By Mike Verdin BBC News Online business reporter, Davos

The escalating tensions between the West and terrorist forces has tipped the globe into World War Three, Malaysian Prime Minister Mahathir Mohamad has warned.

We are in the middle of the Third World War Mahathir Mohamad

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Victims of the September 11 atrocities in the US, and Afghan villagers killed during the ousting of the Taleban regime, were casualties of conflict fuelled by a global climate of fear, Dr Mahathir said.

"We fear cardboard boxes. We fear white powder. We fear shoes. We fear metal cutlery," Dr Mahathir said.

Citizens in states accused of harbouring terrorists, meanwhile, feared sanctions, starvation and military action.

"We are in the middle of the Third World War. Both sides are convinced that their side is right, that theirs is the fight against evil," he added.

"It's going to be a long war because hatred, anger, bitterness rule our hearts."

The alternative view

The comments, made to the official opening debate of the World Economic Forum's annual summit, in Davos, were echoed in part by Lord Carey, the UK's former Archbishop of Canterbury.

While stating great fondness of Americans, Lord Carey said US politicians should be "profoundly disturbed" by some opinions of the country.

Lord Carey: "Alternative views" must be considered

"We have to listen to the alternative views coming out of Porto Alegre," he added, referring to the rival World Social Forum underway in Brazil.

But US congressman Rob Portman, while recognising the US responsibility to assist poorer countries, separated poverty from anti-Western movements.

"There are poverty stricken countries where there is not a terrorist threat."

He also defended the US's right to fight for freedom.

"Not just freedom, but democracy. Not just democracy but human rights."

He added that five members of the US cabinet were flying to Davos.

"They are coming here to listen," Mr Portman added.

Old wars, new wars

Dr Mahathir traced the outbreak of current hostilities to the end of the Cold War, which had promised an era of "peace and prosperity".

But the loss of a counterbalance in the form of the Soviet Union had led "that great proponent of justice and fair play" - a thinly veiled reference to the US - to become "unbalanced".

He added: "The friendly face of capitalism is not needed any more. They can do what they like, and what they like is to make money for themselves."

The war could not be ended by even the military defeat of states targeted by the West.

"The target is wrong," said Dr Mahathir, who rules a Muslim country.

"All that will happen if they are defeated is to create more anger."

What was needed was "good people" who realised that terrorists "do not tie bombs to their bodies or crash planes for the fun of it".

Mr Portman distanced the US, which has 10 million Muslims, from anti-Islamic feeling.

The US had, in Bosnia and Kuwait, acted "primarily to protect or liberate Muslims".