THE ‘PRICE’ OF TERRORISM

Security measures are said to increase the price of terrorism. This price has not been hitherto defined in an economically meaningful way. This paper provides a precise definition by treating the terrorists’ resource endowment as a parcel of contingent claims to political influence with a price equal to the summed value of those contingent claims in potential states of the world. Equipped with this definition, an equilibrium model of the price of terrorism is deployed. Important insights are gained into the effect of terrorists’ risk aversion at the level of the price of terrorism in different states of the world and the theoretical conclusion is reached that higher security is associated with a lower price of terrorism rather than a higher price. The implications for policy are discussed.     

An Unlikely Alliance: Portuguese and South African Airpower in Angola, 1968–1974

The war that Portugal was obliged to fight in Africa began in 1961 and immediately stretched the resources of its armed forces. Nowhere was this thinness more apparent than in policing the vast territory of Angola. The east and southeast of Angola were particularly vulnerable, as the area was a vast, sparsely populated region characterised by enormous featureless plains or chanas covered in tall grass and broken by an extensive river system and mountainous forests. The only military solution to policing these immense spaces was aviation and specifically the helicopter that could carry troops into battle, protect them with a gunship and bring them home when the operation was concluded. The immediate problem for the Portuguese Air Force (Força Aérea Portuguesa or FAP) in Angola and elsewhere was a scarcity of helicopters. The solution was an alliance with South Africa, which had a strong inventory of Alouette IIIs, to help in policing the east. This move was likewise in the interest of South Africa, as its threat came from Zambia through south-eastern Angola. This article examines the strategic and tactical development of this unusual, cross-cultural alliance and the symbiotic relationship that resulted in destruction of the enemies of both in Angola.     

Measuring hard power: China’s economic growth and military capacity

China’s rapid economic growth is facilitating massive increases in its military spending and causing increased security concerns in Asia and the Western Pacific. But there is uncertainty over how large China’s military spending is relative to other countries, or how fast it is growing in real terms. We address this issue by deriving a relative military cost price index based on the relative unit costs of inputs. We find that China’s real military spending is much larger than suggested by exchange rate comparisons, and even larger than standard purchasing power parity comparisons. We also find, however, that the real growth of China’s military spending has been smaller than conventionally thought. This is due to rapidly growing wages in China and the large share of personnel in China’s military budget.