Understanding the Daesh Economy

Beliefs about the long-run economic prospects of Daesh, often known as the Islamic State or ISIL, inform international decisions over how to counteract the group. We analyze Daesh as an economic entity, demonstrating first that the amount of productive activity in areas it controls is small and second that its institutions are inimical to sustained growth. Unless one believes that the group’s ideology will enable it to manage an extractive autocratic economy with historically unprecedented efficiency, then its long-run prospects are poor. This observation has a number of policy implications at both operational and strategic levels.