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Here are some of the repsonses to the editorial on terrorism.  THe names have been removed as most were sent directly to me and I never said in advance I would be using them.   THe formating is messed up as all I did was copy it over from emails...

if you have not read the original editorial, I recommend you do:

 
I read your editorial on the finacial solutions to war
and thought it was very interesting. Thus i am lead to
ask a few questions. Since you are biased b/c of what
you have read i guess iam too. I just recently read
both the Lexis and Olive tree and longitudes and
attitudes and Daneil Yergins book, which i don't
remember the name of on the oil shock of 1973. And
might as well add the last book i read a classic
Gullivers Travels. Just to add satire and economic
bubbles into my mindset.
I think in a way building fences makes information
easier for us to handle. Not to say that we are more
informed,i think it is just the opposite, but being so
far removed from Iraq if we can actually place blame
on someone like Sadaam we become motivated to take
action and find a resoultion. Albiet like you said
this is a short term resoultion. However even if
getting to the heart of the problem which I too agree
is education, more internet access, access to mrkts, a
DOS captial 6.0, the problem is its not news worthy
and the incentives do not allign with the goals of
politicians. Can a politician get a golden parachute
such as a extra term for attempting to solve the
problem rationally. Unfortunatly not, Bush and the
republican party are concerned about short term
reelection. Thus the economy and our pride should
increase in the short term by a military build up and
a common goal. Huge assumption. We know who the enemy
is if we link them to sadaam and know we have a
target. So it is an easier sell to the public that
they are enemy much like the cold war example in TF's
book. Moreover, Sadaam is in a high enough position
that we can effectively remove him and look as if we
won, adding to Bush's value. However, the project has
like you said a -npv. I guess i could continue on but
i will stop.
my other question was, has there been any research on
slow economic times resluting in large gov't spending.
Inc debt on public and private sector following a
recession. I guess but more concisely is there a
positive correlation between companies debt to equity
ratios and increases as goverments debt. THus using
gov't debt as a signal of good times. Sorry for the
length, have a good spring break, brian hale

from S--- in Ireland
Hi Jim,

Just a note to say how much I enjoyed your latest
editorial. As an Irish
person, I know a little of the terrorist mindset, and
the things that didn't
work here. The Northern Ireland troubles are at least
controlled now,
precisely due to the factors you mentioned - increased
FDI, and some
prisoner amnesties. If Britain had done what is now
proposed as a "war on
terrorism" it would live on for generations more.
Proof is that for
centuries, they did adopt those policies, and that
inflamed Irish
nationalism, and kept terrorism alive and well.

And your website goes from strength to strength. Well
done

All the best
**************************************

Dear Jim:

I just stumbled upon your site and look forward to
exploring it further.  I
also read your editorial and must take issue with it. 
I am reminded of the
old story of a beggar who approached Baron Rothschild
and said he should
receive a bequest because he was very worthy.  The
baron gave him a small
coin and said, "Here is your share of my wealth!"  The
idea of a $3 billion
fund is nice in theory, but woefully insufficient,
witness Turkey's demands
for $6 Billion now and $20 B or more later in loan
guarantees.  Simply,
neither we nor any other nation has the resources to
buy off all the
demands.  Imagine how the guy far back in the line
feels when there is no
money left to hand out.

Maybe Bush's swagger is ill advised, (I believe it is. 
He's backed himself
into a corner.) but the alternative you propose sounds
an awful lot like
appeasement, which has also been shown not to work. 
The only way to raise
the GDP of the 3rd world is through globalization. 
China is a great
example.  Its growth rate and wealth of its citizens
has been and will be
very rapid in the next decade, not because they are
democratic or communist,
but because they are now a  more open society and have
a natural trade
advantage.  Collaterally, as China grows, the GDP of
the developed world
must also slow until the wage/productivity gap narrows
sufficiently to
rebalance the trade deficit.

China was able to leapfrog into the 21st century
overnight, and so can many
other under-developed countries.  The Muslim
countries, by and large, have
chosen the path of ignorance for their people.  Not
until they change their
ways can they advance.  Unfortunately, the rulers and
the mullahs have
combined to rob the people of their just part of the
world's prosperity.
Appeasement and bribes are not the right solution;
education and openness
are the enlightened paths.

Regarding the impact of terrorism on the financial
markets, Israel is an
excellent case study for the rest of the world, having
been the constant
target of terrorism for over five decades and being a
quasi-western society
with a market highly correlated with the US.  At the
risk of tooting my own
horn, I edited an article, Terrorism and the Stock
Market in Israel: A guide
for the United States,  written by two Israeli
authors, Ruth Gesser and Rony
Halman, just published in the current edition of The
Jounal of Investment
Consulting, v5, no 2, Nov/Dec 2002.  I believe you
will find it interesting
reading.

Your comparison of the modern-day David and Goliath
left me cold.  Clearly,
Israel is the Goliath to the Palestinians, but the
nations surrounding
Israel are the Goliath to Israel.  There is an old
truism that, for the
winners, the war has ended, but for the losers, it
never ends.  Israel has
defeated the forces of its enemies multiple times, but
they keep coming back
for more.  Israel's economy is badly wounded and, the
Arabs hope, will soon
be destroyed.  As long as the other Arab nations
continue funding terrorism,
the war there will never end.  In that sense, it is
not an economic war, but
truly a Jihad.  You are correct that the vast majority
of Muslims are peace
loving.  You are also correct that there is a high
correlation between
economic well-being and religious anger.  The few
zealots can, over time,
convince the peace lovers that Jihad requires them to
fight also.

Like most Americans, I am scared of being obliterated
by a terrorist nuclear
weapon, (I live in Seattle, a prime defense target.)
but scared also of
being involved in a trillion dollar fiasco leading to
a ruination of the
economy even if we win.  Winning the enmity of a
billion Muslims is also a
terrible future.  At this point in time, we have the
most overwhelming
military advantage the world has ever known.  If the
war happens, as I
believe it will, and terrorist cells turn various
cities into tinderboxes or
death wards, the world could be set back 1000 years. 
Perhaps this is the
unavoidable consequence of our getting knowledge
without gaining wisdom.  I
can pray for sanity, but am pessimistic

********************************************

Jimmy -

Only a couple problems with your analysis.  One, it
doesn't apply to Bin
Laden and his buddies.  While the stereotype terrorist
are poor, Bin Laden
and his buddies are not.  They have millions of
dollars and access to
billions of dollars.  They also have access to media
outlets.  Secondly,
99.9% of poor and unconnected people don't perform
terrorist acts.  They go
about their business of survival.

Next, I hate to use this term but I do believe there
is "irrational evil" in
the world.  Bin Laden, Hitler, Stalin - these guys
had/have money and media
resources.  They were just evil, crazy people who were
able to command
masses of people to do unspeakable acts.

Noting my comments above, that is my only protest
against the war in Iraq.
I think the world will be better off with Saddam out
but do we need to kill
the average Iraq citizen and soldier?  I go to your
golden parachute
comment.  I can't believe that we can't convince
Saddam to leave power with
a few dollars and a summer home in South America.

*************

as for the terrorist discussion:

While I agree that being poor makes a difference these
terrorist are not
looking for $'s.  I believe misguided religious
theme's might be more of an
issue.  While I don't believe the religion of Islam is
evil, I believe that
evil people can use these religious themes to
motivate.

The 99.9% of the poor don't perform Terrorist acts
around the world relates
to reality that a majority of all third world nations
have severally poor
people and that western countries have very poor
people yet they don't
perform terrorist acts.  I.E. homeless America's,
kid's from Calcutta and
black in South Africa aren't blowing up building
through-out the world.
It's a very radical and misguided sect of individuals
in a few countries.

**********************

Very interesting points.  I think that poverty and
lack of
education/information lead to the isolationism in many
countries and are the
main drivers of fanaticism leading to terrorism.  I'm
amazed by the gap
between the ruling classes and the ordinary citizens
in many of these
nations.  I read an MSNBC article a couple weeks ago
that described the life
of Kim Jong-Il, the North Korean dictator.  The man's
wealth and lifestyle
would make it difficult for the U.S. or any other
country to convince him to
accept incentives for accepting international
sanctions.  While most of the
nation is starving, he is spending on a lavish
lifestyle and further weapons
research.  With an irrational craving for power and
little room to gain in
personal fortune, dictators like this would want to
retain the status quo. 
They think the golden parachute is already theirs.

I'm hoping for continued U.N. discussions leading to
an agreed-upon deadline
rather than an independent invasion of Iraq. 
Hopefully there is still a
chance war and its political consequences can be
averted.

*************************************

that was a pretty interesting piece with a
number of ideas well worth developing. I could
probably take some of his arguments and make a journal
article-or he could. If I did do that, I'd acknowledge
him at least as a source. If he is interested in
pursuing this further, he also ought to run some of
these ideas by Barkley who knows quite a bit about the
literature on asymmetric information as well as on the
history of the ME and the reasons for various failures
of regimes. I had made a very similar point to my
International Political Economy class the other
day-though I did not explicitly bring in the finance
problems.

I had some quibbles, and a few quarrels, but I like
his motif of putting this into the framework of
misaligned incentives and information asymmetries. My
main objection is his premise that opennness will
resolve these problems. It is not necessarily so and
that I think is a big part of the problem.

Openness in trading and financial markets is not
creating the sorts of payoffs and incentives that
would forestall terrorism. There is a lot of history
behind this as well-the failure of Nasserism. The
problem is that since Nasserism has failed, people are
looking for alternatives. In the ME you basically have
two alternatives- a secular, democratic market based
economy or rebuilding society around Islamic
principles (or someone's skewed interpretation of
Islam). The latter means that you have to wall
yourself off from the secular, democratic market based
world becuase fundamentalism and democratic market
based economies cannot really coexist if
fundamentalism is the ordering principle of society
(as opposed to fundamentalists simply living their
lives in the context of a society that intrudes on
their values).

So what is he missing? Uncertainty-it is not just
about quantifiable risk. A movement towards openness
does not always and automatically improve the level of
living for everyone and also causes rapid loss in
status. So the golden parachute you need is not simply
for a few leaders-but for a whole segment of society.

Anyway, I thought it was a thought provoking piece
that deserves some further exploration.

***********************************

Jim, I really enjoyed reading this.  Good perspective. 
I forwarded it on to several friends, who have already
sent back very positive reviews.

Working a mile from the Pentagon, I watch a little too
much CNN.

************************************

Of course you are correct.  We have been doing wrong
thinking
believing we can make our world saver by whacking bad
guys with
dangerous toys.  There is very little record that
works...otherwise we
would not have some many of them, that they seem to be
multiplying and
whatever toys they have scare us.

Sharon's policies breed terrorists.

Bush's policies in Afghanistan breeds terrorists (and
poppies).

George III's policies bred Green Mountain Boys.

And Pope Innocent III policies bred yeoman with
crossbows killing
knights (funny story about the failure of disarmament
in the 13th
century....bad to allow crossbows because any clunk
without proper
fighting/religious training could pierce the armor
with the
crossbow...oh yes, Innocent III said OK to use
crossbows on infidels.

So we know what does not work, conclusively.  Anything
else has a
higher probability even is still small.  UN says it
would take about
$34B/yr. to eliminate hunger and disease everywhere in
the world, less
than 10% of the US defense budget.  Let's try
"draining the swamp."

Financial incentives are fine and financial literature
has not yet
made good crossovers between straight financial
incentives and those
more nearly non-, as in business people endow schools
to get their
name over the arch....foregoing a financial return for
a memorial when
they are not even around.

I once tried to measure "good companies" in terms of
social behavior
in comparison with stk mkt performance thinking that
cos. that planted
trees in the parking lot should have happier
employees, at least with
more O2 in their lungs...hence higher stk prices.  The
research method
had such flaky data that we gave up.

Note there is a $25 mil reward for bin Laden (dead or
alive...and in
Texas style GWB wanted his head in a box so (per Bob
Woodward) the CIA
sent a team to Afghanistan with a special dry ice box,
a pike inside
for mounting and $3mil in cash to distribute...who
said we are not
medieval?

Back to the $25mil...now we say that he is in such a
poor portion of
Pak/Afghan that the people in those hovels don't
realize that $25mil
is worth something (I don't believe that...the
warlords know the worth
of $25mil).  Instead we should offer 3 sheep, 2 goats
and a wife
(bought with a couple of pigs).

If you offer Saddam a chance to live on the Riviera
for the few years
he has remaining, he would not believe the CIA would
not kill him, the
intl court in the Hague might assert jurisdiction and,
on the other
side, a chance to die gloriously leading the ME in its
fight to
humiliate the US...he'd take the last I think.

Glad you wrote, Jim....all best,

*********************************

In all seriousness, these countries need economic
help.  They need education.  And most of all, sense
of purpose and belonging.

Bringing views in the world together is globalization.

*************************************

Thank you for forwarding this on to me as well as the
other subscribers.
I'm jealous of the resource I had while attending
school and appreciate
having tidbits of it in letters like this.
I agree with your assessment that we have no choice
but to combat the source
and I think that we need to eliminate the isolationist
bias we harbored for
the last decade, especially as it relates to the
MidEast.
Disinformation and poverty, I believe are the root of
the problem.  How to
combat that?  Throwing money at the problem has never
been an adequate
solution as is evidenced by our domestic welfare
system.  Globalization is
the only answer.  Free trade with strong controls by a
powerful and
respected WTO that honors intellectual property, etc.
is essential.
However, with the MidEast it isn't even in the
vocabulary yet.  Similar to
Asia of yester-year capitalism is a foreign concept
and the sacrifices
inherent in making capitalism work are too far removed
from eventual reward.
I agree that information asymetry is barrier number
one.  The unfortunate
reality of this war is that it is necessary to open
expose the MidEast to
the 21st century and 21st century ideas.  Eliminating
a dictator (Hussein,
Kim)holding power by censureship is step number one. 
Occupation that is
founded on education, while careful not to be
percieved as a missionary is
step two. International investment is the final
necessity. With open
information I think a quasi-democratic nation will
emerge and be the corner
stone for the emergence of the middle east as a
respectable region.  This
may not happen in my lifetime but should hopefully
progress.  Same goes for
Cuba, Iran, Venezuela, N.Korea.  Suppressive
dictatorships founded on
censureship and meglamania can't be allowed to
persist.  Whether they choose
to be democratic or more socialistic rule should then
be left to each
nations culture, religion, ideals.
THanks for reading my ramblings.
Love the newsletter and I appreciate your time/energy
commitments.
***************************************************************
I couldn't have said it better myself.  At the heart of terrorism and anti-western thought is the feeling of exploitation and hopelessnes that abounds in this world.  I don't think $ will solve all the problems.  Just as the World Bank attempts to bring the third world into the twenty-first century, open markets are a start.  What do the statistics on Eastern Europe tell us?  I am positive that the standards of living have improved, but not without some problems.  But that is also a culture that is similar to ours, Mostly Judeao-Christian religion.  What we fail to realize is that as a nation we cannot eliminate our enemies-we have to learn to live with them.  I think unless the leaders in these countries develop some morals and ethics $ will only tend to strengthen their grip on power.  We as a country have embraced certain rulers who in some instances are no better than the "tyrants" we try to run out. ie Nicarauga, El-Salvador, Panama - Saudi Arabia - the Shah of Iran etc.  I don't have an answer only questions.  Can you ever stomp out poverty?  The riots in LA were not about OJ but about feeling hopeless. An interesting book that I have, that my brother gave me is Jihad vs. McWorld.  The author talks about the McDonald's mentality vs the rest of the world - I don't neccessarily agree, but it does have some interesting thoughts.

One final thought - As a christian, I see the world through Jesus' eyes (attempt to) the world is lost without Jesus Christ.  If you believe in Revelations, you can see many parallels with that book and our present times.  Who do you turn to if you can't turn to our lord and saviour?  I guess if I could "fix" the world I would.  But since I can't I shall try with the Lord's help to make it a better place.  Thanks for writing down your thoughts-  I'll try to get you the author of that book when I get home.  Have a great day

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