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This paper outlines and evaluates the nature of terrorism as perpetrated by al-Qaeda. To begin it graphs the institutional blueprint of society, and identifies the ubiquitous relationship between state, market and culture in any society. It goes on to describe how private markets and cultures are harmed and diminished by the relative expansion of the state. At some stage in this relative expansion, private markets and cultures simply collapse. At this point, a societal backlash ensues. al-Qaeda, in this sense, is the modern day coup d'etat against the overwhelming power of an over-extended autocracy. The paper evaluates this hypothesis through an institutional examination, largely focused on Saudi Arabia, the initial homeland of Osama bin Laden, the highly effective leader of al-Qaeda, and current home to the world's largest financial contributors to the cause of al-Qaeda. Understanding the specific and purposeful institutional nexus from which al-Qaeda has emerged must be a first step in any systematic attempt to reduce the terrorist threat that it poses. Copyright Springer Science+Business Media B.V. 2006Terrorism, Institutions, al-Qaeda, Saudi Arabia, Culture, Norms, Club goods, Islam, Rational choice,

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