Notesale: Turn your study into money

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Global Criminal Economies
A Major Problem
“If the twentieth century was dominated by cold wars
...

Criminal economies are international and networked
Criminal economies are organised – much like the economic forms we have studied in
recent weeks
There are often ‘boundary blur’ issues
Internationalisation of organised crime makes it difficult to police
...
Its continuing existence is maintained through the use
of force, threats, monopoly control, and/or the corruption of public officials
...
Weapons trafficking

2
...
Smuggling of illegal immigrants

4
...
Money laundering

6
...
Narcotics trade 

• Emerging activities:

• Cyber-crime
• ID fraud
• Cultural property
• Poaching

• Piracy

Global Criminal Economies
• Part of broader ‘informal’, cash economies
• Estimated as accounting for 14-16% GDP in advanced economies; 30-40% in
transitional economies and as much as 78% of GDP in some developing
countries
• These estimates constitute a complex skein of legal and illegal activities (Daniels
2004)
• Estimates of global CRIMINAL economy:
• 3
...
$2
...

In ‘99 the IMF estimated that 5% of global GDP was laundered (c
...

50% of this is invested in legitimate businesses
...


Activities

transactions)

Wages, salaries, and assets from

Tax evasion (non-monetary

unreported work related to legal goods

transactions)

and services

Tax avoidance (monetary

Barter of legal services and goods

transactions)

Employee discounts, fringe benefits

Tax avoidance (non-monetary

All do-it-yourself work and neighbour

transactions)

help

Illegal

Monetary transactions

Trade in stolen goods; drug dealing and

Activities

Non-monetary transactions

manufacturing; prostitution; gambling;
smuggling; fraud
Barter of drugs, stolen, or smuggled
goods
...
Theft for own use

Differing Geographical Interpretations
• “[Organised crime] is a spectre haunting globalisation
...
” (Gill, 2008)

• “[Criminal networks] are not marginal to the world’s economies and politics but have
become central aspects of the world order
...

Organised transnational crime, with the capacity to expand its activities and to target

the security and the economies of countries, in particular developing ones and those
in transition, represents one of the major threats that governments have to deal with in
order to ensure their stability, the safety of their people, the preservation of the whole
fabric of society, and the viability and further development of their economies
...
e
...
The Italian/Sicilian Mafia 
• The romanticised version of the Sicilian Mafia OCG represented by the Godfather
films, but actually three other main Mafia groups in Mainland Southern Italy
• Traditionally place based
• Culture of family, of respect and mutual support
• No contradiction between savage violence and mutual support 

• Expanded in the late 19th and early 20th century to the USA via Italian immigrants
• Such place based, historical OCGs have THRIVED with globalisation


‘Commissione Regionale’
Provincial Representative
Provincial Commission
‘cupola’
Provincial Commission
‘cupola’
District Representative
‘Capo Mandamento’
Head of Family
Capo decina
‘Men of Honour’

Sicilian Style Organisational Form

Sicily and The Mafia: Why? 
• Began in the mid to late 19th century following the annexation of Sicily by Italy and the
redistribution of property from the nobility/church to private citizens

• The first mafia clans developed as extra-state arbitrators of property disputes, bandit
hunters and protectors of new businesses

• So the most powerful families were taking advantage of the unrest and began to
perform the duties that the State were not providing, such as with informal policing

• Since the 1890s, the mafia clans/families were involved in a series of alliances, feuds,
extortion rackets, political corruption, bribery, intimidation and all of the things you
would associate them with
...
Its influence in the drug trade was replaced by the
‘Ndrangheta’
• This Calabrian group formed strategic alliances with Chinese triads and Columbian
drug cartels
• Provided a global network for the production, distribution and consumption of Class A
drugs
• In 1997, it was estimated that the ‘Ndrangheta controlled 80% of drugs imports into
Europe and their economic activities represented 4% of Italy’s GDP
...
8billion – 2
...
The Russian Mafia
• Emergence is recent (well known since the late 80s) - linked strongly to the collapse of
the USSR

• Organised crime had existed since Tsarist times

• The transition to capitalism from communism massively encouraged the new mafiya
from 1990

• Similarities with Italian OCGs 

• Emergence in the 1920s-1950s of the vory-v-zakone [thieves-in-law]
• Interred thieves developed fraternities within the labour camps and prisons (gulags)
• Developed distinct culture and codes of honour - often displayed through tattoos went hand in hand with extreme violence, as in Italy/Sicily
• Developed hierarchies and elected leaders to solve disputes


Crime and the Economy: Russia
• 40% of GNP controlled by crime in the early 1990s

• 80% of firms paid protection money to OCGs (to keep premises safe, etc
...
48,000 in one year)

• 450 contract killings in 1995

• 50% of banks had strong criminal connections in 1997
An Indicator of ‘Crime Infested Capitalism’ 
• Castells (2000) argues that the ‘transition to capitalism’ has created a crime infested
capitalist system in Russia

• Long history of criminal/informal economic activity

• Pre-soviet tradition of the ‘thieves community’
• The soviet underground economy (‘second economy’) was a parallel economy
controlled by the nomenklatura (not by criminals)
• Post-soviet criminal capitalism in which the state and economy, and legitimate and
illegitimate business have become intertwined - therefore very difficult to do anything
about it, linked into factories, banks, etc
...
Rapid neoliberalisation created billionaires
• e
...
Boris Berezovsky – an oligarch who made a fortune capturing state assets at
knockdown prices in the rush to privatise – now a refugee in Britain despite
arrest warrants and extradition requests for numerous crimes

Crime Hierarchies 
• A complex hierarchy of leaders evolved
• The supreme  ‘boss’ in the city is known as the ‘vor’
• The vor is responsible for the fund (obshchak) to which all criminals contribute
...
Criminal economies play a very important role in terms of the global economy
2
...
OCGs thrive in times and places of political-economic transition (e
...
19th century
Sicily; late 20th century Russia/CIS)
...
Key to understanding the economic geographies of OCGs are: a)
...
Their attendant mobilities

1
...
Money Laundering
• Cleaning ‘dirty’ money through the formal economy
• Many different ways of doing this
...
Place cash into a legitimate business
...
Layer this dodgy money with legitimate profits through often complex financial
instruments
3
...
g
...
Bribery and Corruption
• By permeating formal business, political organisations and other institutions through
bribes, backhanders, blackmail and collusion

• Forming shaky, but mutually beneficial, alliances with politicians, business elites and
security officials
• Prime example in Russia between the ‘new’ political elite, the old Soviet,
nomenklatura, the KGB/FSB and emergent oligarchs
• Often the mafia played a BIG part ensuring the economic success of the oligarchs
(Hollingsworth and Lansley)
2
...
Legitimate business interests and activities
2
...
Tax evasion (illegal)
4
...
Illicit GPNS: Cocaine  
• Demand Driven and Export Oriented
• North / South divide 

• Cost $750 to produce 1kg in 1991

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