Foreign Direct Investment and Pro-Government Militias: Understanding the ‘Pro-Business’ Effects of State-Sponsored Terrorism

Scholarly investigations have typically highlighted the acutely negative economic effects of political violence. This includes terrorism, which, according to the relevant literature, is understood to severely inhibit key economic processes such as flows of Foreign Direct Investment (FDI). However, evidence suggests that political violence does not inhibit FDI flows; in fact, studies suggest that, in some countries, higher levels of FDI inflows are recorded during times of political violence when compared to periods of peace. Nuancing the debate, Powers and Choi have argued that ‘business-related terrorism’ (e.g., terrorist attacks that target or affect the buildings, products, employees, etc., of transnational corporations) has a negative impact on a country’s ability to attract FDI; however, ‘non-business-related terrorism’ that is not targeted at the interests of foreign direct investors has no significant effect. While attempting to nuance the debate, this conceptualization overlooks the possibility that terrorist activities might benefit processes of economic development such as FDI. In this light, this paper argues that many studies into terrorism and economic development – similar to literature on other types of political violence such as civil wars – are typically underpinned by a liberal assumption that violence and processes of economic development are incongruent. In contrast, by adopting a critical approach appreciating the often-violent tendencies of global capitalism, this paper argues that particular types of terrorism can facilitate economic processes such as FDI by creating conditions that are favourable to foreign investors. It is then argued that terrorism perpetrated by Pro-Government Militias can often constitute this type of terrorist violence, with acutely negative effects on large swathes of civilians. In this light, this paper argues that while terrorism may indeed be ‘business-related’ or ‘non-business’ related, a third category needs to be considered: ‘pro-business’ terrorism.