It is becoming clear as we move further away from the Cold War years and confront new geopolitical threats that there is a high correlation between the level of asymmetrical threat from a country and the hopelessness of life in the country concerned. Thus North Korea is a country from which threats to our existence (if we inhabit a major U.S. city) are only too apparent, whereas any threats from China and India are much less immediate, even though both countries have a nuclear arsenal many times North Korea’s. The consequences of this correlation for our economic development priorities are considerable.

We can no longer assume that terrorism will be safely confined to a tiny minority of fanatics, or that even the most dangerous weapons will not fall into terrorist hands. The proliferation of terrorist groups in the last 30 years, combined with the proliferation of nuclear powers since 1998, some of them increasingly irresponsible states, has made an intersection of a terrorist group and a nuclear capability more or less inevitable in the not-too-distant future. The only saving grace is that the nuclear weapons currently available to terrorists are of relatively low power by nuclear standards, while delivery methods pose them another and by no means trivial problem, so that any nuclear attacks in the near future are likely to be isolated incidents rather than harbingers of all-out assault. However North Korea has demonstrated that economic impoverishment is no reliable barrier to nuclear ambition.

It has also become clear, through developments in China, India and Vietnam, that while rapid economic growth and integration into the world’s trading and financial systems does not cure international tensions, it greatly lessens the likelihood that they will escalate into full scale aggressive war, either directly or through terrorist surrogates. By looking at the world’s economic development profile, we can thus determine where future outbreaks of terrorist/rogue state activity might arise.

In the eastern half of Asia, there are now few economic basket cases. China and India have soared into prosperity and Vietnam appears to be following them. While Philippines and Indonesia remain of concern, both are currently competently governed and moving more forward than back. Sri Lanka remains a problem because of its ethnic divisions, but its economic growth rate suggests it too may grow itself out of trouble.

In all of these countries there has been no significant terrorist or nuclear threat to the West. They have managed to maintain control over their societies and focus the attention of their people on getting rich and acquiring Western consumer goods. As these societies get richer, their threat to international order lessens, though that might change if they suffered a major economic setback, as did Germany in 1929-33.

The few “basket case” countries of eastern Asia are considerably more threatening. North Korea has a population of only 23 million, and suffers frequent famines, yet has a nuclear capability that is able to force U.S. negotiators to at best a draw. Myanmar and Bangladesh, not currently on the world’s terrorist radar screens, are just as worrying. Myanmar is as poor as North Korea with a per capita economic growth rate of 1.5%, has a government only marginally less paranoid than North Korea’s and a population of 47 million, double that of North Korea. Bangladesh, where democracy has recently been suspended with both major democratic parties in disfavor with the electorate, has a population of 147 million, rocketing up at over 2% per annum. It is only marginally richer than Myanmar and North Korea and has a largely Islamic population (a contributing but not a controlling factor.) Its only savior currently is its economic growth rate of 4% per capita per annum, but if democracy is not restored satisfactorily and Bangladesh suffers a slump, it may become a very serious source of world unrest.

There is probably less threat from Middle Eastern countries while oil prices remain high. Iran, for example, has a relatively educated population and substantial oil wealth; if it co-operated with the West it could be very much richer than it is, as those with memories of the Shah’s reign know. To Iran, unlike to North Korea, the “carrots” which the West could offer in terms of foreign investment and consumer goods can be very enticing indeed. A nuclear attack on Israel, for example, which cut off Iran’s ties to the West and brought economic destruction to Iran, would hugely damage the standard of living that ordinary Iranians already enjoy.

Hence in the long run Iran is likely to be a much less threatening source of terrorist outrage than North Korea or even Bangladesh. A sharp drop in oil prices would however change this picture considerably; the oil does not directly benefit the Iranian populace since its benefits are kept by the government, but the combination of an impoverished government and a deep recession, while radical Islamists still controlled the country, would be dangerous.

Turkey is also unlikely to be dangerous while growth persists, although there it is a sharp further rise in oil prices that poses the principal economic risk. Pakistan is a borderline case – although growing rapidly it remains very poor and its population growth rate is more than 2% per annum, far too high for its economy to be stable. In Pakistan also, there is the threat of a return to democracy. President Pervez Musharraf cannot last forever, and past experience has shown Pakistan’s democratic governments to be economically illiterate.

In Europe, even the poorest countries are far enough from destitution to avoid terrorist action; the only dangers are from pockets of poverty such as Bosnia or Kosovo, or from impoverished and disaffected minorities within a mainly prosperous country, such as the Moslems of the Paris banlieus or the Birmingham slums. It is likely however that policing methods and society’s adaptation mechanisms would be sufficient to prevent more than localized outbreaks.

The former Soviet Union is an interesting case. Russia itself should be wealthy enough not to engage in terrorist activity, strong though the temptation may be for Vladimir Putin and future Russian leaders to gain political strength through radical posturing and alliance with terrorist forces elsewhere. However outside Russia in the impoverished states of Central Asia there are a number of countries which if sufficiently radicalized might well take up terrorism; geography makes their future prosperity very problematic.

Africa is a different story. Here the majority of countries are highly impoverished, with high population growth rates, poor governments and economic stagnation that combine to make them dangerous. In the past, there has not been a sufficient radicalized intelligentsia in Africa to cause significant terrorist trouble worldwide, but the spread of multinational education means that the West cannot assume that a relatively wealthy terrorist elite will not seek to radicalize the impoverished population as a whole. Such countries as Sudan, Islamist and home to a civil war, Eritrea, Islamist and radical, and Nigeria, partly Islamist and highly corrupt, are all potential nexuses for terror to a much greater extent than the oil-rich states of the Middle East.

Finally, Latin America should not be ignored. The electoral successes of Hugo Chavez in Venezuela and his allies in Ecuador, Bolivia and Nicaragua have already demonstrated the continent’s penchant for radicalism and self-defeating economic policies. Economic growth has been poor for the last quarter century and in some countries such as Venezuela and Argentina for the last half century, while income distribution is atrocious, producing the potential of a mass radicalized proletariat. As the popular reaction to the 9/11 attacks showed, the Latin American people do not naturally have pro-American instincts. Hence the continent is likely to prove a fertile ground for terrorist recruiting, and its inhabitants are likely to perpetrate an increasing share of terrorist atrocities against both the United States and Europe in the years ahead.

Thus there are plenty of countries where current living standards and economic growth rates are insufficient for the local populace to exert a worthwhile restraining influence on a radical terrorist-friendly government. Many of those countries have little or no connection to Islam. This has implications for U.S. and EU foreign policy, but also for international development policy.

Each country which becomes a Vietnam, emerging into rapid economic growth and increasing commercial links with the world, is one less country where terrorism can potentially incubate. Thus the West has an urgent need of more Vietnams, in particular in countries like Bangladesh where excessive population growth, deep poverty and Islam produce a fertile ground for terrorist activity if the wrong leadership emerges.

Nevertheless, the long term trend if world economic growth continues is towards fewer potential terrorist states, not more. Countries that are fully integrated into the world economic system, with large percentages of their citizens relying for their livelihood on work generated through an international market mechanism, are unlikely to become terrorist havens. Oil or mineral wealth alone may not be enough, because it can too easily be concentrated in the hands of the government, to little or no benefit to the people as a whole. An effective economic anti-terrorist program would thus include some or all of the following measures:

• A population growth reduction program with real muscle, focused on those countries such as Bangladesh with the most rapid growth and the poorest populace. Economic growth is impossible with rapid population growth, which also produces a surplus of poorly-educated young people and overcrowded and unpleasant social conditions. This is THE most important international social program of our time, more important than disease eradication and far more important than combating global warming. A world in which there are 30 or 40 impoverished radical nations, each with access to nuclear weapons, is a world that won’t reach 2100 in any form we would recognize it.
• A focus on sound economic development policy rather than democratic niceties or geopolitical considerations when choosing the governments we support. Democratic socialist governments in poor countries are a menace to the long term success of their countries’ economies, and therefore to the security of us all. Equally, pro-American strongmen such as Egypt’s Hosni Mubarak or the rulers of Central Asia who pursue economically self-defeating policies should not be perpetuated in power. If a country’s electorate repeatedly shows a tendency to vote in economically illiterate populists or religious fanatics, an authoritarian regime like that of Chile’s Augusto Pinochet, which can maintain order and provide economically sound policies for its people, is greatly preferable to any kind of democracy.
• As Iraq has shown, U.S. military intervention is often counterproductive, producing a worse mess than before, and massive U.S. economic aid is equally unlikely to produce positive results. Indeed, the histories of Vietnam and North Korea since 1975 suggest that the best policy towards a hostile regime is to ignore it altogether. If the U.S. government is not an active force in the area, anti-Americanism will normally die down and be replaced by mankind’s natural wish for self-enrichment. A U.S. foreign policy focus on a hostile radical government gives that government legitimacy and entrenches its anti-American activities. U.S.-Cuban relations since 1959 or U.S.-Iranian relations since 1979 are not a model to be copied in this dangerous world.
• Global corporate investment, of the sort that employs lots of local labor at standards slightly above the prevailing local level, is a force universally for economic development and against political radicalism. The multinationals are an enemy only to the left and those committed to radicalism and economic failure. Equally, when a host country nationalizes a U.S. company without proper compensation, as did Venezuela with Electricidad de Caracas, or expropriates foreign bondholders, as did Argentina, the appropriate response is a severe one, not a bien-pensant sweeping of the problem under the carpet. Mal-treatment of foreign direct investors lessens international foreign investment in general, thereby impoverishing all of us.

Vladimir Putin has considerable nostalgia for the certainties of the Cold War; in this new and very dangerous world one can sympathize with him. Nevertheless, there are clear economic methods available by which the danger of terrorism can over a period of a generation be reduced or even eliminated. As a benign side-effect of such policies, the poor world will at last begin to enrich itself.

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(The Bear’s Lair is a weekly column that is intended to appear each Monday, an appropriately gloomy day of the week. Its rationale is that the proportion of “sell” recommendations put out by Wall Street houses remains far below that of “buy” recommendations. Accordingly, investors have an excess of positive information and very little negative information. The column thus takes the ursine view of life and the market, in the hope that it may be usefully different from what investors see elsewhere.)