Economic issues

As mentioned at the outset of this Topic Guide, organised criminal activities as diverse as extortion, drug trafficking, migrant smuggling, oil theft on an industrial scale, illegal gold and diamond mining, cybercrime and counterfeiting, among many other ‘lines of criminal business’, generate huge amounts of money every year. Such activities are essentially geared at stealing natural, intellectual and other resources, depriving states of very large amounts of revenue and serving as ‘massive drains on the productivity of nations, for the potential for equitable and sustainable economic growth, and for the capacity for governments to provide services to their citizens’ (Global Initiative/SWP, 2014, p. 4). This lost revenue comes in the guise of taxes and other duties that are not accrued by states and massive illicit financial flows out of developing countries, which in 2015 surpassed the $1 trillion mark, to offshore tax havens or bank accounts in industrialised countries in Europe, the Americas and Asia (Kar & Spanjers, 2015; OECD, 2014).

Corruption rings involving public officials, sometimes at the highest level of the government and state, often play an important role in the siphoning of public revenue. In this regard, Margaret Beare observes that,

It is essential to appreciate the interface between the legitimate and illegitimate operations within criminal enterprises. This interface is to varying degrees facilitated by corruption. However, the one important dimension in which the processes employed by different organized criminals vary is their ability to garner support and assistance via corruption. […] The ability to corrupt enables one to buy protection from enforcement, eliminate competition and therefore amass capital. […] The greater the ability to corrupt, the greater the ability to remain invisible, or to be seen to be legitimate – unless the entire system is blatantly corrupt and has redefined pay-offs and the like as publicly recognized business procedures. The problem arises that at the most sophisticated integrated level, the ability to corrupt enables one to control the definition of what is or is not defined as corruption (Beare, 1997, p. 158).

It is under such conditions that the conventional distinction between corruption and organised crime risks becoming meaningless. As Ellis and Shaw observe with regard to Africa, ‘corruption is […] the objective of the most serious organized criminal groups in Africa, not a facilitating activity as it is often held to be in the literature on organized crime elsewhere’ (Ellis & Shaw, 2015, p. 510). The estimated value of this global illegal-criminal economy is truly startling. According to the Global Initiative, organised criminal activities and networks are

stealing the future: it is estimated that one trillion dollars is diverted into the illicit economy by organized crime. This siphoning of funds away from the legitimate economy and licit actors has considerable impact on the viability of sustainable markets. […] With growing illicit activity and the creation of protection economies, the illicit economy can crowd out the legitimate economy. By flooding [licit] markets with illicit capital, by protectionism, price fixing and rent seeking, criminal groups push out genuine economic activity and distort markets. […] Through the provision of social and economic goods, [they] siphon social capital and reduce trust in the state (Global Initiative, 2014, p. 5).

However, it would be mistaken to assume that criminal activities and protection economies do not create livelihoods and generally reduce economic growth (Dawid et al., 2002). The point is that they do contribute to income and livelihood generation but at the same time they destroy and/or undercut licit livelihoods that would be sustainable and development-enhancing in the longer term (Global Initiative/SWP, 2014; Schultze-Kraft, 2014).

In this context, it cannot be emphasised enough that poor and vulnerable people and communities are not among the ‘winners’ of these criminal and illicit economies. On the contrary, they constitute the groups that are most exposed, even if not always in direct ways, to market distortions as well as extortion, intimidation and violence wielded by drug trafficking outfits, insurgent and terrorist organisations and corrupt political and economic elites. At the same time, poor and vulnerable people and communities – such as coca and poppy growers in the Andean region of South America and Afghanistan, respectively, or artisanal oil thieves in the Niger Delta of Nigeria and illegal timber loggers in Nepal – are first in line to be ‘criminalised’ by governments and national and/or international law, making them subject to harsh law enforcement interventions. Because of the lack of or suboptimal and non-viable economic alternatives, this can – and in fact does – result in endangering the livelihoods of these communities. However, it is also pertinent to note, in the words of drug policy expert David Bewley-Taylor, that,

In Afghanistan, as in other fragile states (drug producing or otherwise), the ‘legal’ economy is pervaded by criminal behaviour, with actors floating between worlds. Within such an environment, most Afghan farmers engaged in poppy cultivation are doing so as the result of a complex mix of drivers and thus should not simply be classified as rational economic actors merely seeking maximum returns. Nonetheless, a relatively low ‘risk premium’ certainly incentivises involvement in the illicit opium economy, for both producers and traffickers (Bewley-Taylor, 2013, p. 7).

  • Recent estimates are that ‘illicit financial flows in some countries can equate to 25% of all goods imported’ (Global Initiative/SWP, 2014, p. 4). However, it is extremely hard to come by information on whether illicit financial flows from the developing world are being invested in productive/industrial activities in developed countries. Furthermore, we do not know what role emerging markets, such as China, Brazil and other BRICS, are playing in this global illicit economy.
  • This is starkly reflected in the famous statement of Nuhu Ribadu, a former Nigerian anti-corruption chief: ‘the Nigerian state is not even corruption, it is organised crime’ (cited in Watts, 2007, p. 650). Keeping in mind context-specific variations and differences regarding the order of magnitude, the same can presently be said for a number of other developing countries, including Afghanistan, Guatemala, Guinea-Bissau and Iraq.