Journal of Political Inquiry Fall 2014

Fall Issue | 2014

Nauru: An Experiment
By Hannah Thomas
Nauru is an island country of less than 10,000 people, and with a landmass of a mere twenty-one
square kilometers, tucked off the shore of Sydney, Australia. In October 2014, the nation found
itself featured in The Economist for its imminent descent into bankruptcy. 1 In many ways Nauru can
be used as a case study to understand the insufficiencies of democracy, if democracy is merely
defined by elections and representation. Despite Nauru’s democratic governance structure, which
includes a unicameral parliament, elected representatives, and recognition of civil liberties, the
country still faces multifaceted instability. Its democratic institutions fall short of helping to protect
liberty and property as seen in Nauru’s impending bankruptcy. Moreover, the entire country is an
interesting case because unlike most failed democracies that can attribute failure to political, ethnic,
or social violence, Nauru has none of these conflicts but is still at high risk of being a failed state. It
is a democratic country that is confronting myriad social and economic problems that threaten its
sovereignty and the legitimacy of its government—not too different from the political and economic
challengers that arose in a nascent United States of America. Finally, the potential of other countries
(which have more significant involvement in international markets) with such problems could be a
threat to international stability. The following serves as an examination of the political, economic,
and social implications of a small island state that finds itself confronting exceptional risks to
national stability.
The political condition of Nauru can perhaps best be described as paradoxical. Freedom
House accords Nauru the highest rating for being based on representation and free elections 2 as the
country operates under a Westminster system bequeathed by its colonial rulers. 3 Despite this
“freedom,” Nauru is ravaged by government corruption. The system has generated numerous
changing of the guards in the past decade alone which has resulted in political instability amidst
allegations of political corruption, legislative stalemate, and no-confidence votes. In order to break
1"Closing Down." The Economist. October 04, 2014. http://www.economist.com/news/asia/21621873-dismal-tale-oneremotest-nations-closing-down
2 Freedom In The World 2014: Nauru. Report. Freedom House. Accessed November 03, 2014.
http://www.freedomhouse.org/report/freedom-world/2014/nauru-0#.VDs7xPnF9aQ
3 Australia. Department of Foreign Affairs and Trade. Nauru's Country Brief. Accessed November 03, 2014.
http://www.dfat.gov.au/geo/nauru/nauru_brief.html

the legislative stalemate the government had to introduce legislation to bring the number of
parliamentary seats to an odd nineteen. 4
Nauru’s unicameral Westminster system of government has very little checks and balances.
The only accountability mechanism occurs when the government is pushed out through a noconfidence
vote or popular elections. Moreover, 3 years as a time span for implementing policies is
very short. Therefore, it is no surprise that the government’s policies cater to the whims of voters.
When a large sector of the economy is public, as in Nauru, political accountability is inextricably
linked to economic decisions, therefore political risk is dependent on economic risk.
Historically, Nauru’s economy was largely reliant on the fossilized droppings of seabirds,
industrially known as phosphate deposits. Regrettably, the island’s phosphate reserves were mostly
plundered by colonial rulers. Despite this, when Nauru finally threw off the shackles of colonialism
in 1968, the country was still financially sound. 5 The Economist reports that, “After independence in
1968, phosphate exports briefly put Nauruans, per head, among the world’s richest people.” 6 But the
policies of successive governments failed at rehabilitating the land, diversifying their economy and
investing wisely in the years of abundance. Initially, phosphate revenues contributed to robust
economic growth. Australia and other colonial raiders also paid huge sums in reparations. However,
the country's GDP growth peaked in 1981, and over the following three decades, Nauru's GDP in
fact declined in many instances from the 1980s and through the 2000s. Only recently has moderate
economic growth emerged. 7 According to the Asian Development Bank, this growth is partly
attributable to the regional processing center for people seeking asylum in Australia, referenced at a
later point in this report. 8 Ultimately, unsound investments abroad and at home depleted much of
Nauru’s phosphate wealth. 9 This includes the purchase of an air fleet which was to be a national
carrier and was instead used by presidents for personal reasons at the expense of paying customers
who were left stranded at the airport. 10
4 Freedom In The World 2014: Nauru. Report. Freedom House. Accessed November 03, 2014.
http://www.freedomhouse.org/report/freedom-world/2014/nauru-0#.VDs7xPnF9aQ
5 "Paradise Well And Truly Lost." The Economist. December 20, 2001. http://www.economist.com/node/884045
6 "Closing Down." The Economist. October 04, 2014. http://www.economist.com/news/asia/21621873-dismal-tale-oneremotest-nations-closing-down
7 Nauru: Country Profile. UN Data. Accessed December 02, 2014.
https://data.un.org/CountryProfile.aspxcrName=Nauru
8 Nauru: Economy. Asian Development Bank. Accessed December 02, 2014.
http://www.adb.org/countries/nauru/economy
9"Paradise Well And Truly Lost." The Economist. December 20, 2001. http://www.economist.com/node/884045
10 "Paradise Well And Truly Lost." The Economist. December 20, 2001. http://www.economist.com/node/884045

Many of the poor economic policies of prior decades are inflicting contemporary
consequences, and this is not strictly limited to depleted resource wealth. Nauruans do not pay taxes.
Instead, they have increasingly become reliant on social welfare with schooling and medical fees paid
for by the government. Housing, electrical and telecommunication services are all subsidized. Since
the phosphate industry is state owned, 95% of employment in the country is in the public sector.
When unemployment was at 90% in 2005, 11 the government told the people that the welfare society
they were used to was no longer sustainable. 12 Today, an estimated one-third of the population is
thought to be unemployed. 13
Like many other small island states, Nauru is compelled to leverage its resources creatively.
The government has taken to some unusual ways of filling their coffers, including serving as a haven
for dubious characters who seek off-shore banking alternatives and selling citizenship. Nauru has
also developed warm relations with Taiwan by recognizing their statehood and allowing them to
have the distinction of the only embassy on its paradise in return for fiduciary loans at low interest
rates. 14 Regulations of bank start-ups are minimal and this has spun into a roaring business of
crooks using Nauru as a venue for money laundering. 15 In a highly publicized case, Nauru played an
essential part in a trail left by money laundering crooks from Russia to the United States. Whatever
the verity of the story, Nauru’s international image was ultimately tainted due to its lax rules and
refusal to ramp up legislation on offshore banking. 16 These illegal activities might not represent a
problem for other countries who can easily impose sanctions on Nauru; but for Nauru, fiscal ties
with these countries are a necessity. As a small island nation, the country has limited economic
options and the state of foreign relations bears significant weight. Now, the country is on the brink
of economic collapse and the policies mentioned above are dysfunctional.
11 The World Factbook: Nauru. Report. Accessed November 03, 2014. https://www.cia.gov/library/publications/theworld-factbook/rankorder/2129rank.html.
12 "Paradise Well And Truly Lost." The Economist. December 20, 2001. http://www.economist.com/node/884045
13 "Closing Down." The Economist. October 04, 2014. http://www.economist.com/news/asia/21621873-dismal-tale-oneremotest-nations-closing-down
14 "Paradise Well And Truly Lost." The Economist. December 20, 2001. http://www.economist.com/node/884045
15 "Paradise Well And Truly Lost." The Economist. December 20, 2001. http://www.economist.com/node/884045
16 Jason Sharman. "A Study for the Pacific Islands Forum on Offshore Finance Centres in Forum Island Countries:
Assessing the Impact of the Proposed US ‘Stop Tax Haven Abuse’ Act."
http://www.forumsec.org/resources/uploads/attachments/documents/FEMM%202008%20Offshore%20Finance%20
Centres%20in%20FICs%20-%20Report.pdf

According to the Australian government, the greatest growing source of revenue (5%
increase in real GDP in 2011) 17 today is the previously-referenced offshore processing center, used
to house the boat-loads of refugees seeking asylum in Australia. In return for money, Nauru houses
the refugees. 18 Former president Marcus Stephen said that “Nauru's parliament would unanimously
support the re-opening of the two detention centers on the island, which operated between 2001
and 2008”. 19 Refugees, on the other hand, expressed their displeasure at being housed there instead
of in refugee camps in Australia. 20
Aside from political and economic implications affecting the overall stability of the country,
there are notable social factors at work. As referenced previously, Nauruans depend on the
government for work and social welfare and they are used to a lifestyle of opulence including short
work hours and access to imported goods. In fact, Nauru has been branded the “world’s fattest
country” in an indictment against the lifestyle changes that came with phosphate prosperity— the
shift from a traditional diet to an imported diet of soda, beer, spam and fast-food. The body index
for men and women is 33.85 and 35.05 respectively. Obesity was ensued by related diseases: an
estimated 45% of Nauruans are plagued by diabetes. 21 This increases the government’s spending on
social welfare and healthcare. It will definitely contribute to a low life expectancy, and undoubtedly
has a damaging effect on the value of the country’s labor force. Society will eventually become
riddled with problems that government policies will find hard to address.
Along with ill health, phosphate prosperity also gave way to a population that was less
inclined to work. 22 Education lost its value. In 2001, it was reported that only a third of children go
on to secondary school. Education took a hit in 2001-2005, when the system came to a standstill
because teachers were not being paid and schools stopped functioning. It is reported that, “In 2008,
less than 9% of teachers in Nauru had a degree qualification. Half had only a basic certificate and
17 "Nauru: Economy." The Commonwealth. November 03, 2014.
http://thecommonwealth.org/our-member-countries/nauru
18Australia. Department of Foreign Affairs and Trade. Nauru's Country Brief. Accessed November 03, 2014.
http://www.dfat.gov.au/geo/nauru/nauru_brief.html
19 Alana Rosenbaum. "Nauru's President Quits Amid Corruption Allegations." The Age, November 2011.
http://www.theage.com.au/world/naurus-president-quits-amid-corruption-claims-20111110-1n8qo.html
20 "Paradise Well And Truly Lost." The Economist. December 20, 2001 http://www.economist.com/node/884045
21 Joshua E. Keating. "Why Do The World's Fattest People Live On Islands" Foreign Policy, February 08, 2011.
http://www.foreignpolicy.com/articles/2011/02/08/why_do_the_worlds_fattest_people_live_on_islands
22 "Paradise Well And Truly Lost." The Economist, December 20, 2001. http://www.economist.com/node/884045

over 30% had effectively no qualifications, being classified as trainees.” 23 Even if the government
enacts policies to address the economic dysfunction, society will not be willing to change.
While Nauru exists under a democratic governance structure, there exist myriad elements
with political, economic, and social dimensions which, coupled with a faulty unicameral
parliamentary system, all contribute to the unstable and vulnerable position in which Nauru finds
itself today.. Economic challenges are particularly intractable through the country’s political system
because individual and social choices are reflected negatively in the political system. Like most
countries endowed with natural resources, Nauru’s reliance on phosphates will not last forever. Most
investors should refrain from investing in this phosphate industry because of the economic risks and
the moral issues of contributing to the slow death of a failing state. Using Nauru as an example of
the risk that comes with elections as a platitude of democracy, when issues like these are present in a
more significant player in the international system, they can present both an economic and security
risk. This begs the question: what should be done with Nauru and states that face similar issues
One option has been illustrated in the case of Lanai, a Hawaiian island with 3,200 residents
purchased in 2012 by Larry Ellison, founder of Oracle and one of the world’s richest people. 24 In
fact, Nauruans are seeking a way out of the island entertaining the possibility of purchasing another
island. 25 As Nauru runs out of money, it is also running out of ideas. One mutually beneficial
solution for Nauru and investors (including sovereign funds) could feasibly be for an investor to buy
the island. Nauruans will have the option of leaving to another country or seeking employment
under the investor in what would no longer be their country. The investor would own that country
and control much, if not all, of the island’s economic productivity. Admittedly, this is controversial;
however, this experiment might lead to better yields than if Nauruans continue with the status quo.
A “good” investor might turn Nauru around in a way that Nauruans were unable to do. This could
lead to similar solutions for vulnerable “microstates” and those who have to suffer living in them.
23 International Council For Open and Distance Education. November 03, 2014.
http://www.icde.org/projects/regulatory_frameworks_for_distance_education/country_profiles/nauru/
24 Jon Mooallem. "Larry Ellison Bought a Island in Hawaii. Now What" The New York Times, Sept. 23, 2014.
http://www.nytimes.com/2014/09/28/magazine/larry-ellison-island-hawaii.html_r=0
25 "Paradise Well And Truly Lost." The Economist. December 20, 2001. http://www.economist.com/node/884045

Traveling and reading inspired Hannah Thomas to work for her master’s at New York University in political theory,
after graduating with a bachelor’s in political science and economics from Miami University in Ohio. She focuses on
democracy, liberty, and revolutions.

Is Liberal Hypocrisy Causing Political Disengagement
By James Lees
In January 1918, ten months before the end of the First World War, U.S. President Woodrow
Wilson delivered his famous Fourteen Points speech. In his remarks, President Wilson outlined
his vision for post-war peace, with order and justice for all states, no matter how small. This
speech laid the foundations for the “idealist” world that many statesmen would fight for in
subsequent years. Tenets of liberalism are still foundational in our society today: selfdetermination,
protection of civil liberties, free trade, open treaties, and democratic governance.
Yet, its development up to and through the 21 st century has been marred by a lack of cohesion
between domestic and international ideology. During the golden age of liberalism, while
international relations were often conducted on a liberal basis, states were largely inadequate in
their protection of domestic individual rights. Conversely, following the Second World War,
liberalism ascended in the domestic sphere, while international society became far more realist.
These two seemingly paradoxical trends were witnessed in both the United States and
throughout Western Europe. Through historical review of such trends, this paper examines the
contemporary political dissatisfaction that has manifested in the West, and the underlying forces
that have contributed to citizens’ discontent with and distrust in their respective political
systems.
The ideas contained within the Fourteen Points were fundamental in shaping
international society after the end of the First World War, and are best exemplified through an
emphasis on self-determination and the creation of the League of Nations. A precursory
institution to the United Nations, the League was established to provide collective security for
the allied powers and to prevent another world war. It intended to “guarantee […] territorial
integrity to great and small states alike.” 1 Its design, based on “Wilsonian idealism,” stressed
equal rights for all sovereign nations. Yet, a voiced respect for equal rights was not reflected in
the implementation of domestic policy of any Western powers; and this is especially true for the
United States. The Wilson administration oversaw an expansion of blatant institutional
segregation, 2 as well as the passing of legislation such as the Oriental Exclusion Act of 1924,
which denied rights to many foreign and domestic minority groups. 3 Concurrently, while allied
powers in Europe echoed the sentiments of Wilson’s Fourteen Points, these states still held
1 Woodrow Wilson, "Speech on the Fourteen Points," Congressional Record, 65th Congress 2nd Session, 1918, 680681.
2 Ronald Pestritto, Woodrow Wilson and the Roots of Modern Liberalism, (Lanham, Md.: Rowman & Littlefield Publishers,
2005) 41-45.
3 William Easterly, The Tyranny of Experts: Economists, Dictators, and the forgotten rights of the poor (New York: Basic Books,
2013), 51.

tightly to their colonies, exploiting local resources and labor to support their domestic
economies.
There is a reasonable explanation to this apparent paradox. The disparity between
international liberalism and domestic oppression in fact benefitted Western powers, both
politically and economically. By declaring and maintaining sovereign rights for all nations, the
most powerful states believed they could maintain stability and peace. By denying domestic
liberalism through suppression of individual rights, particularly for minority groups, they could
ensure that their economies remained profitable and powerful; and retain majority political
support for their respective regimes.
However, even the “idealist” system at the international level was not as it seemed. While
states had supposedly committed to liberalism internationally, they instead continued to put their
national interest first and did not act with “unselfish sympathy,” as Wilson had called for. Even
between the allied powers France, Britain and the U.S., relations in the inter-war years were
described by Robert Boyce as being in “a state of virtual war, wherein mutual incomprehension
fuelled a downward spiral” 4 and ensured a breakdown in trust between the three. In fact, the U.S.
had failed to even join the League of Nations, despite its formation only taking place due to
Wilsonian idealism. The onset of the Second World War ultimately ended the failed experiment
in international liberalism.
The ideas espoused in the interwar years would then migrate into domestic issues. The
Allied powers needed vast resources for the war effort, seeking troops and materials from the
colonies. As William Easterly notes, to ensure they could count on the support of their subjects,
the colonial powers needed to convince their colonized that it was better to stay on side. He
quotes one official as stating, “Colonial subjects might be tempted to say that they have not
much freedom to defend.” 5 Consequently, this supported a shift, albeit slight, towards the
acceptance of racial equality, which would in turn culminate in swift and marked decolonization
in the post-war years. Hendrik Spruyt suggests that after the war there was a shift in the
receptivity of elite groups in the West to ideas of racial equality,. 6 an idea that has been
significantly explored by Ikenberry and Kupchan. 7 This would not only lead to decolonization,
4 Robert Boyce, "World Depression, World War: Some Economic Origins of the Second World War”, in Paths to
War: New Essays on the Origins of the Second World War, eds. Robert Boyce and Esmonde Robertson, (St. Martins Press,
1989), 88.
5 William Easterly. The Tyranny of Experts, 81.
6 Hendrik Spruyt, “The end of empire and the extension of the Westphalian system: the normative basis of the
modern state order”, International Studies Review, (2000): 65-92, 88.
7 John Ikenberry and Charles Kupchan, "Socialization and hegemonic power", International Organization 44: 03 (1990):
283-315.

ut would also bring about a rise in support for civil rights movements. As domestic liberalism
increased, a movement emerged in the West towards universal equality, which included universal
human rights. This movement was embodied in the end of segregation, the rise of feminism, the
LGBT movement, and secularization (to name but a few); Wilson’s legacy had accordingly
moved from the international to the domestic sphere.
Yet at the same time, the international environment drifted away from liberalism. The
immediate onset of the Cold War and the spread of nuclear weapons following the Second
World War, rendered statecraft to be defined by rational choice and game theory. The
commitment problem, that a state can never really know the true intentions of another, led to
international relations representing a prisoner’s dilemma, a well-known concept to political
theorists, with gamesmanship becoming a defining characteristic of foreign policy, particularly in
the United States vis-à-vis the Soviet Union. Now, it seemed the apparent paradox had come full
circle: Liberalism became a domestic phenomenon, while international relations were far more
realist.
We witness a culmination of this phenomenon today. There are myriad domestic and
transnational movements calling for individual rights to be respected and enhanced, but the
international order is still far more realist than it is liberal. Perhaps among the most glaring
illustrations of this contradiction in its contemporary form lies in the governance and operation
of the League’s successor, the United Nations. While the institution and a majority of its
members have professed and encouraged commitments to various dimensions of human rights
and humanitarian norms, there are countless instances of the United Nations failing to uphold
these declared principles. Frequently, the inaction can be attributed to the operational workings
of the Security Council. The body, by design, inevitably serves the realist aims of its permanent
membership. The recent revelation of the U.S. spying on Germany, one of its closest allies,
demonstrates a distinct lack of trust and the absence of liberal ideology. Further, the current
airstrikes against the Islamic State of Iraq and Syria (ISIS) are motivated more by a fear of threat
to Western national security than humanitarian concern for the Syrians caught up in the conflict.
By and large there are few examples of genuine liberalism existing as a prevailing force in
international society, despite the system being predicated on liberal democracy. Governments
and their leaders profess liberalism, but they do not practice what they preach. I believe that this
disparity is one of the root causes of the current disillusionment between voters and politicians.
Politics today is marred by extreme disengagement. The 2014 midterm elections in the
US are only one prime example. Not only did the New York Times report that the 2014 midterm

elections produced the lowest voter turnout in more than seven decades, 8 but interest in the
elections actually fell as they approached. 9 The voters are also disenchanted with political actors.
Just recently, in October 2014, President Obama received his highest disapproval rating of
57% 10 . Europe faces its own share of political cynicism, as noted by Aurelien Mondon. 11 Yet,
while there is clearly deep dissatisfaction in the West with the political process, there remain
political issues in which people express great interest. The recent Scottish referendum on
independence proves that. There was an historic voter turnout, with 84.6% of the electorate
using their franchise. 12 How do we explain this seemingly incongruous relationship between
political interest and political dissatisfaction I contend that it is the political hypocrisy, steeped
in historical circumstances and ideology, and demonstrated by inconsistency between what is
said and what is done, which serves as the best explanation. This hypocrisy has historically
been—and remains—heavily influenced by an ultimate non-belief in and apostasy of political
liberalism, demonstrated by Western leaders throughout the 20 th Century and into the new
millennium.
The liberalism of Wilson emphasizes peace, universal rights and the “understanding of
[others] needs as distinguished from [our] own interest,” 13 on an international level. Yet, as both
history and contemporary politics demonstrate, it is as if liberalism retains merely a hallucinatory
presence in international affairs. Liberalist ideas attract the support of the public, yet they do not
provide leaders with the power and security they often seek. Thus, liberalism continues to imbue
political rhetoric, yet fails to pervade political action. Perhaps the continued push for liberalist
ideals in the domestic sphere could eventually translate to foreign policy. But until politicians can
align the message with concerted action, it is difficult to perceive how current political
dissatisfaction in the West could be alleviated.
8 “Worst Voter Turnout in 72 Years”, The New York Times, Nov 11, 2014.
http://www.nytimes.com/2014/11/12/opinion/the-worst-voter-turnout-in-72-years.html.
9 Chuck Todd et. al, “The Great American Tune Out”, NBC News, Oct 15, 2014.
http://www.nbcnews.com/politics/first-read/great-american-tune-out-interest-midterm-elections-drops-n226251
10 "Presidential Approval Ratings -- Barack Obama", Gallup. http://www.gallup.com/poll/116479/barack-obamapresidential-job-approval.aspx.
11 Aurelien Mondon, “Distrust of the Political System, not the Far Right, is real threat to our European future”, The
Conversation, May 14, 2014. http://theconversation.com/distrust-of-the-political-system-not-the-far-right-is-realthreat-to-our-european-future-26662.
12 “Scottish Independence Referendum”, The Guardian, Sep 18, 2014. http://www.theguardian.com/politics/nginteractive/2014/sep/18/-sp-scottish-independence-referendum-results-in-full.
13 Woodrow Wilson, “Speech on the Fourteen Points.” Full speech can be viewed via the following link:
http://web.ics.purdue.edu/~wggray/Teaching/His300/Handouts/Fourteen_Points.pdf

James moved to New York to study for a master’s in international relations at New York University. James has
a background in finance; having completed his bachelor’s in economics at Bristol University, he then spent two
years working for an investment bank in London. His focus is on economic and political development, particularly
in sub-Saharan Africa.

On the 18 th
Scottish Independence: The Thistle in Europe’s Side
By Elia Francesco Nigris and James Lees
of September 2014, the citizens of Scotland voted to remain a part of the United
Kingdom. Independence was rejected by a margin of over 10%, with the ‘No’ campaign taking
55.3% of the votes, and winning majorities in all but four of the 32 constituencies. Scotland has
been part of the United Kingdom since the Acts of Union of 1707, and while the independence
referendum did not lead to the creation of the 197 th country, it does have major implications within
the United Kingdom, and both across and beyond Europe. Domestically, it has sparked a fresh
debate on the devolution of powers, which may in fact be a positive outcome. However, the
referendum has set a precedent for independence movements across Europe, which could result in
continental instability. In this paper the authors will outline why the referendum took place, and
consider its potential consequences within both the domestic sphere and the European continent.
The referendum’s outcome, one of the first of its kind in recent history, is recognized by both
the government of the United Kingdom and by the regional government of Scotland. The decision
to hold a referendum was agreed upon in October 2012 by David Cameron, the Prime Minister of
the United Kingdom, and Alex Salmond, the nationalist First Minister of Scotland, through the
Edinburgh Agreement.
Many wonder why David Cameron decided to allow this referendum to happen; the most
common answer being that the question of Scottish independence had to finally be answered. Mr.
Cameron, a true believer in the right of self-determination and democratic and liberal ideals, deemed
a referendum the most noble and definitive way to find a permanent solution to the problem, as
leaving the issue unsettled could have weakened the entire Union. While Cameron’s own political
ideals may have played a part, there are additional arguments that can be made. The most important
factor that needs to be considered is that, at the time of the signing of the Edinburgh Agreement,
there was little to suggest that a Yes vote in favor of independence could actually win. Mr. Cameron,
along with many pundits and British politicians, believed the No vote would easily prevail. Hence,
on the one hand, the risk of allowing a vote on the issue seemed minimal and, on the other, the
gains for him, politically speaking, could have been extremely high.
In Mr. Cameron’s thinking, the issue of Scottish independence could be addressed once and
for all, while he could be hailed as a truly democratic leader, not afraid to let ‘the People’ decide their
own fate. Furthermore, the vote on Scottish independence could have locked up his re-election

campaign for 2015, suggesting that the decision may have had an internal, political motive. It is no
secret that Scotland is a strongly pro-Labour stronghold, and Ed Miliband would need the region’s
support in order to defeat the incumbent Prime Minister. Mr. Cameron believed that a vote on
Scottish independence could gain him some popularity among nationalist voters and, even more
importantly, undermine the support for Labour in the region. This strategy seems to have partially
worked: even though Tories have not racked up much support in Scotland, Labour seems to be
losing a good deal of its own. 1 In an October 2014 poll, support for the Scottish National Party had
reached a historical peak of 52%, meaning they could feasibly win 54 seats in the British parliament,
leaving Labour with only 4 in the region—an historical low. 2 With these numbers, it is extremely
hard to imagine that Mr. Miliband could become the next Prime Minister, unless he forms a
coalition government with the SNP.
In addition to the potential changes in Parliamentary composition, the referendum has
inspired shifts in the amount of power devolved to regional parliaments. Scotland and Wales were
first given devolved powers in 1998, as the fulfillment of one of Tony Blair’s campaign promises.
Since that time, decentralized power has gradually increased in all the regional parliaments. But in
the final weeks before the referendum, the leaders of the three major parties—David Cameron, Nick
Clegg and Ed Miliband—all promised that they would deliver ‘devo-max’, should Scotland remain a
part of the United Kingdom 3 . This would give the Scottish government greater power over taxation,
spending and welfare policies. While these vows were heavily attacked by the Yes campaigners as
‘too little too late’, once the results came in both No and Yes activists alike called for their
fulfillment. But it is not just Scotland who now expects greater devolved powers. The Welsh,
Northern Irish and even the English are looking for changes. England is now the only region that
has no devolved powers; any ‘English-only’ laws can still be voted on by MPs in Westminster whose
constituents are not impacted by changes.
1 Indeed, as of the writing of this report, Mr. Miliband has attempted and largely failed in recouping Labour support
throughout Scotland in the wake of the referendum. See Simon Johnson, “Ed Miliband attempts to win back Yes voters
in Scotland.” The Telegraph. November 28 2014, http://www.telegraph.co.uk/news/politics/ed-miliband/11260800/Ed-
Miliband-attempts-to-win-back-Yes-voters-in-Scotland.html
2 Severin Carrell, “Labour faces massive losses to SNP at UK general election, poll shows,” The Guardian, Oct 30, 2014,
accessed Nov 24, 2014, http://www.theguardian.com/politics/2014/oct/30/scottish-labour-snp-general-election-poll
3 David Clegg, “David Cameron, Ed Miliband and Nick Clegg sign joint historic promise which guarantees more
devolved powers for Scotland and protection of NHS if we vote No,” The Daily Record, Sep 15, 2014, accessed Nov 24,
2014, http://www.dailyrecord.co.uk/news/politics/david-cameron-ed-miliband-nick-4265992

While this may be an outcome Mr. Cameron did not expect, it may well prove beneficial him.
By modernizing the unwritten constitution to decentralize certain power, it may be possible to create
policies that are more broadly supported, as policy can be targeted to smaller groups. Many policies
unevenly benefit a certain area, be it a city or a region. By allowing for devolved policy making,
political parties may actually be able to deliver more of what people want in specific areas. This
could certainly be the case in regards to different welfare benefits, such as housing, where needs and
costs significantly change from region to region. In an age where disengagement with political
parties is rampant, finding a way to interest people in the political process is vital. Indeed, the high
84.6% voter turnout in the Scottish referendum proved that people still care about high-level
political decisions, especially when they can understand and relate to how these decisions affect
them.
Outside of the UK, there have been considerable effects for other independence
movements. It seems Mr. Cameron, when he made his decision, did not take into consideration that
he does not live in a vacuum; the referendum has set a precedent for other independence
movements across Europe, providing them with legitimacy. The better known, of course, is the case
of Catalonia, an eastern region in Spain that has unsuccessfully tried to become an independent
nation for many years. On the 9 th of November 2014 they held a straw poll on independence
“defying legal and political objections from Madrid.” 4 The poll returned with 80.7% in favor of
independence, and with a turnout of approximately 50%. It had originally been planned as a nonbinding
referendum, but the Constitutional Court of Spain had deemed this illegal. One voter, Maria
Pilar Lahoz, was quoted as saying independence is “unstoppable and the door has now at least been
opened.” 5 The Spanish government, unlike the British one, has no intention of recognizing this
result, but it seems those who support independence have been emboldened by the Scottish
referendum.
Of course, Catalonia is not the only region in Spain that would like to free itself from the
government of Madrid; the Basques have had a long history of deep separatist sentiments. The same
is true for the Flemish region in Belgium, where the Dutch speaking part of the country has sought
4 Raphael Minder, “Catalonia Overwhelmingly votes for Independence From Spain in Straw Poll,” The New York Times,
Nov 9. 2014, accessed Nov 24, 2014, http://www.nytimes.com/2014/11/10/world/europe/catalans-vote-in-straw-pollon-independence-from-spain.html
5 Ibid

to gain independence from the government of Brussels 6 , and independence movements can be
found in the Italian regions of Veneto and Sardinia, among numerous others. Together, these
independence movements pose larger challenges to the stability of Europe. It is clear that allowing
an independence referendum for every single linguistic and cultural minority in Europe would be
impossible, but it would be equally impossible, once Pandora’s box has been opened, to allow some
to vote on the issue and not to allow others. Where is the line drawn Granting independence to
numerous separatist groups would feasibly result in the formation of many small nations, offsetting
a balance of power that has, even in a period of crisis, given Europe welfare and prosperity since the
end of the Second World War. This realization helps one understand why Mr. Cameron’s decision
sets such a dangerous precedent: it indirectly legitimized the demands of every single independence
movement in Europe, even when most other governments do not intend to grant the same
concession Mr. Cameron has made to the Scottish people. And despite his belief that the
referendum would answer the Scottish question once and for all, it has not. Many expect that talks
on a new referendum will become prominent in the coming years, especially if the UK goes ahead
with a planned referendum on EU membership. Scotland is far more pro-European than England,
but may find they have little power to sway the result of the referendum, due to England’s far
greater number of voters. 7 Thus, it is reasonable to wonder whether a second referendum may come
around far sooner than was expected.
The consequences for other countries, if or when their governments refuse to follow in the
steps of the UK, could be significant: social tensions could arise (indeed, they have emerged under
similar circumstances in the past); independence movements, receiving rebuttals to their referenda
demands, could prove more vocal and the resulting social turmoil could boil over into violence.
After all, there have been multiple incidents of terrorist movements in Europe killing innocent
civilians in the name of independence—the Basque Homeland and Freedom movement (ETA) in
Spain, for example, as well as the National Liberation Front of Corsica, France and the Committee
for the liberation of South Tyrol (BAS), in Italy. Moreover, it is feasible that the implications of the
Scottish referendum could extend outside Europe, concerning other ethnic or religious minority
groups fighting for autonomy, such as the Uyghur people living in the Xinjiang Uyghur
6 Katrin Bennhold, “Separatists around the world draw inspiration from Scotland”, CNBC, Sep. 10, 2014, accessed Nov
30, 2014, http://www.cnbc.com/id/101990463#
7 Libby Brooks, “Nicola Sturgeon calls for Scottish veto on EU referendum,” The Guardian, Oct 29, 2014 accessed Nov
24, 2014, http://www.theguardian.com/politics/2014/oct/29/nicola-sturgeon-scottish-veto-eu-referendum

Autonomous Region within the People's Republic of China, or the separatist movement in Quebec,
Canada. It is not difficult to perceive how the precedent of an official referendum in Scotland, which
might be upheld as a shining example of democracy in the United Kingdom, may very well cause
tension and tragedy elsewhere.
It is without doubt that the consequences of the Scottish referendum lie in contrast to some
initial expectations. While many assumed the referendum would serve as a final answer to the
question of independence, it has instead increased the number of those in Scotland calling for selfrule
and indirectly legitimized other independence movements, in Europe and beyond. It has also
forced the United Kingdom to examine its constitutional set up and seek ways to modernize its
institutions, while ensuring that the most significant decision-making remains centralized. While
Scotland voted “no” to independence this time, there have already been numerous calls for another
referendum. This is in part because, as suggested above, should the referendum on Britain’s EU
membership move forward, the Scottish may well be virtually powerless to influence the decision.
The Scottish referendum may indeed prove to be an enduring thistle in the side of Mr. Cameron and
in Europe.

Elia grew up Milan, Italy and graduated with a bachelor's degree in economics and social sciences from Bocconi
University. He then moved to the New York to pursue a master's degree in political economy analysis at New York
University.
James moved to New York to study for a master’s degree in international relations at New York
University. James has a background in finance; having completed his bachelor’s in economics at Bristol University, he
then spent two years working for an investment bank in London. His focus is on economic and political development,
particularly in sub-Saharan Africa.

Acquiescence and Consent in Democratic Theory
By Andrew Tripodo
Tenacious men with strong wills, admirable aims, and impressive minds planned and executed the
American Constitutional Convention of 1787. These men had neither a legal right nor popular
mandate to forge a new government, overturning the existing Articles of Confederation. No
authority granted them permission to draft this constitution, and the majority of the population,
mostly farmers, hadn’t an inkling that such a convention was even taking place. What these fifty-five
men did have were keen insights into human nature---most importantly, that the natural human
tendency for selfishness can be channeled to serve the public good. They also possessed strong
understandings of the needs and wants of Americans and the means to act on these convictions.
They succeeded in an obvious way: the United States exists today as a relatively stable democracy,
with institutionalized electoral processes, term limits, and a system of checks and balances on
government. The country is more or less free from abusive authority, and its citizens enjoy
predictable stability and need not worry about the dangerous hand of arbitrary power. However, just
because this strategy worked, does that mean it was also legitimate
Questions on the legitimacy of government are as old as the study of government itself, and
they are prominent elements of Russell Hardin’s forthcoming book, Why a Constitution, 1 which shares
its title with a chapter Hardin contributed to the The Federalist Papers and the New Institutionalism
(1989).
Hardin begins by addressing the theory, prominent in the writings of John Locke, which
claims that a government can only be legitimate if it first maintains order and second, protects the
natural rights of its citizens. These principles are the foundation of Liberalism, a theoretical form of
government that elevates the rights of individuals over the rights of rulers, and emphasizes the duty
of a ruler over the duty of a citizen. Liberal principles underlie nearly all of the political dialogue of
the modern age, whether it be between intellectuals or among the general public. Few will argue that
the American government fails at either of these duties—the U.S. citizenry is on the whole
threatened by neither anarchy nor arbitrary government action that jeopardizes people’s life, liberty,
or property rights. This government, then, is legitimate according to the classic liberal criteria.
1 This forthcoming work was provided to the author by Professor Hardin in manuscript form. The following citations
apply to the manuscript text as it was presented to the author of this report.

However, Hardin directs the reader’s attention to an enormous rift between liberal theory
and reality: at the time of the drafting and signing of the U.S. Constitution, the vast majority of
American citizens had never heard of such claims to legitimate authority, an thus could not have
consented to be governed in such a way. This is as true of the bulk of American citizens today as it
was in 1787. But here they are, allowing themselves to be governed, abiding by the rules of a regime
they never consented to, resting on a theoretical foundation that they are largely unaware of. The
governing philosophy that centers around individual freedom, in the form of rights, fails to present
those citizens with perhaps the most fundamental freedom (or right) of all: to truly accept or deny
the constitution that will govern them. Here the claim could be made that, though Americans are
not fully aware of the basis for their government’s legitimacy, they clearly do not have serious
enough qualms to actively and loudly disagree with the system, and this must imply consent.
Perhaps, but the word consent is far too strong. It denotes active, conscious agreement, and
most American citizens are unaware of the possibility for such agreement, nor what they would
agree with. Here, Hardin resurrects a more apt word to replace the concept of “consent of the
governed”. It was first articulated by David Hume to describe the general behavior of citizens under
the U.S. Constitution (and constitutions in general): acquiescence. Citizens do not agree, they just do
not disagree actively or fight back. They abide. Apathy underlies acquiescence, while engagement
underlies consent.
Why do citizens acquiesce Hardin explains that people acquiesce to political and legal
orders (as they are outlined by constitutions) for the same reason that they follow social
conventions: because resisting would be costly and, as long as the imposed sociopolitical
conventions are not excessively offensive (that is, not radically different from prevailing trends),
acquiescence has no real costs. In essence, Hardin concludes, “we acquiesce because it would be
very difficult to organize what would de facto have to be a collective action to topple an ongoing
convention or to organize a new one” 2 . Even the most rigorous study of history would be hardpressed
to find an instance when the bulk of citizens actively agreed with the constitution they were
about to be subjected to: there was a furious debate in the American states over ratification between
the “Federalists” and the “Anti-Federalists”. North Carolina and Rhode Island did not even formally
ratify the Constitution until after George Washington had been elected as the first President of the
United States: by that time, Hardin asserts, they decided to accept the consensus of the rest of the
2 Russell Hardin, Why a Constitution (forthcoming, 2015). p. 12 (manuscript).

states since they realized that holding out cost more than joining in. Many other countries’ political
systems today are governed by such constitutions and do not seek to change the underlying premise
of these covenants: their citizens acquiesce. But acquiescence is not inevitable. History presents
occurrences in which citizens do not abide by new rules placed upon them and will, as Locke put it,
“appeal to Heaven” (revolt) in the face of requirements they find offensive or unduly burdensome.
So, what will incite citizens past the realm of acquiescence and into the realm of active
disagreement Here, Hardin cites Hume’s Duel Convention Theory: “government derives its power
(not its right) to rule by some specific form of coordination that is a convention and the populace
acquiesces in that rule by its own convention.” 3 Therefore, a Constitution that creates political
conventions that are more or less aligned with the social conventions of the populace will be
successful, by which we mean stable, unchallenged. If a political convention moves in direct
opposition to a social convention, however, it will be offensive enough to justify action. Hardin
explains this logic via the economic language of opportunity and transaction costs, but we do not
need this language to understand the concept. What is important is that the political order created by
a constitution does not create excessive friction with the traditional social order. A constitution that
pushes people to change can wake them from their acquiescent slumber and jeopardize law and
order.
Communities will not acquiesce on issues they feel passionately about, and here is where
some comments on religion is relevant. Most religious believers consider following their beliefs as
being in their ultimate interest, as it is the only interest that extends beyond death and, in life, defines
whom they associate with and how they do so. A constitution that attempts to control the religious
views of its populace can (and often will) spark impassioned conflict. Societies that are religiously
homogenous are an exception to this observation: they are indeed more tightly bound by their
shared spiritual beliefs, and constitutions that govern such societies are strengthened rather than
compromised by their religiosity because it enshrines the status of that religion. But what gives
religion its unifying power also endows it with destructive power. Hardin claims that if there is any
hope of uniting people who hold different religious beliefs, the topic must be omitted—the absolute
nature of the topic simply defies compromise. Since general acquiescence seems to be a necessary
public condition for successful constitution-making, and religious differences do not lend
themselves to acquiescence, the rational decision is to simply leave religion out of the constitution
3Ibid, 11.

and thus out of the realm of state regulation. Hardin rightly touts the strategy of removing religion
from constitutions as “the single greatest achievement of political thought and practice in all the
history of western political thought.” 4 With religion omitted, acquiescence reigns supreme.
Still, the question remains: is a government that relies on acquiescence legitimate
Acquiescence is the compelling fact in successful governments, but should it be the goal Is it
sufficient
The most widely accepted justification for the claim to constitutional legitimacy in the face
of acquiescence lies in the theory of implied consent: that by virtue of reaping the benefits of the
government into which citizens are born, they have implicitly consented to its existence. We have, in
effect, entered into a contract that we never knew existed. This theory exists primarily for
intellectuals, for they are among the few who are conscious of this problem. The rest think not of
legal legitimacy, and, their conventions not being egregiously broken, acquiesce.
If we strip the “implied consent” theory of its venerable sheen, its obvious illogic will be
revealed. A story will to pull this theory down from abstraction: In downtown New Orleans,
tourists are apt to come upon “shoe shiners” who run up to their unknowing patrons, apply some
cleaning solution to their shoes, and expect compensation for their efforts. According to the implied
consent theory, tourists should pay them. Just as citizens unknowingly benefit from the order and
security provided by the government into which they are born, and thus are bound to “implicitly
consent” to its rule, so the patrons reap benefits. Thus, they are obliged to compensate their
provider. In the government case, the trade is consent for rights and security. But trade was made
without the knowledge of one party. Given a true choice, some will pay, and some will want to walk
away. All are indignant. They know that they have not consented to being governed in a contractual
sense. But this is the concept that underpins democratic legitimacy.
It is crucial to emphasize that in an important way this argument is irrelevant---it misses
reality. The reality is that order exists because a constitution successfully establishes political
conventions that are aligned with previously held social conventions, thus enabling the politically
significant members of the population to abide by the new government.
4 Ibid, 9.

Given the dubiousness of the “implied consent” theory, the pressing question arises: how
can we legitimize a new constitution In answering this question, Hardin asks that his audience let
go of theories and focus on facts. The reality of acquiescence, he submits, need not lead to
pessimism. After all, if the government took action that we found upsetting, the spell of
acquiescence would be broken and citizens would loudly protest. So is the reality of acquiescence
evidence that government is generally meeting the people’s needs If people do not want to
participate, does that mean they are content with the way things are
This is where this author and Hardin’s views diverge. Hardin identifies the crucial difference
between consent and acquiescence, and then concludes that acquiescence is good enough. It solves
more problems than it spawns, and is evidence of overall governing success. If the government was
failing to ensure stability or to protect private rights, people would surely not react with
acquiescence, they would be moved to actually engage in politics. Governments functioning by
virtue of widespread acquiescence are, by the criteria of Liberalism, successful. If we simply let go
of the implied consent theory, we can easily come to terms with the reality of acquiescence. But to
take this view is to give up on the democratic ideal of representation. If people are consumed with their
private lives and unengaged with government, how can their views be represented Consent is the
lowest tier of representation. It makes no attempt to capture the nuance of opinion, but simply asks
for wholesale rejection or acceptance of a proposal. If we give up on the possibility of widespread
consent in a democracy, we must face a disturbing question: are democracies actually representative
Put even more starkly: are democracies responsive to their people If citizens accept the reality of
acquiescence, then do they simply regard the idea of democratic responsiveness and representation
as a myth crafted to maintain order
Clearly there is much at stake. Setting the precedent of consent instead of acquiescence will
ensure that the government remains truly representative and responsive to citizen needs. If the
government is founded on acquiescence, then it is very likely that the vast majority of the population
will remain ignorant of the institutions erected by the constitutions and of the political arena
thereafter. And, though the constitution may have been founded on social convention (which
naturally aligns it with the wants and needs of the people), the two need not remain linked forever.
That is, incremental political changes could slowly disempower a citizenry that is unaware of them.
The acts of self-serving politicians could erode the political dynamics that enable citizens to
comfortably acquiescence while remaining confident that order and right security will remain. While

the public slumbers in acquiescence, forces that could undermine the foundation of the system that
allows for comfortable acquiescence are free to wreak incremental havoc. Nestled within a culture of
acquiescence, citizens are unlikely to notice small changes—but small changes accumulate and over
time could transform a population from one that acquiesces to one that is subjugated. Sudden, large,
changes would likely rouse citizens to take action, but a culture of acquiescence could make them
blind to small, pernicious shifts over time: new voter requirements, increased thresholds for
parliamentary participation, loosening or tightening of controls on free speech, terms limits, and
financial donations. Alternatively, the conventions that are the foundation of the constitution could
themselves disempower and ignore large swaths of society, systematically depriving them of
representation. After all, slavery was enshrined in the U.S. Constitution in 1787 and the document
did not even grant voting rights to all American freemen (or women) until amendments were made
over time to expand suffrage, a stark reminder that conventions have no inherent normative valence.
Any institution created by the constitution to guard against abuses of power could fail to fulfill their
function, as institutions that are neither respected nor understood by the populace can be ignored,
manipulated, or changed by those in power. In other words, the same apathy that enables
acquiescence has the potential to undermine the representative goals of democracy.
“If men were angels,” Madison famously remarks in Federalist #51, “no government would
be necessary.” He goes on to call for a political order in which institutions are pitted against each
other, a system where personal ambition is channeled to serve the general good, a government filled
with selfish men who become the unwitting sentinels over the public health. He gives up on
bettering men, dismisses selfish power-seeking as the natural human state, and resigns himself to
figuring out how to manage that selfishness. He forgets that just because men are no angels does not
mean that they are devils, and it does not mean that they cannot become more angelic with practice.
Cultivating public virtue among the entire population is the only way to craft a democracy that lives
up to its claim to representation. Institutions are not enough to protect an apathetic public. In fact,
without an engaged and informed public, the very institutions meant to protect citizens can become
perverted and distorted by those bent on acquiring personal power.

Andrew has lived in many places in the pursuit of myriad, mysteriously connected, interests. He revels in learning and
teaching and is ever charmed by the difficulty in fully disentangling the two from each other. He currently studies
political science, coaches high school debate, and enjoys writing on a wide range of subjects.

The Faces of D-Company: An Analysis of the Terror-Crime Nexus
By Elizabeth Bennett
This paper looks at the transnational criminal organization D-Company out of South Asia. The
analysis includes origins, aspects and faces of D-Company as it shifts along the terror-crime nexus.
D-Company is looked at as a criminal organization, a terrorist group, and an economic actor in
South Asia.
In today’s world of proliferating threats, an organization that engages in both criminal and
terrorist activities can be a significant destabilizer in a region such as South Asia. The following
analysis will examine the origins of D-Company, an organized criminal group which formed in India,
and whose influence can now be felt across the region. This organization, while perhaps not as wellknown
as some other criminal or terrorist groups, is a destabilizing force in South Asia, particularly
due to its adaptive, multifaceted role. In tracing the history and development of D-Company, this
report will explore how the organization has evolved into such a role. Discussion will turn to two
primary causes for the group’s shift into terrorist activity, and the three different ‘faces’ of the
organization as it exists today: a transnational criminal organization, a terrorist group, and an
economic actor. Regardless of where D-Company and its leader Dawood Ibrahim fall on the
spectrum between a criminal and terrorist organization, this examination finds that the group
remains both a national and regional security threat for South Asia.
D-Company Origins
Dawood Ibrahim’s criminal syndicate D-Company originated in the late 1970s in the city of
Mumbai, India. D-Company rose to power following the city’s declared emergency order from 1975
until 1977, which aimed to take down mainstream criminal organizations. 1 India, and particularly
Mumbai as the center of India’s criminal underworld, fostered conditions that were conducive to the
rise of criminal syndicates. India’s strategic location with port access and drug and illicit good
smuggling in neighboring states, gave D-Company and other criminal syndicates ample opportunity
to rise to international prominence in the late 1970s early 1980s. 2
1 U.S. Library of Congress, Congressional Research Service, International Terrorism and Transnational Crime: Security Threats,
U.S. Policy, and Considerations for Congress, by John Rollins, Liana Wyler, Seth Rosen, CRS Report R41004 (Washington,
DC: Office of Congressional Information and Publishing, 2010).
http://fpc.state.gov/documents/organization/134960.pdf
2 U.S. Library of Congress, Congressional Research Service, Nations Hospitable to Organized Crime and Terrorism,
(Washington, DC: Office of Congressional Information and Publishing, October 2003).

Taking advantage of favorable conditions and the void of criminal syndicates left by the
emergency order, D-Company flourished as a top criminal organization in Mumbai. By the mid
1980s Ibrahim fled to Dubai under the growing pressure from Indian authorities. Based out of the
port city of Dubai, D-Company was involved in drug and arms trafficking, gold smuggling,
extortion, counterfeit currency, real estate, contract killings, gambling, and film piracy. 3
Evolution
1992 Riots & Muslim Marginalization
D-Company’s evolution into a criminal-terrorist organization involved many factors. The
following analysis will discuss the two primary causes for evolution: first, the 1992 riots/violence
against Indian Muslims, and secondly a shift in the market that prompted Ibrahim to expand outside
of purely criminal activities to sustain D-Company.
The shift towards ideologically motivated activities took place following the destruction of
the 16th century Babri mosque in Uttar Pradesh, India in December 1992 and the resulting riots that
killed hundreds of Muslims. 4 In 1984 the Hindu nationalist party Bharatiya Janata Party (BJP) was
elected into power, and at the time, India’s minority population of Muslims was around 150 million
people, roughly 12 percent of the population. Leading up to the 1992 attacks, a wave of Hindu
nationalism swept India that led to Muslim marginalization and violence. 5
In retaliation and seeking to protect the minority Muslims, D-Company smuggled in
explosives and weapons that were ultimately used in the 1993 Mumbai Bombings. In early 1993,
ships departed from Dubai for Karachi carrying explosives and numerous small arms. These arms
and explosives, facilitated through the Pakistani Inter-Services Intelligence agency (ISI), were used in
the 13 bombings throughout Mumbai on March 12, 1993 that killed 157 and injured over 700. 6
Following this attack D-Company moved its headquarters to Karachi. This proved to be a pivotal
moment for D-Company: the previously secular organization split along religious lines, with the
majority of Hindu members leaving to follow a Hindu Lieutenant, Chota Rajan, and the rest
3 Ryan Clarke, Terror-Crime Nexus in South Asia, (New York: Routledge, 2011).
4 "The 1993 Mumbai Blasts: What Exactly Happened on March 12 that Year," IBN Live, 2013.
http://ibnlive.in.com/news/the-1993-mumbai-blasts-what-exactly-happened-on-march-12-that-year/380222-3.html
5 Kanisk Tharoor, “Divided and Conquered: Indian Muslims and Hindu Nationalism,” Globalist, 2004.
http://www.yale.edu/globalist/archive/issue12/divided-conquered.htm
6 The targets of the attack included the Bombay Stock Exchange, the Air India building, headquarters of the Hindu party
Shiv Sena, and the Cinema Plaza.

emaining under the control of Ibrahim. 7
ideology, and shifted into the terrorism-crime nexus. 8
From here, D-Company adopted a degree of radical
Cause: Shift in India’s Markets
With rampant corruption and a closed economy, D-Company flourished as one of India’s
top criminal organizations. But in the early 1990s, at the same time as the riots and destruction of
the Babri mosque, the economic and markets shifted in India, leaving many of D-Company’s
activities less profitable. This was also a primary motivation for D-Company moving towards
terrorist activities. Prior to 1991, the economy of India was dominated by the public sector, with
limited international trade and socialist-oriented policies. Such economic policies had helped to
cultivate criminal and black market activities within the country. However, in June of 1991 the newly
elected Congress Party changed the fundamental structure of the Indian economy, devaluating the
rupee immediately by twenty-five percent to alleviate the current account deficit. 9 By the end of the
decade the Indian economy was averaging over 6 percent growth rate and witnessed a declining
market for illicit activities. 10
New business dealings with the Pakistani ISI created opportunities to diversify D-
Company’s portfolio and created a new market for illicit activities. For example, a bond between al-
Qaeda and D-Company was forged that allowed the use of smuggling routes by al-Qaeda members
to escape over the Afghanistan border into Pakistan. This al-Qaeda connection gave D-Company
the opportunity to deal in the Afghanistan heroin market. 11 Another major policy change was the
liberalization of gold imports. Indian policy makers cut the duty rate in half from Rs 450/10gms to
Rs 220/10gms. 12 The government of India seized nearly 5.7 and 5.0 tons of gold in 1990 and 1991,
respectively, but by 1992 the amount seized had dropped to nearly 2.9 tons under the newly open
policy. 13 This change in gold import policy marginalized D-Company’s gold smuggling enterprise
7 Ryan Clarke "The PIRA, D-Company, and the Crime-Terror Nexus," Terrorism and Political Violence 20, no. 3 (2008):
376–395.
8 International Terrorism and Transnational Crime: Security Threats, U.S. Policy, and Considerations for Congress.
9Manmohan Agarwal, Whalley, John. “The 1991 Reforms, Indian Economic Growth, and Social Progress.” National
Bureau of Economic Research: Working Paper 19024, May 2013. Page
10 U.S. Library of Congress, Congressional Research Service. India-U.S. Security Relations: Strategic Issues, by Alan
Kronstady. CRS Report R42948. (Washington, DC: Office of Congressional Information and Publishing, 2013).
http://fas.org/sgp/crs/row/R42948.pdf
11 Ryan Clarke, Terror-Crime Nexus in South Asia, 85-87.
12 Reserve Bank of India history series. Volume 4, 1981-1997, Part A
13 Reserve Bank of India history series. Volume 4, 1981-1997, Part A

and drastically reduced its profit. The more open economic context forced Dawood Ibrahim to
expand business activities, led him into dealings with terrorist groups.
Faces of D-Company
To understand the multifaceted, intricate nature of the organization, it is important to
examine the different ‘faces’ of D-Company, and to assess the groups’ ideological and financial
motivations. These ‘faces’ include roles as a transnational criminal organization, a terrorist group,
and an economic actor. Upon examination, it is clear that D-Company is not solely a terrorist group
or criminal organization, but in fact shifts its role to best suit its own interests.
Transnational Criminal Organization
Residing in Pakistan, Ibrahim is able to manage his criminal network that now spans across
Asia, Africa and the Middle East. As a transnational crime syndicate, D-Company is involved in
arms and human trafficking, gold smuggling, extortion, bribery, contract killing, counterfeit
currency, and drug trade. The command structure of D-Company is made up of various cells that
are led by top individuals, such as ‘Tiger’ Memon, who report directly to Ibrahim. Regional
commanders lead operations of each cell, which focus on varying criminal activities based off of
their respective locations and expertise. Under the regional commanders are lieutenants that report
orders and commands to foot soldiers carrying out the operations. Buying off corrupt politicians,
referred to as netas, D-Company has been able to exploit the weaknesses and complacency of many
governments of the countries in which it operates. 14
The Dubai based cell, for example, has specialized in counterfeit currency. Because of
Dubai’s accessibility to ports, D-Company was able to spread Fake Indian Currency Notes (FICN)
to major cities in India by sending notes with laborers returning from Dubai in their backpacks or
suitcases. This counterfeit currency is reported to end up back in the hands of the ISI to finance
illicit activities and militant groups in India, including Lashkar-e-Taiba (LeT). 15 In August 2013
Indian police arrested a top lieutenant, Abdul Karim Tunda, whom confessed to the FICN
14 Ryan Clarke, "The PIRA, D-Company, and the Crime-Terror Nexus," date
15 Sumita, Sarkar, Arvind Tiwari “Combating Organized Crime: A Case Study of Mumbai City,” South Asia Terrorism
Portal. http://www.satp.org/satporgtp/publication/faultlines/volume12/Article5.htm

operation and an estimation of hundreds of thousands of fake notes were coming into India
annually. 16
Additionally, the organization was involved in opium and heroin trade, and human
trafficking that spanned from South East Asia to the Middle East. D-Company is also involved in
smaller activities such as illegal Bollywood production with sales to the U.S. and the U.K. Taking
such activities into consideration, the organization seems financially motivated and is
nondiscriminatory in dealings to increase profitability and revenue.
Terrorist Organization
Since D-Company’s first terrorist activities in 1993, the organization has been both directly
and indirectly involved in terrorist activity and funding in South Asia. 17 The inability of Pakistan to
provide a secure and stable environment has lead to the use of groups like D-Company as a resource
for gains against India, and in return Ibrahim and D-Company were given safe haven. 18 While D-
Company and the ISI or LeT have differing ideological goals, Ibrahim and his syndicate as a
facilitator of terrorism are one of the most dangerous organizations in the region.
The ISI and LeT were given access to vast smuggling routes by D-Company for arms
trafficking, drug trade, and as an escape route from Afghanistan. ISI has benefited from the fake
currency and arms trade through D-Company. The profits from this trade are used to provide LeT
with supplies and weapons in the proxy fight against India. 19 Ibrahim has been implicated in other
terrorist attacks and was named a Specially Designated Terrorist by the U.S. State Department and
U.S. Department of Treasury for his connections to al-Qaeda. 20
Ibrahim was also connected with financing, providing safe houses and contacts for various
terrorist groups across South Asia attacking inside India including Jaish-e-Mohammed, Harakat-ul-
Jihad-i-Islami, the Indian Mujahideen. 21 Most recently it was reported D-Company made a deal with
terrorist organization Boko Haram out of Nigeria to supply drugs and weapons. 22 Given the
16 Biswas Shrideep, "Currency of Terror," South Asia Terrorism Portal, 2011.
http://www.outlookindia.com/article/Currency-Of-Terror/277209
17 Ryan Clarke, Terror-Crime Nexus in South Asia, pg. 196-205.
18 Ibid. pg. 196-205.
19 Ryan Clarke, Terror-Crime Nexus in South Asia, pg. 196-205.
20 United States Department of Treasury, Office of Foreign Asset Control. U.S. Designates Dawood Ibrahim as Terrorist
Supporter. http://www.treasury.gov/press-center/press-releases/pages/js909.aspx
21 Ryan Clarke, Terror-Crime Nexus in South Asia, pg. 161-166.
22 “Exposed: Boko Haram-Dawood nexus to smuggle drugs in India,” Times of India, September 6, 2014.
http://timesofindia.indiatimes.com/videos/news/Exposed-Boko-Haram-Dawood-nexus-to-smuggle-drugs-in-
India/videoshow/41886330.cms

diffusive nature of D-Company, its presence spanning three continents and the diversity of its
activities, the alliances with ISI and terrorist financing and related activities comprise only one part
of D-Company’s portfolio.
Economic Actor
D-Company’s role as an economic actor is very similar to that of any regional or
multinational corporation concerning the level of influence and decision-making on a local level.
The group’s economic relationship with the region is also reciprocal: Pakistan benefitting from illicit
revenue and D-Company receiving political protection. D-Company has played a vital role in the
Pakistani economy: lacking foreign investment and internal growth, Pakistan’s economy is
unsustainable without considerable amounts foreign aid. D-Company’s illicit revenue via funding to
the Central Bank and massive deposits of foreign currency in local banks has reportedly assisted in
the bail out of Pakistan’s economy on many occasions. 23
Operating out of multiple countries D-Company took advantage of globalization, ease of
international trade and demand for goods, technology, and ease of travel. In the late 1990s D-
Company was able to exploit the growing film industry in India. Vertically integrating operations
with production, distribution, manufacturing through trading companies like Al-Mansoor and
SADAF Trading, Ibrahim was able to exploit new markets in the United States and the UK for
Indian film products. 24 Also, as discussed the fiscal policy change in the early 1990s with reduced
duty rates on gold left the smuggling business for D-Company less profitable. But a policy change
reverting to high import duties on gold and silver June 2013 has again opened up a market for
precious metal smuggling. 25 An analysis of the organization as an economic actor demonstrates that
D-Company has generally acted in an economically adroit, rational manner seeking to increase
profits but also taking advantage of political and economic opportunities across the region to secure
optimal monetary and nonmonetary outcomes.
23 Ryan Clarke, Terror-Crime Nexus in South Asia, date, pg. 288-304.
24 Gregory Treverton; at el. Film Piracy, Organized Crime, and Terrorism. (Santa Monica, CA: RAND Corporation, 2009). pg.
91-95.
http://www.rand.org/content/dam/rand/pubs/monographs/2009/RAND_MG742.pdf
25 “Why Gold Smuggling is on the Rise in India.” BBC News, March 13, 2014.

Impact and Responses
For India, the impact of D-Company on South Asian stability is now greater than ever. The
declarations of al-Qaeda in the Indian Subcontinent, rise of other jihadist activity in the region and
the U.S. preparing to exit Afghanistan, D-Company has numerous opportunities to strike at the
heart of the BJP government. Ibrahim has the network and finances to assist in a complex strategic
attack in India that could be devastating and have a proliferating effect on terrorism in South Asia.
India
The Government of India has taken a group centric approach in trying to counter the
influence of Ibrahim and D-Company. Following the 1993 bombings India sought extradition with
countries like the United States and UAE to bring D-Company members associated with the attack
back to India for trial. While India arrested some of D-Company’s key figures, its influences
remained. In 1999 India enacted the Maharashtra Control of Organised Crime Act (MCOCA) to
update original framework to deal with the growing organized crime and is currently trying top D-
Company lieutenants Abdul Karim Tunda under the Terrorist and Disruptive Activities (Prevention)
Act. India targeted specific assets known to Ibrahim and his associates in India, demolishing homes
and businesses. 26 The newly elected prime minister of India, Narendra Modi, prior to the election
promised the extradition of Ibrahim from Pakistan. 27 No substantial action has been taken since
Modi’s election to dismantle D-Company’s network of influence.
U.S. Efforts
The United States has been involved as secondary support in assisting India to contain and
take down D-Company, including adding Ibrahim and his lieutenants to U.S. Treasury and State
Department sanctions lists. 28 The 2014 joint U.S.-India statement mentioned the goal of,
“dismantling of safe havens for terrorist and criminal networks, to disrupt all financial and tactical
26 “IPL spot-fixing: Court orders property attachment process against Dawood Ibrahim, Chhota Shakeel,” Z News, May
31, 2014. . http://zeenews.india.com/news/nation/ipl-spot-fixing-court-orders-property-attachment-process-againstdawood-ibrahim-chhota-shakeel_936311.html
27 Since election of Modi in May 2014 it was widely reported that Dawood Ibrahim asked the ISI for more protection
and to be relocated.
28 United States Department of Treasury, Office of Foreign Asset Control, Designations Pursuant to the Foreign Narcotics
Kingpin Designation Act, 2009.

support for networks” for groups like Lashkar-e-Taiba and D-Company. 29 The FBI and India’s
Intelligence Bureau are now sharing intelligence on the location and assets of Ibrahim. Lastly it was
speculated that the U.S. was going to provide assistance in extraditing Ibrahim from Pakistan, the
country who denies his existence in the country. 30 This type of activity has been reported before but
the U.S. has taken no action. 31
Conclusion
The preceding analysis illustrates an organization that, in spite of lacking the global
awareness or media attention experienced by its peer groups, remains a genuine political and
economic force in South Asia and beyond. Because of Dawood Ibrahim’s ability to adapt and grow
D-Company through nearly four decades, his organization remains one of the most influential
groups in the region. Today, it is important that all of D-Company’s “faces” be acknowledged: this
includes the organization’s roles as a transnational criminal organization, a terrorist group, and an
economic actor inside of Pakistan. In tracing the group’s historical development and examining the
regional context in which these developments took place, one can better understand how the
organization has acquired the multidimensional role it exhibits today. And in turn, by examining this
we can better understand how each role threatens the stability of the South Asia. It remains to be
seen whether, or how, D-Company continues to threaten regional stability if it manages to maintain
its adaptive nature.
29 Office of the Press Secretary, “U.S.-India Joint Statement,” The White House, September 30, 2014.
http://www.whitehouse.gov/the-press-office/2014/09/30/us-india-joint-statement
30 Elizabeth Bennett, “Time for India to Take Down Dawood Ibrahim,” The Diplomat, Nov. 1, 2014.
http://thediplomat.com/2014/11/time-for-india-to-take-down-dawood-ibrahim/
31 “No Request Made to US to Track Down Dawood Ibrahim, Clarifies Government,” Press Trust of India, February
19, 2014.
http://indianexpress.com/article/india/india-others/no-request-made-to-us-to-track-down-dawood-ibrahim-clarifiesgovernment/

Elizabeth is a graduate student at New York University’s Department of International Relations. In 2013
she received a B.S. in Economics from Bentley University. She specializes in U.S. national security and terrorism
focusing on South Asia.