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How big a threat is terrorism?

Cato's Malou Innocent makes the case that U.S. policy is driving radical recruitment:

As a 2006 Government Accountability Office report noted, "U.S. foreign policy is the major root cause behind anti-American sentiments among Muslim populations." A 2004 Pentagon Defense Science Board report observed, "Muslims do not hate our freedom, but rather, they hate our policies."

At times it takes humor to shed light on such weighty and controversial issues. Writing about the motivation of Islamist radicals, American comedian Bill Maher once opined, "They hate us because we don't know why they hate us."

For far too long, politicians and pundits have danced around these uncomfortable truths. But it is well past time for American leaders to thoroughly explore the notion that U.S. policies contribute directly to radicalization. Reigning in the West's interventionist foreign policy will not eliminate the number of people and organizations that seek to commit terrorist attacks, but will certainly diminish it..

In this respect, terrorism can no longer be attributed to ignorance and povertyâ??conditions that exist in foreign conflict zones, but in and of themselves do not generate attacks against the West. Viewing poverty and underdevelopment as an underlying cause of extremism makes the mistake of stereotyping terrorists and their grievances. It also commits the error of ignoring the unintended consequences of past actions and very real dangers right within our borders.

I'm of the mind that, in general, a less interventionist foreign policy would serve American interests well in part because it would serve to reduce the terror threat. But sometimes I think that those advocating a less interventionist policy lean too heavily on that rationale. So in the spirit of subjecting our beliefs to scrutiny, it is worth asking if terrorism should cause a major rethink of where and when the U.S. intervenes in a foreign country. Sticking just with Cato analysts, Benjamin Friedman has argued that the threat from terrorism is in fact rather small and manageable (or as Stephen Walt, another non-interventionist, put it, more people are at mortal risk from nut allergies and bathtub drownings) and that hysteria over the threat is usually far more damaging than the threat itself:

Itâ??s been six or seven years since people, including me, started pointing out that al Qaeda was wildly overrated. Back then, most people used to say that the reason al Qaeda hadnâ??t managed a major attack here since September 11 was because they were biding their time and wouldnâ??t settle for conventional bombings after that success. We are always explaining away our enemiesâ?? failure.

The point here is not that all terrorists are incompetent â?? no one would call Mohammed Atta that â?? or that we have nothing to worry about. Even if all terrorists were amateurs like Shahzad, vulnerability to terrorism is inescapable. There are too many propane tanks, cars, and would-be terrorists to be perfectly safe from this sort of attack. The same goes for Fort Hood.

The point is that we are fortunate to have such weak enemies. We are told to expect nuclear weapons attacks, but we get faulty car bombs. We should acknowledge that our enemies, while vicious, are scattered and weak. If we paint them as the globe-trotting super-villains that they dream of being, we give them power to terrorize us that they otherwise lack. As I must have said a thousand times now, they are called terrorists for a reason. They kill as a means to frighten us into giving them something.

So is radicalization a major issue that warrants the U.S. to think twice before pursuing a preferred policy, or is it a small threat that doesn't warrant sweeping government changes? It seems to me you can't argue that on the one hand, the threat from terrorism is rather small and manageable, and on the other that it is so grave that we need to make major changes to American foreign policy.