I guess the difference between terrorism and war is the same as that between a pirate and and emperor, namely that the emperor acts on the authority of a state where as a pirate acts upon his own authority, but when we raise the question of the source of that authority we wonder whether there is any real difference between a pirate and an emperor. As the pirate king said to Alexander the Great, the only difference between the two was that Alexander had an army.
The same would apply to the terrorist and the freedom fighter, namely that one acts on the authority of a state while the other acts upon their own authority, but even then those distinctions become blurred. The French Resistance acted on their own authority during World War II but also acted in the interests of the Allies, though theoretically were probably no better than the insurgents that acted against the Americans in Iraq and Vietnam. In fact, the insurgents in Vietnam were acting under the defacto authority of the North Vietnamese.
However the idea from this book is not the question of the source of the authority that allows one to go to war and forbids the other. When Saddam invaded Kuwait without authority he was punished, but when the United States invaded Iraq without any authority, no punishment was metered out. It is much easier to place economic sanctions against a tinpot dictatorship than it is place them against an economic superpower, however that, in many cases is changing. For instance, manufacturing is moving outside of the United States, and the United States is no longer considered to be the sole superpower with the rise of China. However, the problem is that the Chinese and American economies are so intertwined that it would be hard, if not impossible, for China to survive with sanctions against the United States. Yet, we also must remember that there was a very similar situation in the lead up to World War I with a similar symbiotic relationship between England and Germany.
The question of sanctions against a superpower also brings us back to the Napoleonic Wars. Here Napoleon attempted to place sanctions against England in an attempt to starve England economically. Basically it did not work, and while he had control of the European Continent, he did not have complete control, which was why he had to invade Russia. Further, it did not actually starve England because England was a sea power who was able to draw upon her colonies to survive. She could be isolated from Europe without facing any ill effects, and in fact she had blockaded Napoleon's ports and also destroyed his navy at Trafalgar, which gave her unprecedented control of the seas.
Then again who suffers in a war? The easy answer is that it is the civilians. When economic sanctions are levelled against a country it is not the ruling elite who suffer, and it is not necessarily their army that suffers either but it is the average civilian. If the idea of sanctions is to starve and weaken the power of a rogue dictator it generally does not work. Take North Korea for instance: despite years of economic sanctions the army is still strong enough to keep the leaders in power. The leaders still have their luxurious palaces and the army still has food in their stomach, but the average civilian is struggling daily to stay alive. What is happening is in fact the opposite: the civilians are becoming weaker which means their ability to rebel against the leadership is sapped away while the position of the leadership becomes stronger because the population is no longer able to rebel against an army that is still being fed.
The best way to undermine such a power is to undermine the army because it is the army that keeps the ruling elite in power. We are seeing this in North Africa, where we have Gadaffi's army deserting him forcing him to rely upon a mercenary force. Okay, without Western intervention, Gadaffi would have won, and if Gadaffi had enough money to support an army, then he has enough money to support a mercenary force. In the situation of many of these people there does not actually seem to be any concern that they will be killed because even though Gadaffi was on the losing side, he was still able to bring mercenaries in. I guess it is the whole risk/reward principle. People still gamble despite the knowledge that the odds are weighed against them because of that small chance that the odds will shift, even for a moment, into their favour.