Jun 08 2009

institutions of trust in piracy and terrorism

by at 8:05 pm under Uncategorized

We can transpose Greif’s comparative analysis of disparate economic groups to look at two of the emerging models for economic activity among the bottom billion. The two groups I have in mind are Al Qaeda and the Somali pirates. Although, at a first glance, these two networks may appear to be motivated more by destruction than by production and distribution, I would argue that we take a closer look, at the cultural grounds of each collection of actors. We may find that by comparing the structures and behaviors of each group, we can shed a great deal of light on the growth of economic institutions today. But first, we should generally characterize the cultural background of each group.

Somali piracy has existed next to Somali fishing for at least twenty years, since before the Somali Civil War. Part of the initial capital that funded the acquisition of boats and other equipment came, ironically, from international development aid money, which was re-channeled from its intended uses through corruption and other self-reinforcing economic mechanisms. This points to a lack of third-party enforcement of the norms for applying such funds in Somalia. At any rate, with or without those contract-enforcing institutions already in place, groups of pirates began to evolve into the sophisticated, tight-knit organization controlling so many ships in the Gulf of Aden today. The material wealth and social swagger associated with that wealth might both be seen as ends in themselves for the individuals of this network, which characterizes this as an individualistic sub-culture. The implications of such individualism become apparent in the types of trust that can be formed among pirate groups, and between the pirates themselves.

Al-Qaeda is an international Sunni Muslim organization, founded around 1988. Its description as a “terrorist network” has become one of the most popular articulations of what constitutes a “network” in recent memory. It is no accident that the English translation of the group’s name reads, “The Base,” although theoretically one member of this group has few, if any, horizontal connections to others at their own level of seniority or expertise. Members of Al-Qaeda are bound not only by their religious principles; the group’s economic activity has been estimated in the tens of millions per year by the 9/11 commission report. Again, it seems that much starter capital was invested into this now-illegitimate group by way of international (in this case, US) aid. Since much of that activity is illegal in the countries in which it is performed, and since so much of that activity demands secrecy, even and especially within the group itself, the formation of trust in this complex network of interactions, at once isolating and communitarian, gives rise to some peculiar institutions.

While not as dense as those across the Atlantic or Pacific, the shipping lanes in the Middle East are crucial to world trade.

While not as dense as those across the Atlantic or Pacific, the shipping lanes in the Middle East are crucial to continuous, volatile world trade.

We can apply Greif’s description of how private- and public-order, organic and designed, contract-enforcing and coercion-constraining institutions come about to compare these two groups. The degree of contact between these two networks is unknown, but whether we assume interaction from zero to constant, we may still differentiate between the two organizations on the basis of their internal structures. At any rate, we can infer that among the Somali pirates, trust is formed by mechanisms similar to those of the Genoan traders; as the cultural grounds of the group demand that each member do what is in their own best interest, incentives for trust among members of one crew are constrained by the amount of capital the group as a whole can command. In other words, the pirates are motivated to work together rather than by competition amongst themselves in order to increase the total market share available to each of them as a result of that collaboration. Conversely, punishment for disobedience or dissent — in these terms, we are speaking of punishment for breaking the other pirates’ trust — would take the form of temporary sanctions such as physical violence, rather than complete expulsion. This is because it is more valuable to the group to continue to include one member who has cheated and yet still helps the group as a whole to bring in higher returns, than to exclude that member and suffer the overall loss to the group’s earning potential. Thus, the primary institution for forming and maintaining trust among Somali pirates seems to be based on each individual’s own interest in the group’s performance — we are dealing here with public-order, organic contract-enforcing institutions.

Contrast this with the institutions of trust among members of Al-Qaeda, which must conform to and arise from the culture and structure of that organization. Among various terrorist cells, information cannot flow freely, since no singular cell can know to whom they are related, outside of certain invaluably close ties. In other words, since the weak ties among cells at a horizontal level are unknown, there are already deep seeds of mistrust towards those who are not known to be immediately subordinate or superior to the cell in question. Thus, the communitarian aspect of the organization has less effect on the organic formation of trust than does its vertical, isolationist aspects. It follows that strong, formal codes of behavior are necessary for the group to maintain trusting bonds among its operatives, especially among those who are unsure of one another’s identities. These formal codes may take the form of passwords, or go-betweens such as immediate subordinates or superiors. By using private-order, designed contract-enforcing institutions, the members of Al-Qaeda are able to maintain trust among themselves, although this increases their transaction costs in the process.

These two groups are certainly outliers in the global economy. And yet, their impacts on physical resources such as buildings, ships, farmlands, and fisheries are clear punctuations of any sense of global equilibria. On top of this, the cultural impact of these groups is not only local. Larger governments must devote vast resources in order to respond to the actions and threats of these two networks. Such spending has its own effects, and so the complexity only grows. Understanding the institutional basis of trust within these groups carries the potential to restructure nations’ relations with these non-state actors. This is a step into the interstices of global politics for those nations’ governments, an area as fluid and unpredictable as the deep seas of the pirates’ domain. Still, with that uncertainty comes opportunity to change the direction of history.

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