Illicit : How Smugglers, Traffickers and Copycats are Hijacking the Global Economy

Naím reports that legitimate global trade has doubled since 1990 from $5 to $10 trillion. Meanwhile, money laundering has gone up tenfold, exceeding $1 trillion a year. Smuggling and money laundering have always existed, but Naím shows how they have increased at a staggering pace in the wake of globalization, despite new government controls since 9/11. The main culprits are the collapse of the Iron Curtain and state deregulation. As the reach of organized crime has expanded, governments have failed to keep up. Naím illustrates the problems with stories about A.Q. Khan, the father of Pakistan's atomic bomb who sold nuclear technology to North Korea and Libya; Walter C. Anderson, an American who was accused of hiding $450 million in offshore accounts to evade taxes; and Vladimir Montesinos, the Peruvian intelligence czar who is on trial for trafficking drugs and arms. The book, while a little dry, will be interesting to policy buffs and aspiring crooks alike. --Alex Roslin

Book Description
Pick up a newspaper anywhere, any day, and you will find reports of illegal migrants, drug busts, smuggled weapons, and laundered money or counterfeit goods. Illicit trades are booming and so are the traffickers’ revenues—and their political influence. Hamstrung bureaucracies in rich and poor countries alike are losing the battles against these agile, well-financed, politically powerful, and ever-shifting networks of determined individuals. Religious and political zeal drive terrorists, but it turns out that simple profit is no less a motivator for political upheaval and international instability. Black-market networks are stealthily transforming global politics and economics.
Filled with fast-paced, vivid examples that are as real as they are surprising, Illicit shows how we got to this dangerous point—and stresses the interconnections between these illegal enterprises, how they endlessly recombine to breed new lines of business, distort the economy of entire countries and industries, enable terrorists and even take over governments. From pirated movies to weapons of mass destruction, from human organs to endangered species, drugs or stolen art, Illicit reveals the inner workings of these amazingly efficient international organizations and shows why it is so hard—and so necessary—to contain them.
Illicit offers a fresh, ingenious and compelling vision of this untold story of globalization. It provides a powerful new lens with which to assess how today’s world really works and where it may be headed. Illicit will surely ignite urgent debate at the highest levels—and change the way you think about the world.

Customer Reviews:

Review #1: A riposte to free market cheerleaders
2006-06-10
"Illicit" by Moises Naim is a good primer on the underground economy. Mr. Naim's experience as an Editor at Foreign Policy magazine appears to have helped the author hone his skills at synthesizing an impressive quantity of third-party research to support his thesis. It is also evident that Mr. Naim's discussions with numerous high-level personal and professional contacts around the world have helped him reflect on the topic at length, leading him to offer many pages of thoughtful critique and analysis. The end result is a balanced and nuanced book that makes a valuable contribution to our understanding about an increasingly urgent and worrisome problem.

Some might also read Mr. Naim's description of how globalization empowers illicit trade as a riposte to free market cheerleaders such as Thomas Friedman, who tend to equate entrepreneurship with utopianism. To the contrary, we find that many counterfeiters and traffickers are highly skilled and creative people who excel at exploiting decentralized and flexible underground marketing, sales and production networks for personal gain but at great expense to our collective peace and security. According to Mr. Naim, "profits...was the name of the game" for nuclear weapons traders such as A.Q. Khan, and it is on this basis that the struggle to curtail illict trade must be based.

Given that governments around the world are currently losing this struggle, Mr. Naim argues for a strategy of harm reduction including the removal of the artificial barriers that create myriad profit opportunities for criminals. For example, this might include the decriminalization of marijuana. The author reasons that law enforcement could better focus on much more dangerous activities and on enforcing the laws in more readily attainable ways, such as prosecuting major drug dealers and the employers of illegal aliens. I found Mr. Naim's recommendations to be refreshingly commonsensical when compared with the more politically expedient but ineffective supply-side fixes that are proposed by far too many policymakers today.

Regrettably, Mr. Naim fails to take the book to a deeper level of analysis by making a stronger connection between neoliberal ideology, democracy and illicit trade. To be sure, Mr. Naim highlights the fact that some places on our planet have become anarchic, controlled by criminal gangs of all sorts whose economic power has allowed them to buy off their local governments (if they exist at all). However, he does not acknowledge the fairly obvious fact that illicit trade might represent precisely what neoliberalism desires: pure capitalism without the restraining influence of government. Might his recommendations have been made stronger by insisting on ways to achieve meaningful social and environmental justice through radical democratic reforms, rather than plugging holes in an already far too leaky and decrepit system of global neoliberal governance?

Setting aside this reasonable difference in opinion, I found this book to be an engagingly interesting and informative read. I highly recommend it to all.

Review #2: Same Business Savy/Muscle As Wal-Mart
2006-05-20
"In todays labyrinthine routings of contraband across multiple contients, front companies are easy to set up, dozens in order to blur one's trace. As a result intermediaries in international commerce of illicit products, services , & humans have increased their profile and their profits. It is the brokers who control today's illicit markets, set the deals, & make the big money".This is a small snipet of the market place. The markets are just markets/ legal or illegal. Governmements decide the righteousness of them. In other words: what is in a true market: cent$, can now be dollar$. The magic of a legalized highway robbery stroke of the pen. Of course its a no brainer that governmemnts are getting greased. Through corporate(legal/illegal) sugar daddys or just down and dity in your face corruption. It has penetrated deeply into the private sector, politics, and governments. It is penetrating markets deeper, horizontally and vertically, in direct proportion to their profits, to control crucial decisions within national governments. In some cases the national interests are completely aligned with illegal profits. A must for understanding the workings of a global economy. An entertaining and informative read. Welcome to globalization. Either side of the border: they own it.

Review #3: The limits of moral indignation
2006-05-18
Naim starts his book by describing the corrupting influence of global trade. He argues that the rapid fall in trade barriers during the 90s has produced a boom in illicit trade. Just as it is easier to make an international call or buy clothing manufactured in China, it is now trivial to traffic slaves and contraband. With all their cash flow, smugglers have made a big business of tax evasion. In some places, it is cheaper for smugglers to buy the government than fight it. Once purchased, they can make their line of business 'legal', at least within their own territorial domain. The consumer can politely ignore all of this until smuggler profits fund political violence such as 9/11. The way modern smuggling threatens the peace provides Naim with a great story line, something that should interest a wide audience.

With uncontrolled global trade identified as the primary culprit, Naim turns to detailed stories regarding the immoral traffic in slaves, drugs, body-parts and weapons. I use the term 'immoral' because Naim relies on 'moral outrage' to maintain reader interest.

Naim paints a picture of global smuggling networks composed of independent, but cooperative agents now finding a stealthy niche in international commerce. He shows how these agents arbitrage the differences between legal systems. When useful, they can simply buy the government and grant themselves legitimacy. The amounts of money are huge. They specialize in cross border movement and make the most of high tech gadgets. Take out any individual, and a competitor quickly fills the gap. There is no long vertical chain which would allow police to immobilize the smuggling network by taking out a few kingpins. These networks are very robust.

Naim spends the last 10% of the book on policy recommendations, but they seem tentative and conventional. He lists 6 steps:
1. Enhance surveillance technology (eavesdropping, biometrics, etc.)
2. Unify government agencies (do 'homeland security', but do it right)
3. Give government goals that can be achieved
4. Use global solutions
5. Build political will power to do reasonable things (like legalize marijuana).
6. Get everyone involved.

The 6 step program strikes me as schizophrenic. The first two steps are very conventional 'big government' solutions. The last 4 might be rephrased to read 'educate the voters, and kick out the rascals'. Who wants more big brother programs? What is the educational curriculum, the joys of surveillance?

What gets ignored is rising gang violence. Naim is curiously silent on levels of kidnapping, extortion and blackmail. These problems are particularly bad on the borders. Nor does Naim discuss theft of real property. For example, the theft of electricity and oil from various energy networks (bunkering) never makes it into his book.

Rather than explore the nature of network violence, Naim seeks to show 'illicit' trade is simply an economic issue. Time and again, Naim tells us that these criminals are capitalists, driven by economic goals. He asks us to think of them as bankers rather than bootleggers. They are driven by profits and only become 'criminals' because of misguided political events. Naim argues that few bootleggers are purely doing illicit business. They are really generalists. Almost all have some 'licit' business. Further, if you really take a close look at yourself, everyone has done an 'illicit' deal at some point in their lives. We are all in the 'illicit' business.

It is a little harder to make this case if robbery, kidnapping, extortion and blackmail are included in the list of 'illicit' activities. One can argue that economics illuminates murderous motivations, but I've always found such arguments hollow. I'm not convinced that thugs are purely economic actors. The thugs I've met instinctively like violence and domination, regardless the economic consequences.

Naim spends the last 10 pages describing the declining importance of the 'nation-state'. He derides the Bush administration for expecting terrorism to be 'state sponsored'. This represents a 7th recommendation. He argues that terrorist are sponsored by global illicit trade, not 'states'. Instead of looking for the 'state', we should be looking for the 'network'. One is left wondering what 'looking for the network' might mean.

Review #4: Attacking Illicit Trade
2006-01-06
Illicit is a thought-provoking, though somewhat derivative, study of modern-day transnational crime and the challenges it poses to governments. The significance of interconnections between globalization, illicit trade, and world politics has long been apparent to specialists, if not to inveterate cold warriors and rarefied academic traditionalists. The writer skimps a little on important topics; for example, there is much more to the "loose nukes" problem than the machinations of A.Q. Khan and his associates. However, the chapters are generally an excellent read. As a one-time consultant for Microsoft in greater China, I found the chapter on the cross-cutting economic implications of counterfeiting especially insightful.

Effective countermeasures to illicit trade are necessarily elusive.The author is critical of supply-side enforcement, and indeed it hasn't worked well for drugs and other mass-market commodities. He suggests that to "stand between millions of customers desperate to buy and millions of merchants desperate to sell and stop them" may be asking too much of governments. Demand-side remedies may work better, though for items with great destructive potential, demand-reduction equates to conflict resolution--a long-term and uncertain proposition at best. In such areas, interdiction and source control programs-- locking down Russian nuclear warheads and materials, for example--remain indispensable guarantees of international security and stability.

Review #5: Not bad but not good either
2006-01-05
I'd not heard of Moises Naim or if I had, the name did not ring a bell. I had heard a podcast of a speech he did and he hooked me. Since I have both a personal and professional interest in this area ordered the book.

I found it very interesting and pretty well written. It covered a lot of important areas and I learned a few new things. I think the most valuable aspect of the book is the way he looks at illicit trade as more or less independent of the goods, services or people being traded.

However, I found a number of things that set me to tingling.

In one section he says that COngress voted to make Assault Rifles legal. This is not exactly true. They used to be legal, they were banned for a specific number of years and when the ban expired it was not renewed. It's not quite a lie but close. In the following sentence he quotes a Colombian(?) minister as saying that the US had made "machine guns" legal. The implication, which Naim does nothing to correct being that assault rifles are fully automatic. Machine guns continue to be illegal in the US.

He says, sort of in passing, that General Michael Kalashnikov is suing the US for distributing counterfeit AK-47's to the Iraqis. I had not heard this and it just sounds hinky. I was unable to find any reference to this, even in the source that Naim cited. (Newsweek)

Speaking of Condaleeza Rice, he refers to her as a "professor". She was not, she was Chancellor of Stanford University. *BIG* difference. A chancellor actually runs a complex organization as opposed to a professor who teaches, writes and does research but runs nothing and is responsible for nothing.

There were a number of other things in the book that were either wrong or felt like they were probably wrong (or perhaps just not quite right). I got the sense that he did this on purpose to promote a point of view but I am not clear what point of view he was actually trying to promote.

So, read the book. It is worth the effort. But take it with several large grains of salt.

John Henry
john@changeover.com