URBAN TAKEDOWNS

A rapid increase in urbanization and the proliferation of megacities are salient trends of global economic development since WW2.  These trends will be exploited in this war.  Cities are both the center of gravity of modern urban economies and extremely vulnerable to global guerrilla systems sabotage -- the leveraged infrastructure that cities rely upon is the perfect target. 

It is therefore important to understand what provides cities their cohesion and why they collapse.  In a departure from 4th generation warfare (4GW) theory, this cohesion isn't provided by moral factors but rather economic.  A good source of insight into the economic factors that hold cities together, is a post 9/11 report by James Harrigan and Philippe Martin of the Federal Reserve Bank of New York (PDF).  Their analysis indicates the following:

• Cities form when aggregation is economically advantageous to both firms and workers. 
• A city's size (its population of both firms and workers) is maintained through a market equilibrium, where the benefits of aggregation are balanced with the costs. 
• Ongoing insults to this equilibrium, in the form of a terrorist tax, can cause a city to decline (disaggregate).  This decline is defined as a transition to a new stable market equilibrium at a smaller size. 

A Terrorism Tax

A terrorism tax is an accumulation of excess costs inflicted on a city's stakeholders by acts of terrorism.  These include direct costs inflicted on the city by terrorists (systems sabotage) and indirect costs due to the security/insurance/policy/etc. changes needed to protect against attacks.  A terrorism tax above a certain level will force the city to transition to a lower market equilibrium (aka shrink).  So, what is that level?  Here's what they concluded:

• Singular terrorist events (black swans), like 9/11, do not impact city viability.  The costs of a singular event dissipate quickly.  In contrast, frequent attacks (even small ones) on a specific city can create a terrorism tax of a level necessary to shift equilibiriums.
• In the labor pooling model of city formation, a terrorism tax of 7% will cause a city to collapse to a lower equilibrium.  Labor pooling equilibrium reflects the benefits of aggregating workers in a single location.  Workers get higher wages and more choices.  Firms get stable wages (no one firm can deplete the market) and more candidates.
• In the core-periphery model of city formation, a terrorism tax of 6.3% will push a city to a lower equilibrium.  The core-periphery model is based on transportation costs.  Firms generate transportation savings by concentrating in a single location next to suppliers and customers.  Customers and workers glean the benefit of lower transportation costs by locating near jobs and goods.

Case Study:  New York City

The models used above are likely insufficient to fully explain why a city is in equilibrium.  However, it is good approximation.  As a rule of thunb, a terrorism tax of 10% would be sufficient to push a city to significantly lower equilibriums -- it would cause workers and firms to leave the city for other locations until it ceased to be a target or expensive to defend. 

If we apply this model to NYC, the terrorism tax necessary to collapse the city would be $40 billion a year (10% of NYC's $400 billion a year economy).  London is $23 billion ($236 billion), Paris is $13 billion ($131 billion), etc.  As large as these numbers are, it isn't hard to see how quickly they could mount.  For example:  the northeast blackout of 2003 indicates that a power loss to NYC costs ~$1 billion a day.

Comments

[name]

judging by the results attained, the terror tax the marines applied to fallujah must have been far over 100% of the former economy of that city, because not only did everybody go away, but it is dubious that the city will ever re-emerge as a viable place to live and to work. a rather sad end for the place which gave us the talmud.

[Cardenio]

How does Crime fit into this equation ?

[John Robb]

Good question. In these equilibrium models, the current level of crime is already factored in on the cost side. If shortages develop due to systems disruption, a large black market would form. That increase in crime would act synergistically with the guerrilla activity as part of the "terrorist tax."

[tex]

So, is Baghdad shrinking?

[usher]

What about Israel, what is the terrorism tax there and has it caused its cities (or even the state as a whole) to shrink? Did IRA attacks on London impose enough of a tax and if so did it shrink? I don't pose these questions rhetorically, I think it would be an interesting subject for analysis.

[John Robb]

More good questions. The key to the analysis is that the attacks need to be focused on the city. If the level of violence is spread out across a larger region, there isn't any advantage to leaving the city for other locations.

To a certain extent, this analysis does scale to a national level. We see it going on in Iraq right now (tens of thousands of professionals have left for Amman and other locations).

[Charlie]

Bombing strategy in WW2 showed a similar dichotomy of intent: on the one hand, there were bombing raids aimed at destroying the enemy's industrial capacity; on the other hand, there were raids aimed at frightening the enemy population and breaking their will to continue.

Londoners' courageous response to the Blitz is similar to that of Israelis to the suicide bombing campaign. Direct attacks on an opponent often result in stiffening his resolve.

Bombing his industrial plant (which in the global guerrilla variant means disrupting key nodes in his network) is a more indirect approach and more likely to succeed.

What explains the stiffened resolve of a directly attacked population? Perhaps it's the cohesiveness or sense of self-identity of the group? The attack heightens the sense of us versus them, and this focuses and strengthens the will rather than weakens it.

This is happening in Iraq too, but not on the US-backed side. The US and its allies are "them".

[Paul Nelson]

Without ignoring the short-term costs, wouldn't the dispersion of economic activity to more nodes ultimately result in a more robust, less vulnerable system? NYC loses, but the US gains?

[case]

A little off-post, I know: do you give much credence to recently voiced fears that insurgents in Iraq will use low-tech thermobaric devices as mass casaulty options in urban areas?

[Cardenio]

What's a ' low tech thermobaric ' weapon, other than leaving the gas on and then lighting a match ?

[Andrew Batwash]

Has the terrorism tax effected Israel as well? I was under the impression that Israel is stil attracting Jews from all over the world despite the surges in violence over the last five years. Additionally, are there methods to inure a city from the effects of a terrorism tax, especially if the city is locked into a guerrilla conflict for the foreseeable future?

[WeSaferThemHealthier]

Well, they're from all over the world but that doesn't mean there are many of them. Look at the net migration rate for Israel and then compare it to say, Canada's:
http://www.cia.gov/cia/publications/factbook/geos/is.html#People
http://www.cia.gov/cia/publications/factbook/geos/ca.html#People

Even Russia's rate is higher than Israel's:
http://www.cia.gov/cia/publications/factbook/geos/rs.html#People

There is also, as you must know, the effect on tourism.

[cmm]

This thread seems similar to the impact of crime rates. I saw an interesting article:

http://www.foxnews.com/story/0,2933,105954,00.html

showing wide discrepancies of the estimated murder rate in Iraq. The closest apples to apples estimates show Iraq at a comparable to South Africa and some bad neighborhoods in the U.S. Unfortunately, there's not much quality data for the murder rate in the Saddam era. Questions: Does anyone know if the Iraqi murder rate is lower post Saddam or higher? Shall we declare that Washington D.C. is in a state of insurgency?

[jimw]

Seems like there are other variables to consider:
- longevity of impacts from an attack (longer term low/mid-level effects are more costly than short term high effect)
- cost of transition of infrastructure to a new location ... or even viability of doing that ... how would you really move the NYSE? (until it is fully an electronic-only exchange, that is)
- perceived intangible value to the nation of maintaining the city ... govt will probably go out of its way to keep biz there if the city matters to it and if the govt or national identity has any weight and/or funds
- sense of the threat emanating from outsiders who could conceivably be excluded vs threat from other city dwellers who you can't get away from other than by simply leaving
- similarly, sense that the tactics/weapons used in attacks are foreign and excludable vs being intrinsic to the nature of a city ... you can keep guns out of an airport, but not people; you can use sensors to find and thus prohibit certain kinds of weapons, but not everyday instruments of life

[Kim McDodge]

It seems to me that destablizing the City's community cycle is an indication of disintegration from both within and without. In an ecology that is exhausted, internal forces can destablize an overextended economic system as easily as external 'enemies'. In our City, this drama is being enacted:

http://willametteweek.com/story.php?story=5899&page=4

[Sam]

The US taxpayers are subsidizing the State of Israel with a crapload of money and goods (weapons mostly).

[Michael Parekh]

Great post and follow-up discussion...curious as to how the equilibirum number of 7%, 6.3%, etc. were arrived at...are there systematic studies done on these types of events?

thanks.

[Jean-Philippe Barrière]

It is interesting to estimate how much damage should be done to a city before it shrinks. But even if the target of a 7% terrotist tax is not reached, if a terrorist group can market a city as unsafe and troubled, the city will stop to grow, at least it will be more difficult to attract business. The perception we confer to a city has to be factored in.