The Interplay of Economics & Defence

Author Name: Hassan Mujtaba      04 Nov 2020     International Economy

The second week of October unfolded as a sombre one for Pakistani citizens, especially our Armed Forces. On Thursday, October 15, terrorists ostensibly from banned outfits attacked and killed members of the armed services in two separate incidents while performing their duties.

In the first event, a convoy of Oil and Gas Development Company Limited (OGDCL) was attacked on the Makran Coastal Highway (running from Karachi to Gwadar), and in the ensuing ambush, 14 soldiers were martyred, 7 of whom belonged to the Frontier Corps (FC). In a separate event later that day, six soldiers, including a junior officer from the Pakistan Army, embraced martyrdom when their convoy struck an Improvised Explosive Device (IED) in North Waziristan.

These recent attacks are another addition to the long list of terror activities perpetrated against Pakistan at the behest of foreign powers for quite some time now. It is a distinct modus operandi of Pakistan’s enemies and regional rivals to target not only institutions of the state, but also symbols of Pakistan’s progress and economic development.

Economic drivers often become targets of violence.

It is no coincidence that the terrorists ambushed officials of the OGDCL, a public sector company that is responsible for the supply of oil and gas—a key primary resource—used in various industries and economic sectors of Pakistan. Earlier, in June 2020, terrorists from a separatist militant outfit stormed the premises of the Pakistan Stock Exchange (PSX) in an emblematic attack on Pakistan’s apex capital market located in the business district of I.I. Chundrigar Road, often known as the ‘Wall Street’ of Pakistan.

The targeting of economic symbols or institutions by terrorists is neither new nor unique. Take the September 11, 2001 attacks, where enemies of the United States targeted both the Pentagon and the World Trade Centre (WTC) on the same day in a symbolic fashion that is hard to miss, since the former is the defence stronghold of the US, while the latter epitomized its economic might.

These examples prove that throughout the world, states and non-state actors often strategically attack or damage the defense and economic institutions of their rivals simultaneously, as one cannot sustain or survive without the other. This is because a strong but unprotected economy or regional market is vulnerable to the belligerence of forces antagonistic to its progress. Conversely, a well-endowed and Spartan military in a weak economy ultimately risks crumbling under its own weight.

What is the possible causation implicit in this defence-economy relationship? Does a robust economy lead to an impregnable defence or is a strong, secure state the prerequisite for economic growth and development? As with many issues in the Social Sciences, this question too is intricate and may be a mutual causality.

For instance, the Great Depression of the 1930s eroded the robustness of the British economy, which enfeebled its military, thereby, causing the empire to lose grip over its overseas colonies. The empire on which the sun never set, became so incapacitated that in less than a decade, it withdrew from almost all its colonies and lost the status of a global superpower.

Similarly, in the 1960s, the US government borrowed heavily from its central bank to finance the Vietnam War leading to a rapid depletion of its gold reserves. It forced the US Federal Reserve Bank to shed the gold standard and float its currency which when juxtaposed with rising oil prices, spelled disaster for the American economy. Unsurprisingly then, the dwindling coffers forced the US to withdraw from Vietnam in a manner that caused it an international embarrassment.

However, the causality runs in the other direction as well, with several case studies from around the world. Consider the example of Libya under Muammar Gaddafi. Before Gaddafi’s rule, Libya was one of the poorest countries in Africa with very high levels of illiteracy and low social development. However, after Gaddafi overthrew the foreign-controlled Sanusi monarchy in 1969, he undertook sweeping economic reforms that led to considerable development, economic growth, and welfare of the common people. Under Gaddafi, Libya rose from economic nadir to become a country with the highest Human Development Index (HDI) in Africa in 2011. Moreover, Libya came to be recognized by the United Nations Development Program (UNDP) as a high development country in 1995. In fact, at one time, Libya had fewer people living below the poverty line than the Netherlands! Unfortunately, however, Muammar Gaddafi significantly underinvested in the Libyan military fearing another takeover. This encouraged his enemies to invade—which they did—and oust Gaddafi besides rolling back Libya’s economic progress.

A clear-cut cause-and-effect relationship between defense and the economy is difficult to establish. However, there are other novel approaches to look at this interrelation. For example, Karl Marx (1818-1883) would have asserted using Hegelian dialectics that the economy and security ‘over-determine’ each other i.e., the economy shapes security and security shapes the economy dynamically along with a plethora of other factors. This approach is more flexible and qualitatively different from the econometric investigations of cause-and-effect that are derived from the philosophy of ‘formal logic’. So, while it is difficult to ascertain the exact nature of their relationship, one fact is certain: security and economy are twins - one cannot exist without the other.

Hassan Mujtaba is a Researcher in the Economic Affairs section of Centre for Aerospace and Security Studies (CASS). This article was first published in The Business newspaper.  He can be reached at


Image source; harrier-cargo3

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