Relationship Between Security and Economy

Professor Bishwambher Pyakuryal

Context

Some say, the link between economics and security is normally assumed, not analyzed. As unequal distribution of income, power, and resources has led to political and economic instability, efforts have been made to encourage economists to explore economic aspects of security. However, the problem one faces in security and economy is the fact that most of the crime and security-related studies have to deal with several “information gaps”. Developing quantifiable methodological issues are difficult and the applied research is limited. Therefore, considering the limitations of the studies in linking economy with most of the crime, terrorism and security aspects, a modest approach has been taken in the paper to review appropriate literatures in linking security and economy includingauthor’s occasional lectures at Army Command and Staff College during last few years.

Overall security measures could reduce the chances of criminal event including the risk of terrorism. The financial cost is so high, poor nations have to find out appropriate measures to reduce the expenditure but maintain security. Available data on the costs of crime is very scary. Unless a practical model for financial management is prepared, it will be extremely difficult for less developed countries. In the Netherlands, for example, in 2005 the estimated costs of crime remained at 20.2 billion euro, which was approximately 4.1 percent of the GDP. The expenditure in 2000, in England and Wales were between £35 and £60 billion per year (http://securipedia.eu/mediawiki/index.php/Economic_effects_of_crime). This gives the glimpse of the relationship between the security and economy.

Since economic security is expected to fend off non-economic challenges, it is linked to continued economic well-being, which is stable and predictable – It is therefore, beyond current prosperity dilemma. Study shows one time growth has perverse relationship with security. In Iraq and Afghanistan, double-digit growth could not guarantee security and peace. Furthermore, in Iraq, double-digit growth is negatively related to security threat. In Afghanistan, increased investment, creation of economic fundamentals and security move in opposite direction. Rebuilding economy through security perspectives has suffered since US funding,as many commentators believe, has failed in sustaining Washington-built development projects in these countries.

Defining the term

The narrow definition of the economics of security is the importance of economic factors to security. The broader definitions consider a macro impact with lots of security implications, which extends beyond territorial integrity. ILO considers economic security is composed of basic social security, defined by access to basic needs infrastructure pertaining to health, education, dwelling, information, and social protection, as well as work-related security. There are many instances where economic security converges with law and order. In simple language, economic securityis the condition of having stable income or other resources to support good living standard, which in turn helps the nation to design containment strategy.

There is a strong and positive relationship between the global economy and security policy, including defense plans. As stated in aforementioned paragraph, since security policy is linked to the economic cost, scarce resources should be used intelligently while developing defense plans. The countries should be selective in allocating resources for priority-specific security activities and economic well-being of the people. Expenditure management in security activities is not the concern for only military powers, it is equally important for the less developed world(http://as.nyu.edu/docs/IO/2589/EconomicsandNationalSecurity.pdf). Security is country’s one of the key sectors that demands budgetary allocation with great care.

The economics of security has been a hot and rapidly growing priority in global agenda especially after 9/11 terrorists attack in twin towers in the United States. The rising threat of security has swelled annual budgets of dozens of developed, developing, and less developed countries. Also, in advanced countries, security industry is expanding area of economic activity. As security threats have far-reaching economic and societal implications, the challenge is to balance between security expenditure and sustainable economic development.

Linking economics and international security:

Terrorism and War

Literatures show, there is a link between extreme poverty and terrorism. Many think, terrorism has been institutionalized and is being developed as a multinational company. However, such link is at times complicated as there existsconfusion between war and terrorism. For instance, people killed indiscriminately in town and population centers are called war in self-defense not terrorism and which avoids the risk of any legal consequences. This has happened in Iraq, Yugoslavia and many other countries during different time intervals[1].

Conflict and Incompatibilities

Generally conflict occurs when there are incompatibilities (largely fragmented by caste and community; and with linguistic, regional and cultural differences). However, it is surprising to note that of the 50 poorest countries in the world, only Afghanistan and to some extent Bangladesh and Yemen have experienced relatively increased terrorism because of poverty. Similarly, all the 19 hijackers on 9/11 were well-educated middle class Saudi Arabians.

Data shows, 43.3% of the higher status of Palestinians respondents such as merchants, or professionals justified the use of terrorism to achieve political goals compared to 34.6% of lower down the ladder group of people namely, laborer and craftsman. The biographies of 285 suicide bombers during 1987-2002, also revealed that majority, except 15% of the individuals were richer and more educated[2].

Global leaders have talked about the link between poverty and terrorism. However, there is robust evidence that there is no such link. This does not necessarily mean that economics has no meaning or irrelevant. The important issue to consider is economic dimensions of terrorism exists but not in the way the conventional understanding would have it. Having said this, I agree, conflict may be contributing to low per capita income, or low income may be contributing to conflict. Findings that are common is the fact that poor economic circumstances are more likely to result in conflict(http://siteresources.worldbank.org/INTPREMNET/Resources/EP31.pdf)

State of Economy and Global Influence

State of economy of a nation & global influence is linked. The larger economy enjoys greater influence in establishing international economic relations. However, when powerful nations step outside the global rules, difficulties arise. As interaction between economics and security has been advancing, big powers such as USA need to revisit the fundamentals of their economic strength. In case, economic dynamism is lost, countries like USA will lose its identity on the global stage.

It is thought United States’ and for this matter many other economically sound nations intend to achieve their foreign policy influence while giving financial assistance to the crisis-prone countries. For example, the top five countries receiving USAID include Afghanistan, Israel, Iraq, Pakistan, and Egypt. For many years, aid to Egypt exceeded all the rest of Africa combined. Pakistan receives $2 billion per year, or $9 per person(http://www.twincities.com/business/ci_23650277/real-world-economics-u-s-aid-is-all). The question is, has this assistance been translated into fulfilling United States’ interest in real sense? Although it is difficult to quantify the benefit of aid to make desired changes in the recipient nations and the cost of public support in domestic front, this is a message that other nations should learn from United States’ experience.

Economic deprivation and security

A decade-long insurgency has shown that in Nepal, peoples’ realization of security threat is also linked to the economic deprivations and ever-increasing income inequality among development districts. It is sad to learn that local governments have lost their capacity to generate income to meet annual expenditure requirements. About 24 districts (32%) make less than 5 percent and 60 percent districts make between 5-10 percent revenue out of their total annual expenditure needs.

Inequality has contributed to the inaccessibility of basic services to people. It can be illustrated through the expenditure trend in Nepal from the author’s recent unpublished study completed for the Asia Foundation.The actual data in the study shows poor revenue generation capacity at the local level. The situation before and after Nepal was declared a Republican State is not very different. After mainstreaming Maoists in the new political order, in the year 2006/07, the total government budget remained at Rs. 116852 million, of which Rs. 45027 million was earmarked for social services (38.5%). During the same Fiscal Year, total revenue of local bodies was Rs. 10564 million including both the internal revenue worth Rs. 4980 million and central grant of Rs. 5583.8 million. This could meet only 23.5% of the total expenditures of the local government in social services. This again means local governments must be able to generate 76.5% additional revenue to sustain the priority social services programs such as health, education, drinking water etc[3].

Poverty and insecurity

Similarly, on poverty front, efforts have been made to measure poverty in terms of basic education, health care, nutrition, water and sanitation, in addition to income, employment and wages. Beyond income and access to basic services, individuals and societies are also poor and tend to remain so if they are not empowered to participate in decision-making process that shapes their life. This was a missing link in Nepal’s development endeavor which invited insurgency and economic uncertainty.

The highest poverty rates in 2010/11 are found among the hill Dalits (43.6) followed by TeraiDalits (38.1), hill Janajatis (27.6%) and TeraiJanajatis (24.6%). Nearly one –half population of Damai and Sarki are deprived from the basic necessities, who suffer from chronic poverty diseases – similarly, Kumal, Sunuwar, Majhi, Thakali, etc. are in the second rank in the poverty profile. As there is high degree of inequality among the poor, the accumulation and uses of human capabilities are too far from this group.

The Issue for Professional Discourse

A Harvard Professor Albert Abadieconsiders the poverty-terror connection has been debunked many times. The freest and most oppressed countries had little experience in terrorism. The middle level countries where politics was unsettled and governments were often weak experienced relatively more conflicts (http://www.zoominfo.com/p/Albert-Abadie/1180449283).

Is it that although there are many good reasons to worry about poverty, reducing poverty alone is not the answer to ending terrorism? Whether the cause of the conflict is ‘greed’ or ‘grievances’ or any other factors? This necessitates the investigation with a broad and multidisciplinary perspective.

Conclusions

To conclude, the economics of security is a hot and rapidly growing field of research. Usually, security measures are developed for mitigating the negativesocio-economic impact of crime and terrorism. There are direct costs involved in procuring equipment, training and using private agents. The other costs for mitigation are linked to the secondary effects which occur before and after security breakdown. As consensus is found in acknowledging that security involves economic cost, the question often raised in less developed countries is the affordability and management of scare resources by prioritizing event-specific eventualities.

The magnitude of risks and the impact of security measures are difficult to estimate, therefore, security policy needs to be designed in terms of how much a certain security measure should reduce the risk of a security threat to be cost-effective (http://securipedia.eu/mediawiki/index.php/Economic_impact_of_security_measures).Based on the definition of costs and the methods used, it is believed that social cost-benefit analysisand economic impact study can help countries to prevent wasteful expenditures on security.

Some of the issues in information technology have raised new challenges in security regime. In this context,the economics of information security has become a thriving and fast-moving sector. This area offers valuable insights in ‘security’ such as privacy, bugs, spam, etc. and into more general areas such as system dependability (http://www.cl.cam.ac.uk/~rja14/Papers/toulouse-summary.pdf). As this is a new area of concern, serious studies are warranted to practical information security.

When a country suffers from slow economic growth, it will be difficult to project itself as a leader to maintain and influence global security. On the contrary, the countries,which have been growing rapidly, are changing the security landscape and influencing global decisions on security management.

When a country suffers from slow economic growth, it will be difficult to project itself as a leader to maintain and influence global security. On the contrary, the countries who have been growing rapidly, are changing the security landscape. Weakening economy has led to a radical retrenchment of the United States internationally; economic devastation of Britain and France during WW II had led them to relinquish their empires; abandonment of communist regimes in Eastern Europe and withdrawal of Soviet troops from Afghanistan are largely because of deteriorated economy (http://www.nationalreview.com/articles/259024/economy-and-national-security-zalmay-khalilzad ). This also justifies the strong and positive link between economy and security.

In short, the paper offers following observations:

• There is no connection between poverty and terrorism. This was found by Harvard professor, Albert Abadie in his comprehensive study conducted for 1,776 terrorist incidents. The recent findings such as Cait Murphy finds terrorists often come from above the poverty line and are more educated and financially stable(http://www.sygyzy.com/2007/03/19/is-terrorism-related-to-poverty/).
• Rising crime, terrorism, and free movements of goods, capital and people have increased security industry with far-reaching socio- economic consequences
• Although the commercial alliance is a “source of security”, it could also be a “source of vulnerability”
• The challenge is balancing security and economy by analyzing the future of new “security economy”, its components and drivers
• When the State fails to judiciously give back the returns from people’s own contribution, instability occurs.One should decide either to go for “double-digit” growth or “sustain steady growth” of the economy by minimizing the chances of economic contraction
• A study conducted for the Asian Development Bank has shown through sub-national econometric analyses that there is much more to poverty reduction than just economic growth. In India, for instance, study has shown that growth has lesser role in poverty changes. The lesson is; growth alone is not an answer to nation-building.

1

[1] Pyakuryal, Bishwambher (2013). Economic Dimensions of Security, Army Command and Staff College, Shivapuri, Kathmandu, Thursday, June 30.

[2] Murphy, Cait (2007). The Poverty/Terror Myth, Fortune, March 13.

[3] Pyakuryal, Bishwambher (2013). Nepal’s Development Tragedy: Threats, and Opportunities, (In Press),New Delhi, Fine Prints.