Transcript Security Scenarios And The Global Economy

NS3040
Fall Term 2014
Economic Security: Illicit Activities
Economic Security: Illicit Activities
• Illicit activities are one of the fastest growing
businesses in the global economy:
• Documented by Moises Naim:
• The Five Wars of Globalization, Foreign Policy,
December 2003
• Mafia States: Organized Crime Takes Office, Foreign
Affairs, May/June 2012
• Both articles document the nature of the globalization
of illegal activities and the difficulties of combatting
the spread of these activities.
• Between the time articles written many aspects of the
problem had become much more serious
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Naim: Five Wars of Globalization I
• Main areas of illegal trade:
• Drugs
• Arms Trafficking
• Intellectual Property
• Alien smuggling
• Money Laundering
• Drug Trade
• At the time this article written – drug trade was about $400
billion – roughly size of Spanish economy
• U.S. was sending about $35-$40 billion on war on drugs
• Once one area controlled, another sprang up – case for both
production and routes
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Naim: Five Wars of Globalization II
• Arms Trafficking
• Illicit trade accounts for almost 20 percent of total small arms
trade
• Generates more than $ 1 billion a year
• Helped fuel 46 of the 49 largest conflicts in 1990s
• Threat of growing trade in biological and nuclear materials
• Problem: restricted supply, high demand = profitable prices
• Alien Smuggling
• About $7 billion a year business
• Many pay smugglers high fees
• Women, children often victims
• Intellectual Property
• Some success through WTO and other organizations to get
better compliance of patient, copyright laws.
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Naim: Five Wars of Globalization III
• Money Laundering
• Caymen Islands has population of 36,000 but
• 2,200 mutual funds,
• 500 insurance companies
• 60,000 businesses and
• 600 banks
• Efforts to crack down on banks have had some
success – new regulations, reporting and oversight -FATIF
• Banks do not want their reputations harmed so many
voluntarily police activities
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Naim: Five Wars of Globalization IV
• Why Government’s Can’t Win – criminals:
• Not bound by geography
• Not even clear where the war against a certain illegal activity should
be fought
• Defy Traditional Notions of Sovereignty
• CIA official – they can move money around world faster than I can
shift it in my department
• Pit governments against market forces
• Mark-up of a gram of Cocaine from Bogota to Kansas City is 17,000
percent.
• Pit Bureaucracy Against Networks
• Networks to adaptable for most bureaucracies to adjust to
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Naim: Five Wars of Globalization V
• Possible Solutions
• Develop more Flexible Notions of Sovereignty
• Strengthen existing multilateral institutions
• Interpol very underfunded
• Devise new mechanisms and institutions
• Move from repression to regulation
• All difficult of unclear as to proper course of action
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Naim: Mafia States I
• The global economic crisis has been a boom for
transnational criminals
• Weak economy – cash rich criminal organizations can acquire
financially distressed companies
• Fiscal austerity – governments cut back on enforcement
• Those laid off tempted to break the law
• Many very talented people willing to work for organized crime
• Major problem
• Criminals have penetrated governments to an unpredecented
degree
• After being penetrated, many governments have
taken over illegal operations – Mafia states
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Naim: Mafia States II
• Conventional wisdom about international criminal networks
rests on three faulty assumptions
• 1. Everything has been done before
• Reality – criminal networks have expanded beyond their traditional
markets and started taking advantages of political and economic
transformations – exploiting new technologies
• 2. International crime is an underground phenomenon
operating at margins of societies
•
• Reality -- in many countries criminals to day do not bother staying
underground at all – some celebrities, own newspapers etc.
3 International crime is strictly a matter of law enforcement,
best managed by police departments, prosecutors and judges
• Reality -- better understood as a political problem with national
security implications
• Some organizations have vast resources and significant political
influence
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Naim: Mafia States III
• Some countries where organized crime has taken hold
of government – to one extent or another:
• Russia
• Kosovo
• Afghanistan
• Guinea
• Bolivia
• Mexico
• Venezuela
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Naim: Mafia States IV
• Solutions:
• Need to do more than curbing the traffic of illegal
activity
• Must also prevent and reverse criminalization of governments
• Problem – today’s law enforcement agencies no match for
criminal organizations – especially those with government
protection
• Even Interpol’s credibility damaged by corruption at the top
• Combatting international crime cannot be purely
national effort – requires international action –
• “Coalition of the honest”
• a long way from this however
• Public needs to be made aware of the problem
• Need broad based support and citizen involvement
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