The Economics of Osama’s Death

3 May 2011.

When Osama bin Laden and Al-Qaeda attacked the World Trade Center on 9/11 nearly ten years ago, they sought to achieve two separate effects. The first was obvious – causing the death of human lives. The second however was symbolic in nature. By attacking America’s symbol of economic might, Osama bin Laden was foreshadowing his true desires – to significantly hurt the US economy.

Three years later, Osama released a videotape where he explicitly stated his intentions to bankrupt the US.

3 May 2011.

When Osama bin Laden and Al-Qaeda attacked the World Trade Center on 9/11 nearly ten years ago, they sought to achieve two separate effects. The first was obvious – causing the death of human lives. The second however was symbolic in nature. By attacking America’s symbol of economic might, Osama bin Laden was foreshadowing his true desires – to significantly hurt the US economy.

Three years later, Osama released a videotape where he explicitly stated his intentions to bankrupt the US.

“We are continuing this policy in bleeding America to the point of bankruptcy…and it all shows that the real loser is you. It is the American people and their economy.”

In addition, Osama bin Laden also pointed out that while the 9/11 attacks cost al-Qaeda around US$500,000, it paled in comparison to what the US was spending to try and catch him and fight the global war on terror.

According to Ezra Klein from the Washington Post, “Even a partial, very haphazard tallying of the costs from 9/11 reaches swiftly into the trillions of dollars. The Afghanistan and Iraq wars, neither of which would’ve been launched without bin Laden’s provocation, will cost us a few trillion on their own, actually.”

While Osama bin Laden failed to bankrupt the US economy, his actions forced the US into increasing their military spending and indirectly led to other economic impacts in the aftermath of 9/11. According to renowned economist Joseph Stiglitz, the credit bubble that caused the 2008 financial crisis was linked to the Federal Reserves’ loose monetary policy intended to stave off any future recessions due to a major terrorist attack. 

Whether Osama ever intended to cause such an economic impact is debatable. What remains clear though was his desire to harm the US economy.

The Economic Terrorist

According to reports by people who knew him personally, Osama bin Laden was a soft-spoken and mild-mannered man with strong ideological beliefs.

Rory Nugent of Rolling Stone Magazine met Osama bin Laden in 1994, long before the United States Embassy bombings in Africa brought him to the US, and the world’s, attention.

“Osama bin Laden was considered a rich kid with a mixed reputation as a fighter. His money bought him attention, and his knack for logistics garnered him respect. Earlier, during conversations with various commanders in the Afghan war, bin Laden had been described to me as just the kind of guy you want behind the lines to keep an army going. These men thought it funny that bin Laden’s organizational skills were honed by retired American spooks working with his father’s construction company while building the Saudi infrastructure. Not once did anyone remark on bin Laden’s qualities as a fighter.”

While Osama “didn’t strike Nugent (me) as a particularly interesting character” at that time, Osama was already a well-known figure in his home country, Saudi Arabia, for speaking out against the government for aiding US troops. 

Osama’s desire to hurt the US economy can also be traced back to his time in Saudi Arabia. He was born into a rich family and attended elite schools before studying economics and business administration at King Abdulaziz University. His economics education may have played a role in his calculated attempts at damaging the US economy.

Osama’s overall strategy of hurting the US economy was also partly derived from Al-Qaeda’s methods during the Soviet Union’s invasion of Afghanistan during the 1980s where they would use “guerrilla warfare and the war of attrition to fight tyrannical superpowers.” Eventually, Osama wanted to force America to slowly become bankrupt as they spent more and more money searching for him and fighting Al-Qaeda.

Economic Impact on US economy of Osama bin Laden’s Death

Ultimately, Osama failed in his attempt to bleed the US dry. Although the US increased their security budget after the events of 9/11, Osama’s actions did not directly have as major an effect on the US economy as the 2008 financial crisis or even China’s emergence as a global economic superpower.

Hence, there has also been debate among analysts on whether Osama’s death would have any economic impact on the US and the world’s economy.

Amidst widespread celebrations in the US after President Barack Obama announcement of Osama bin Laden’s death, the Dow Jones industrial average, the Standard & Poor’s 500 and the Nasdaq composite rose by 0.3, 0.2 and 0.2 percent respectively. The US dollar also strengthened briefly on May 1st before declining later on Monday.

Globally, most major stock markets reacted positively to the news of Osama’s death. Meanwhile both oil and gold prices fell slightly in the immediate aftermath of President Obama’s announcement, though most believe that they are likely to return back to previous levels.

“This seems like a gut reaction to what the West views as a happy event. A lot of times we see markets move on happy news that in reality has nothing to do with the market, and I think this is one of them,” James Williams, an energy economist at WTRG Economics, said.

However, most experts believe that any economic gains derived from Osama’s death will be short-lived. Furthermore, the short-term effect is more likely to see economic risk rather than economic gain. 

Economist Nouriel Roubini warned of economic repercussions due to a possible retaliation by Al-Qaeda to Osama bin Laden’s death.

“Somebody could decide to try to show strength by attacking the U.S. or Western forces in other parts of the world. So in some sense, the risk premium might be lower today, but there is still significant risk in down there in the global economy,” said Roubini.

In the long run, few see any economic impact for the US economy as a direct result of Osama’s death.

Economic Impact on Middle East economy of Osama bin Laden’s Death

At the meantime, the impact of Osama bin Laden’s death in the Arab world is minimal at best. While President Obama’s announcement sparked wild celebration in the US, there has barely been a whisker of reaction from the Middle East community. Rather, the greatest drivers of social and economic change within the Middle East has been the popular revolutions for democracy that have been sweeping the region in recent times.

“You will see protests for freedom and democracy, yes. But for Osama bin Laden? Definitely not,” said Mustafa Alani, director of the Security and Terrorism Studies Program at the Gulf Research Center in Dubai.

For many Arabs, Osama bin Laden represented part of the old Arab order, which has been increasingly threatened by political uprising.

“His death adds to the modern, moderate and democratic Arab world that is currently in the making. This new Middle East is in sharp contrast to those who defined it before this year of change. Osama was an important force, but this is his end,” said Abdulkhaleq Abdulla, a professor of political science at Emirates University.

According to a poll conducted by the Pew Research Center’s Global Attitudes Project, confidence in al-Qaeda fell from 72 percent in 2003 to 34 percent in 2011. In Lebanon it fell from 19 percent to 1 percent.

The successful revolutions in Egypt and Tunisia have been pinpointed as the primary cause of Osama bin Laden and Al-Qaeda’s declining significance in the Middle East. According to Arab journalist Hazem al-Amine, these revolutions “are showing Arabs that democratic revolutions are an efficient substitute to violence, one that can trigger greater change than traditional terrorist attacks.” 

Economic Impact on Pakistan

What could potentially be far more significant could be the economic impact for Pakistan after the US assault on Osama bin Laden’s hideout in Abbottabad.

The US is Pakistan’s largest importer, importing nearly 16 percent of Pakistan’s commodities. The US is also a major military ally, providing US$1.3 billion in 2010 in military aid and subsidizing 25 percent of Pakistan’s military budget.

Read more on Pakistan’s economic statistics on EconomyWatch.com

These have now been cast into doubt, as there have now been allegations in regards to whether Pakistani officials knew of Osama’s presence within Abbottabad.

Firstly, the town Abbottabad is barely 51km away from Pakistan’s capital of Islamabad. Secondly, Abbottabad was not only home to many former Pakistani military generals and officers but was also close to the Pakistan Military Academy. Finally, the home that Osama bin Laden lived in was a former safe house of the Pakistan Inter-Services Intelligence (ISI).

Many US politicians are now demanding answers from the Pakistani government. Senator Joe Lieberman, chairman of the Senate Homeland Security Committee, said, “This is going to be a time of real pressure on Pakistan to basically prove to us that they didn’t know that bin Laden was there”.

Even if the Pakistani government does not have any involvement with Osama bin Laden, questions will be asked of their commitment in fighting global terrorism.

Raymond Tham

EconomyWatch.com

EconomyWatch.com wants to know what you think. Do you think that Pakistan would knowingly harbour Osama bin Laden and risk their military aid and trade from the US? What would be the economic benefits to hiding Osama bin Laden in Pakistan?

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