“Prohibiting a market does not mean destroying it”

It is an industry worth 15 to 20% of the world’s GDP. It boasts among the most global of operations. We see its results all around us, even in our own homes, without realising it. In these difficult economic times, this sector of the economy is thriving. We are supporting it with many of our purchases and people are dying for it on the streets. The industry in question is organised crime.

Misha Glenny’s book McMafia: a Journey through the Global Criminal Underworld is a fascinating thrill ride that traces the roots of the scourge of modern organised crime. He paints a clear picture of the origins, rapid international spread and possible solutions to the enormous problem of the illegal multinational. He begins in Eastern Europe.

As the communist world was imploding, law enforcement was going with it. In the USSR, state companies, the commanding heights of the economy, were being sold at firesale prices. The new oligarchs, as they were soon to be known, needed protection, and they found it in the ranks of the newly unemployed. (For more on the relation between unemployment and violence, see here.) Mob wars became the defining characteristic of Russia in the 1990s. The oligarchs ran complex corporations where the legal and the illegal were indistinguishable. Thousands of criminal organisations arose to work with them and kill for them. Then, they spread.

Glenny details how organised crime went everywhere in search of black markets to exploit. In Yugoslavia, a war that appeared to be tearing people apart was uniting the mafia across the new borders. Bulgarian gangsters tricked and then pimped prostitutes in Europe, Israel and beyond. He describes it as not only a lucrative business but one that pays consistent dividends. The trade in caviar from the Caspian Sea has enriched gang leaders, corrupted officials (further) and nearly depleted the sea of sturgeon. Dubai’s gleaming buildings belie its status as a hub for money laundering. Sanctions on trade with North Korea have pushed all its dealings under the table, and now a nuclear state is selling weapons to the Taliban. (See here.) British Columbia’s marijuana cultivation brings in 6% of its GDP and ecstasy production is rising and bringing Hell’s Angels with it. Sanctions and criminalisation did not end the trade in these things. This lesson, in fact, is central to Glenny’s thesis.

Innumerable women are exploited as prostitutes. They have no protection from violence or disease. Legalised prostitution would mean they have the law on their side. I have been writing for some time about why legalising drugs is the only sensible answer to the billions of dollars and no end of lives lost to fighting a problem that grows nonetheless. An estimated 70% of the global “shadow economy” is in narcotics.

Lev Timofeev, a former Soviet mathematician and analyst of the shadow economy, put it well in an interview with Glenny when he said the following.

“Prohibiting a market does not mean destroying it. Prohibiting a market means placing a prohibited but dynamically developing market under the total control of criminal corporations. Moreover, prohibiting a market means enriching the criminal world with hundreds of billions of dollars by giving criminals a wide access to public goods which will be routed by addicts into the drug traders’ pockets. Prohibiting a market means giving the criminal corporations opportunities and resources for exerting a guiding and controlling influence over whole societies and nations.” (Glenny, 225)

The idea that something is bad, therefore we must make it illegal means trying to end the economic law of supply and demand. Only market based policies will work. Everything else is doomed to fail. But public pressure is mostly conservative on the issue. (See, for instance, here.) I wrote to my member of parliament, Gary Lunn, to end drug prohibition, and he responded by assuring me that he was adhering to more of the same inept, wasteful policies.

The same simple thinking believes that restrictions on immigration can be effective ways of keeping the barbarians outside the gates. The demand for cheap labour has been rising for years, while barriers to it have been following suit. Many Americans see their country as the destination of poor workers, and while illegal immigrants face various dangers to enter and stay in the US, their counterparts all over the world are doing the same. Millions of people are trafficked to jobs under terribly hazardous conditions to wherever cheap labour is in demand. The criminals running operations kidnap the people and then beat or rape them. The free movement of labour across borders would reduce the risks of being a migrant worker. But being unwilling to embrace cultural change, not understanding interculturalism and scared of losing their jobs, people in the rich world prefer to forget about the problem and watch TV. But more attention to the trade going on under the rug would make our world safer.

The fingers of crime are in every pie, everywhere. Organised crime does not only deal in drugs and prostitutes. It corrupts police forces and governments everywhere. It sells cigarettes. Because of high taxes on cigarettes, cigarette smuggling has cost the UK alone $8b in tax revenue and fueled the brutal conflict in Yugoslavia. It sells diamonds, as we know from the movie Blood Diamond, a gripping, fictional (but true to life) story of a diamond industry that has brought down states and sold millions into slavery. It sells weapons, labourers, DVDs, gold, tin and coltan. Do you know what coltan is? It is a black ore found in almost all cell phones, DVD players, video game systems and computers. Though it is found in many parts of the world, much of it comes from the Democratic Republic of the Congo. The mafia from all around the world have cooperated to exploit the mineral resources of the Congo, and in doing so have been fueling the world’s deadliest war since 1945. (Read more here.)

Though we cannot know the origin of everything we buy, we can choose to stop taking drugs, visiting prostitutes and consuming so much. We can lobby our governments to legalise drugs and prostitution, and loosen restrictions on migration. We can set up regimes to verify the origins of things like diamonds, gold and coltan, like the Kimberley Process has done with some success. It is time to stop standing by and letting criminals corrupt our world when some unpleasant but necessary actions could end their party. I strongly recommend McMafia. You will never look at globalisation the same again.

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8 Responses to ““Prohibiting a market does not mean destroying it””

  1. ilona@israel Says:

    ‘Legalised prostitution would mean they have the law on their side’-i agree with this point but at the same time i dont think it will really prevent violence. this socal group is easy target

  2. menso Says:

    Sure, nothing will prevent violence against such a vulnerable group. But instead of being pushed underground by stigma and criminalisation, they are more likely to get protection and treatment.

    In the book Rogue Economics, Loretta Napoleoni writes “exploitation springs from the illegal nature of the business. In such countries as the Netherlands, where prostitution has been legalized for decades, the degree of exploitation is lower: there are fewer pimps, prostitutes pay taxes, receive medical and social security benefits, and have police protection.”

  3. The unbeatable logic against the War on Drugs « The Menso Guide to War, Conflict and World Issues Says:

    […] Suffice it to say, nearly every country in the world, every major city, is feeling the pain of organised crime and state […]

  4. The chain of future conflict, part 2 « The Menso Guide to War, Conflict and World Issues Says:

    […] criminal syndicates are heavily involved in human trafficking and their income and power increases when a market is prohibited. If there is demand, someone will […]

  5. The War on Drugs « The Rule of Freedom Says:

    […] Would drug use skyrocket if drugs were legal? Well, why don’t you do heroin? Because it is illegal? (For that matter, why don’t you kill and rape? Because they are illegal?) When the government tells you what you can and cannot put in your own body, it is claiming ownership over you. Protecting you from yourself is not only a misguided idea, because you know better than any government could about what is right for you, but it is demonstrably false. The government would need to destroy all guns, cigarettes, alcohol, pharmaceuticals, cars, Coca Cola and Big Macs if it wanted to keep you healthy. Maybe it should ban all those things. But in the words of Lev Timofeev, a former Soviet mathematician and analyst of the shadow economy, Prohibiting a market does not mean destroying it. Prohibiting a market means placing a prohibited but dynamically developing market under the total control of criminal corporations. Moreover, prohibiting a market means enriching the criminal world with hundreds of billions of dollars by giving criminals a wide access to public goods which will be routed by addicts into the drug traders’ pockets. Prohibiting a market means giving the criminal corporations opportunities and resources for exerting a guiding and controlling influence over whole societies and nations. [Find more on the effects of prohibition here.] […]

  6. Don’t fear the free market, part 1: What it is and what it isn’t « The Rule of Freedom Says:

    […] Laws and regulations are not usually good for the economy or for consumers. Most of them benefit the few at the cost of the many. We have seen how above. In extreme cases, government intervention kills. What are the effects of laws on the free market? Well, what is the difference between a legal business and a criminal organisation? Just one law. Both are filling a demand. But one is forced into the violent underground, and reaps big profits, because what they supply is illegal. For some reason, be it a naïve belief that prohibiting something means ending demand for it, or a favour to an interested party such as a rival producer, lawmakers have created an enormous black market comprising 15 to 20% of world GDP no one can control without a huge number of guns. And the more they try to fight suppliers, if demand does not change, they will spend more public money and kill more people. Find more on black markets on my other blog. […]

  7. Menso Says:

    FBI: There are 33,000 gangs with 1.4m members in the US. They are expanding and becoming more violent. “Gang infiltration of the military continues to pose a significant criminal threat, as members of at least 53 gangs have been identified on both domestic and international military installations.”

    Solution: Stop creating black markets by criminalising things people want.

    –>http://www.fbi.gov/stats-services/publications/2011-national-gang-threat-assessment


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