Globalization created a massive expansion of international economic flows. This has many advantages for specialization and comparative advantage. The problem is that the bad guys benefit too. Transnational Criminal Organizations have flourished. Criminals are more specialized and more productive than ever and globalization has given them the way to access a large economy of scale.

Transnational Crime threatens global trade networks and undermines the integrity of the nation-state system. Criminals fund insurgents and terrorists who distract or weaken governments to prevent interference with criminal operations. This is producing a series of exogenous shocks which can seriously disrupt or harm the world economy.

There are many possible causes for the growth in crime. Crime is thriving in failed states, where law enforcement is weak.
The Informal Economy is unmonitored nd ungoverned, allowing criminals to take power over certain markets. These criminals can sell their products overseas to wealthy countries. The Failed Drug War and other prohibitive morality laws have fueled a massive black market in drugs, prostitution, and illicit goods. But there is also a growth in violent crimes, such as slavery and kidnapping and ransom.

Moises Naim described the problem in Illicit and in several of his articles.

The world is facing a crime wave that is more severe than traditional wars. This fits with the 4th generation war thesis which I discussed before. Our cultural narrowly defines “war” to only one type of political violence rather than the whole range. This is, for all intents and purposes, a criminal war.

The world is experiencing a crime pandemic. Crime rates are on the rise almost everywhere, and these crime statistics typically are distinct from the death and mayhem that comes with terrorism, civil war or major conflict. The data reflect the booming number of civilians assaulted, robbed or murdered by other civilians who live in the same city, often in the same neighborhood.

Total recorded crime increased steadily since 1980 for all the countries the United Nations measures, according to a 2003 U.N. report.

The world’s most murderous region is the Caribbean, followed by South Africa and western Africa, and then Latin America, according to a joint U.N.-World Bank report from earlier this year. But the trend is global. Russia’s homicide rate is 20 times higher than Western Europe’s. Rising crime rates are also reported throughout Asia.

Security is breaking down across the world. Local police are outmaneuvered by adaptive and capable criminal organizations.

The Black Market is huge:

This is more than a security issue: the dark trades, driven by the same globalizing forces responsible for the surge in international commerce over the last two decades, now threaten the smooth functioning of the legitimate world. Smuggling revenues are spectacular. From 1992 to 2002 the total size of the global drug trade more than doubled to $900 billion annually.

Money laundering offers perhaps the best glimpse of the total size of the world’s illicit economy. While global trade has roughly doubled since 1990, from the $5 trillion to the $10 trillion range, the amount of money being laundered worldwide has grown at least tenfold—to nearly $1.5 trillion in some estimates. Since illicit trades can thrive only with government complicity, this means that traffickers are investing huge sums to gain political influence, and not just in their home countries. Their operations have become truly multinational, weaving together global networks of political allies and generating profits on an unprecedented scale. Indeed, the sheer size of the problem is forcing entire industries—from shipping to software, banking to movies—to rethink their operations.

The fact that global crime is growing at 5x the rate of the legal economy is disturbing. We’re are facing a security threat with financial capabilities within a range of $1 trillion.

Transnational Criminal Organizations have expanded in power and influence. I’ve outlined Manwaring’s thesis that criminals grow in stages and the 3rd generation gangs begin to wage an insurgency against governments.

  •  1st generation: Street Gangs which rely on local crime and recruitment.
  • 2nd generation: Cartel and Mafia Organizations operation through regional networks and criminal markets.
  • 3rd generation: The Transnational Criminal Organization. They commands international black markets. Many employ paramilitary forces and politically control territory.

We can name many of the classical transnational criminal organizations: There are the Yakuzas in Japan, the Triads and Big Circle Boys in China, the Russian Mob, the Sicilian Mafia, the Sinoloan and Gulf Cartels in Mexico, The Mara Salvatrucha in the USA and El Salvadore, and so on.

Many criminals are forming decentralized networks rather than heirarchies, so we cannot even name them. Small groups of criminals contract temporary business deals with other small groups, making their operations more fluid and shifting than traditional hierarchies.

Criminal profits fund many wars across the world. Africa still faces problems with illicit “Blood Diamonds” used to fund civil wars. The massive illegal arms trade provides the munitions, such as AK-47s, as well as services by bomb-making specialists and others. Drug profits fund the Drug War in Mexico, the Communist insurgency in Colombia and Peru, the Taliban in Pakistan and Afghanistan, and so on.

The illicit drug trade is one of the largest and deadliest black markets.
Washington Post comments on the “Lost War”

Afghan opium production in 2006 rose a staggering 57 percent over the previous year. Next month, the United Nations is expected to release a report showing an additional 15 percent jump in opium production this year while highlighting the sobering fact that Afghanistan now accounts for 95 percent of the world’s poppy crop. But the success of the illegal narcotics industry isn’t confined to Afghanistan. Business is booming in South America, the Middle East, Africa and across the United States.

I will not claim that ending prohibition will make this crime go away, but continuing the war on drugs is definitely not helping. Misha Glenny points out that crime has exploded in violence and intensity to fuel the underground demand for drugs:

I have been traveling the world researching a book on the jaw-dropping rise of transnational organized crime since the collapse of communism and the advent of globalization. I have witnessed how a ferocious drug gang mounted an assault on Sao Paolo, closing the city for three days as citizens cowered at home. I have watched Bedouins shift hundreds of kilos of cocaine across the Egyptian-Israeli border on the backs of camels, and observed how South Africa and West Africa have become an international narcotics distribution hub.

The trade in illegal narcotics begets violence, poverty and tragedy. And wherever I went around the world, gangsters, cops, victims, academics and politicians delivered the same message: The war on drugs is the underlying cause of the misery. Everywhere, that is, except Washington, where a powerful bipartisan consensus has turned the issue into a political third rail.

The supply of drugs like cocaine, meth, heroin, pot, etc is so plentiful that the prices have dropped as much as 2/3rds. The demand is being met easily despite aggressive policing in the US and Europe.

The collapse of the Soviet Union removed the largest state sponsor of insurgent organizations in the world. Many insurgents desperately needed cash flow, so they turned to crime. The distinction between criminals, insurgents, and terrorists today is blurred. These are self-organized and self-funded non-state actors with their own agenda.

Counter-drug trade efforts had marginal effect. The US and other governments often tried to destroy crops which grew the drugs but rarely provided farmers with profitable alternatives. This is a serious defect as many farmers in Afghanistan can make real money growing opium.

In Washington, the war on drugs has been a third-rail issue since its inauguration. It’s obvious why — telling people that their kids can do drugs is the kiss of death at the ballot box. But that was before 9/11. Now the drug war is undermining Western security throughout the world. In one particularly revealing conversation, a senior official at the British Foreign Office told me, “I often think we will look back at the War on Drugs in a hundred years’ time and tell the tale of ‘The Emperor’s New Clothes.’ This is so stupid.”

Indeed, Prohibition is stupid.

The prohibition of drugs has created millions of Al Capones across the world without reducing drug consumption.

This is not just about drugs. There are some crimes which are more intractable. One of which is the growing slave trade.

The world has at least 27 million slaves today, if not tens of millions more. Anti-Slavery International and its counterpart The American Anti-Slavery Group continue to track modern slavery. Here’s a brief description of the problem. Here’s the US State Department’s brief on human trafficking. Slavery is one of the fastest growing criminal enterprises in the world, alongside the drug trade.

There is old style chattle slavery, where victims are bought and sold as property, which is worst in Africa, particularly the Sudan and Mauritania.

Debt bondage uses blackmail to financially trap laborers and force them to work. Debt bondage has grown in South America and Asia. Many workers in the Amazon were tricked by criminals and placed into debt bondage in remote plantations.

Sex Slavery is a fast growing business. This ranges from the sex slavery trade, which is widespread in East Asian countries like Thailand.

When NGOs claim that there are more slaves today than ever before in history, they are not joking. We substantially underestimate the slave trade as it is.

Kidnapping and Ransom is rising too. Criminals still target wealthy victims, but are finding it is easier and just as profitable to target a large number of poorer victims:

“Express” or “lightning” kidnappings are the latest fad, where the victims tend to be less wealthy. They are usually abducted from a taxi, taken to an ATM and forced to withdraw money.

The kidnapping lasts a few hours and can sometimes involve force.

There’s even kidnapping insurance:

Many Fortune 500 companies now carry kidnapping and ransom insurance. It is largely offered as an add-on cover for multinational firms with staff or property in high-risk destinations and for firms whose executives travel extensively.

The best I can do is identify the problem. Transnational Crime has grown immensely and harms our security. I do not know of any real solution or even if there is one. The crimes themselves are not new, but have never been seen on this scale and level of intensity before.

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