Counterterrorism Blog

Several commentators have expressed concern offer the possibility that terrorist investors (especially Islamist ones) might use their vast wealth to obtain control of American public corporations and use them to pursue ruinous economic tactics, influence the media or direct resources to terrorist organizations disguised as charitable contributions. There is a certain sense of discomfort over the growing influence of international investors, which I share. However, while the commentators cited above express this discomfort in measured and reasonable tones, one can discern some similarities with the strident messages of anti-globalization activists and the speeches of socialist dictators who denounce “economic hegemony” and “cultural imperialism”. Any time I find myself agreeing, even a little bit, with Chairman Mao, it might be well to pause and reconsider my position.

Adverse reaction to foreign investment seems to be a periodic issue. During the 80’s there was concern over the growth of Japanese investment in NY real estate. This reached a peak when they bought Rockefeller Center. I frankly never understood this concern. What were they going to do with it, take it back to Tokyo? In the end, the property was sold at a great loss. It seemed that the reason the foreigners were winning all the deals, was that they were the only ones dumb enough to bid so high.

At one level, of course, the issue is not worth debating. As long as we continue to send untold billions of dollars abroad to import oil and cheap manufactured goods, the unalterable facts of global bookkeeping require these dollars to return to us in the form of investments, purchases of U.S. goods and services or claims on the Treasury's reserves. The U.S. balance of trade deficit is a significant policy concern, which addresses broader issues than the fight against terrorism. As long as a trade deficit continues, investment flows are the only bulwark against even more dramatic decline of the dollar and consequent inflation. So until our trade deficit improves, we had better hope that foreign investments continue.

But if we are good capitalists, isn’t investment a good thing? The socialist dictators have sacrificed their economies by refusing outside investments. Even if the social structure they created had allowed workers to be productive, the lack of investment resources ensured that they lacked the means and infrastructure to be efficient. I realize, of course, that none of us are calling for blanket restrictions on all foreign investments, only those from folks we don’t trust. Trust however, is an elusive commodity. Excessively stringent efforts to define our enemies may cause some of our friends to question their trust in us. As we have seen, trust between investment counterparts is essential to the economic system. Any policy designed to weed out undesirable investors would certainly have to be carefully calibrated.

Fortunately there already exists such a program. Administrated by the Office of Foreign Assets Control (“OFAC”), there is a series of economic sanctions currently in place. These sanctions, imposed against 13 countries and thousands of individuals and organizations, seize or restrict the assets of undesirables whenever they come under the jurisdiction of the U.S. Let us imagine that a terrorist organization obtains control of General Motors, (at current prices it wouldn’t take much), and they use their control to pursue some dangerous policy, like car bomb detonators as standard equipment on all vehicles. The president has the authority to issue an order freezing the assets of the organization, including the GM shares. As long as such sanctions can be imposed by a stroke of the presidential pen, the fear of such action is a powerful deterrent to would-be terrorist investors.

There is also the suggestion that some wealthy fanatics could use their wealth as “suicide investors”, seeking control of U.S. institutions and engaging in ruinous investment programs, bringing our economy to its knees. Of course even Al Qaeda couldn’t have pulled off such a scheme. Catastrophes on that scale cannot be imported, they must be homegrown. More importantly though, the idea of suicidal investors simply doesn’t comport with the way the world usually works. Fabulously wealthy oligarchs who become enamored of extreme causes simply don’t sacrifice themselves for the cause. They get other people to do it for them, generally younger and poorer people. Even Bin Laden didn’t fly one of the planes; he paid someone to do it for him. Kaiser Wilhelm wasn’t in the trenches at the Somme, Napoleon rode back from Moscow in a heated carriage, and so on through history. Any scheme that requires the perpetrator to sacrifice vast wealth and power is unlikely to gain much traction, at least not among those of vast wealth and power. Such men may lose everything in schemes gone wrong, but they won’t set out to do so.

A more reasonable concern is that extremists will obtain control of media giants and exert a subtle and pernicious influence on our population. I certainly would become concerned if, say Time Warner, fell under the control of fundamentalist extremist Muslims, or fundamentalist extremist Christians, or for that matter, fundamentalist extremist Red Sox fans. The real issue here is concentration of media power in any hands. Democracy is dependant on the free exchange of ideas. For better or worse, the public forum is now dominated by large-scale public media. Control of such media gives one disproportionate influence. I suspect though, that any such influence by extremists would be self-correcting. One of the chief characteristics of most fanatics, particularly religious ones, is that they quickly become boring. Whatever one may say about the American public, they do not have a large capacity for tedium. If the primetime lineup routinely featured anchors in a Burqa interviewing Koranic scholars, the ratings would drop to near zero.

Lastly there is the concern that, through their investors influence, extremists could direct corporate charitable gifts to terrorist fronts. While I suppose this is possible, it is a rather indirect scheme. Why not just give the money to the terrorists in the first place? If there is an advantage to using a corporate vehicle for this purpose, surely the controls and visibility of corporate gifts are at least as high in the U.S. as elsewhere. Why would an extremist billionaire choose to use a U.S. public corporation for this end when a European or Middle Eastern one would serve as well, with less risk of disclosure?

As Senator Goldwater pointed out; “eternal vigilance is the price of freedom”, so I suppose there is no threat which we can afford to completely discount. However when I wake up in the middle of the night, it will be threats other than from terrorist investors that disturb my sleep.