Dr. Moisés Naím, Editor-in-Chief of Foreign Policy Magazine, Speaks on How Illicit Trade is Transforming Today’s World.
“Illicit trafficking is more important in shaping today’s world – transforming lives of people, countries and industries - than terrorism,” according to Dr. Moisés Naím, Editor-in-Chief of Foreign Policy magazine and author or editor of eight books.
Dr Naím spoke on March 1 at The Fletcher School at a talk entitled Illicit: How Smugglers, Traffickers and Copycats Are Hijacking the Global Economy, which is also the title of one of his best selling books that was selected by the Washington Post as one of the best nonfiction books in 2005. The talk was part of the Charles Francis Adams Lecture Series.
According to Dr Naím, “(T)hough black markets have been in existence since time immemorial, they have now morphed into some of the most powerful forces in the world today.”
He credits this change to two revolutionary aspects of globalization--technologies that have made the movement of people, ideas, money and goods across borders far cheaper and political revolutions that have created access to otherwise inaccessible regions of the world. “The combination of these two have created global politics and economics and huge opportunities for people who specialize in moving banned products across borders,” he added.
In discussing the links between several current news events with illicit trafficking, Dr. Naim explained that “(T)he challenges in international politics and economics cannot be fully understood without understanding the mechanics of illicit trade.”
For instance, the most important factor in North Korea’s willingness to come to the negotiating table, according to Dr Naím, was the closure of Delta Asia Bank – a small bank based in Macao that North Korea had been using to channel the profits made from its illicit activities, namely the production of counterfeit money and trafficking of women and weapons. Similarly, he explained that the reason for the European Union’s request for Greece to restate its gross domestic product was because it was found to have understated it by 20 percent, which is the portion of its economy based on money laundering and prostitution.
Dr Naím said that illicit operations are “massive managerial undertakings with very complex sets of transactions, each of which is a crime but takes place every day, day in and day out in huge volumes globally.”
The counterfeit scarf or bag we see on the streets of Boston or New York or Milan is, in Dr Naím’s words, “the end product of a highly complex, incredibly profitable international financial manufacturing operation.” The steps may include stealing the design from the original makers, transferring the information to counterfeit manufacturers, procuring basic elements of the product, then making the product appear on street corners almost simultaneously around the world, finding a retailer through human trafficking networks, organizing a mechanism to collect the cash from the sales and then finally making the cash electronic so that it can be moved around the world to be a part of the global financial system.
“It is impossible to pull off such operations without governments actively engaging in these undertakings in a systematic way over a long period of time. This is a story of the criminalization of politics and the politicization of crime everywhere,” he said.
While adapting private sector strategies, Dr. Naim said that illicit trade activities have created blurring in three significant areas that are, in turn, generating global transformations. The first blurring takes place between the legal and illegal private sector, as illicit trade operations invest their profits both in legitimate and illegitimate streams. This creates conglomerates which have parts that are entirely legal but have intrinsic connections with illegal enterprises.
Dr Naím said that some corporations have also resorted to bribery and corruption for varied reasons. “Pick any big company in the world and you will find that a significant part of their revenues is spent on something that they call ‘government relations’ – you can call it lobbying or you can call it corruption depending on the country, but the bottom line is that it is using its revenues to influence the regulator. If this is true for companies that are regulated, it is even truer for companies that are banned.”
The second blurring, according to Dr Naím, is between governments and criminals. “Illicit traffickers are very good at capturing governments which, in turn, are very good at discovering these kinds of businesses. Without government complicity, illicit trade cannot make a profit.”
The final blurring he identified occurs in the field of philanthropy. “Illicit operators spend a lot of money on ‘social causes’- museums, hospitals and so forth.” He cited the case of the owner of a major football club in Romania, who is such a notorious member of a criminal syndicate that his conviction became one of the conditions set for the country’s accession into the EU.
When inquired on what can be done about illicit trade, Dr Naím said: “Start changing the conversation and stop hypocrisy. There is always a bias towards dealing and attacking the suppliers, but almost nothing in dealing with the demand. The reality is that these are markets, and markets have supply and demand. So if you don’t take care of both of them, you are condemned to fail.”
Dr Naím closed by underscoring the role of government in addressing the problem of illicit trade. “Humanity will not be able to do progress unless governments become more effective. And for the governments to be more effective, they need to be more selective in the way they deploy its efforts. They cannot be more effective if they are asked to do everything.”