functions – they manufacture propaganda, they raise money, they put out “product” – in Iraq, London, the Philippines, Thailand, and elsewhere. The divisions appear to have little interaction with one another, and are only tenuously connected – perhaps only by inspiration rather than formal chain of command – with the “head office,” which consists of Bin Laden (if he still lives), Zawahiri, etc. Each division produces the product for a typical geographic area.

The economist Oliver Williamson has described this structure as an “M Corporation,” to distinguish it from the “U corporation,” whose divisions are not regions or products but separate functions of the unitary production of (perhaps several varieties of) a single product. There is in a U corporation one finance division, one accounting division, one marketing division, etc. In the jihad as a U corporation there would be separate divisions formed at the central level and charged with doing the propaganda, carrying out the attacks, and coordinating the relations among divisions. Instead, each of those tasks is done within each cell.

In addition to the divisional function, the jihad is highly decentralized. Like any hierarchical structure in nature (the polymer, the firm, the nation-state), the jihad has its own degree of ties across divisions and along vertical lines. The horizontal ties appear on very casual reading to be low – for example, the Iraqi division leader Zarqawi does not plan attacks in Germany. At least since 9/11 (where Bin Laden himself had to approve the operation) hierarchical ties now appear to be quite low as well. It appears that no one goes to the badlands of Pakistan or Afghanistan to receive consent for attacks such as those in London or Madrid.

Gordon Tullock, in Economic Hierarchies, Organization, and the Structure of Production, posits three salient reasons for a more hierarchical and cohesive structure. That the technology requires it (a pharaoh might need to have a master supervising dozens of lower-level supervisors, themselves in charge of dozens of people hauling huge bricks up a pyramid) is not an issue here. It presumably does not take many people to organize and coordinate an attack carried out with simple materials. Only the explosives may (or may not be) something that must be purchased interdivisionally. Hierarchies also increase the ability to monitor and punish opportunistic behavior – starting a competing jihadi group based on some different theology, skimming money off the financial transfers, and providing consistent and reliable information to “investors” – in this case, those who knowingly fund the jihad. Only this reason at this stage might argue for more hierarchy.

Given this, the highly decentralized structure should persist for some time. This structure also has one other benefits not so relevant to Tullock’s analysis of conventional firms. If a cell has a betrayer in its midst the damage up the hierarchy is very limited. Disrupting one cell does not disrupt the entire firm. The analogy would be the costs of GM losing several key people at the top of its marketing division versus Avon losing its chief marketers in Iowa, Florida and Venezuela. The former is certainly more costly. The independent divisional structure also lends itself to taking advantage of entrepreneurial creativity based on local knowledge. A cell in, say, Paris will have better knowledge of which attacks are likely to generate the greatest payoff both among the French and among potential jihadis, and how best to succeed in such an attack within the contours of French society. (Success includes evading the French intelligence services.)

But if the jihad grows, the independence and isolation is costly. If the propaganda campaign among young Muslim men (and Europe is perhaps the most likely candidate) is effective, so that the jihadi ranks grow, then presumably a more hierarchical organization must be established to prevent rival centers of power creating the above problems. If that happens such an organization becomes easier to decapitate, but also (prior to that time) able to engage in more complex activities. There has been much concern about the ability to engage in an attack involving weapons of mass destruction, particularly nuclear weapons. The acquisition of the resources (including stolen nuclear material) and the timing, nature and delivery of such an attack suggests the need for a more complex organizational structure. Until such time as it is rational for the aforementioned reasons to establish one, the decentralized structure will persevere, and hence the size of feasible attacks may be correspondingly limited.

Finally, the fact that each division is for now relatively independent suggests that division of labor within cells is a strength for the division but also a point of vulnerability. The propaganda specialists in particular might be unusually important links in the chain. Each propagandist is implicitly charged with recruiting enough men to make the cell productive. In that sense, allowing the most perversely charismatic recruiters (one thinks of the Finsbury Park mosque prior to its takeover by moderates, for example) to proceed unchecked is unusually costly. Recruiters bring in members, and those members proceed to make the divisions more powerful. If people are drawn beyond the optimal staffing, presumably, some of them can go on to establish other cells. The tolerance of hard-core jihadi sentiments, while the hisstorically correct thing to do in most Western societies, is then unusually costly.


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