21st century feudalism and protection rackets

["Ian Murray" <seamus2001@xxxxxxxx>]

[NYT]
AUG 26, 2001
The Dark Side of the Global Economy
By ALISON SMALE

In Eastern Europe, traffickers ship girls through the Balkans and into
sex slavery. Russians launder money through tiny Pacific islands that
have hundreds of banks but scarcely any roads. Colombian drug barons
accumulate such vast resources that they can acquire a Soviet
submarine to ship cocaine to the United States.

In the decade since the Soviet Union fell, there has been an explosion
of international crime, which governments are just beginning to fight.
And yet, on reflection, it is clear that the globalization of crime is
a logical outcome of the fall of Communism.

Capitalism and Communism, ideologies that served as intellectual
straitjackets for Americans and Soviets, allowed them to feel
justified in using unsavory proxies to fight their cold war. When
those alliances dissolved, those proxies sought other outlets to
maintain - or improve - their positions. The transformation of
apparatchiks into gangsters or money-launderers in the former Soviet
republics and the Balkans is just the most familiar example.

Angola presents another. Its civil war was cast as a struggle for
democratic or Communist domination, but it rages still, financed by
revenues from the very oil and diamonds that once intrigued the
superpowers. (The diamonds are smuggled throughout Africa by a network
run by, according to United Nations reports, a former Soviet army
translator.)

Another significant boost for international crime came not from
proxies, but from principals. In the Soviet Union, the authorities
themselves often scrambled for new sources of income and power as the
Communist Party's grip loosened, blurring the lines between officials
and those who operated beyond the law.

This was by no means the first such fusion in history, but it was the
first in a country with so vast a military arsenal. In the past
decade, much of the American engagement with the old Soviet bloc has
been an effort to stop military equipment and weapons of mass
destruction - or the knowledge of how to make them - from passing to
unfriendly regimes, terrorists or criminal networks.

The end of the cold war also brought a burst of international
financial growth. But wealthy nations' push toward a new, more open
global economy - through the growth of communications and the lowering
of trade and financial barriers - also produced a global casino in
which money could be moved around easily and instantly. If it was the
fall of the Berlin Wall that spurred the relatively unrestricted
movement of people, it was the growth of that casino that enabled the
criminals to hide and move their ever-expanding holdings.

Today, the power of immensely wealthy criminals to overwhelm weak
states is one of the real challenges faced by the Bush administration.
A recent report - prepared by the National Intelligence Council, a
body of senior intelligence officials working alongside the C.I.A.,
and with outside experts - ranks it among the new threats to American
security.

Of course, traditional organized crime was there all along. It just
got bigger.

When the Soviet Union collapsed, most of its institutions imploded,
said Stephen Handelman, author of "Comrade Criminal: Russia's New
Mafia" (Yale University Press, 1995). Criminal groups that had sprung
up in the dying days of the Communist system "took up where the
government left off," he said. "The Mafia did not spring wholly formed
from the earth in 1991; it was always there, and had a close
connection with government officials."

Shady characters in East and West wasted no time establishing links
after the Wall came down. Members of the well-established Italian and
the newly minted Russian mafias began meeting in Prague, Budapest,
Vienna and Berlin. The police observed, but were virtually powerless
to act; a telling image of the early 1990's was of impoverished police
in burned-out east European sedans giving vain chase to the sleek
Mercedes favored by the newly monied.

These criminal groups, Mr. Handelman said, penetrated local, regional
and then central government. Meanwhile, the West was shoveling over
aid, hoping that Communist societies would be reborn as free-market
democracies and that the newly rich would invest at home. Instead, the
old intelligentsia was impoverished and became susceptible to bribes.
The new middle class and the hugely rich, to avoid bad banks and
impossible taxes, stashed money abroad. "We thought: `We'll give them
money, and eventually it will trickle down,' " Mr. Handelman said. "It
ended up trickling out."

That cash is hard to trace. Cyprus, for instance, became a banking
haven for Russians and for the Yugoslav regime of Slobodan Milosevic.
The island's government is now looking harder at the origins of the
money in its numerous banks, but tracing Mr. Milosevic's funds has
proven close to impossible. And, noted Mr. Handelman, "if Cyprus shuts
down, the Russians will just go to Vanuatu, or London, or New York."

The report that warned of the power of wealthy criminals, Global
Trends 2015, gives some idea of the scale of the illegitimate economy:
narcotics trafficking remains the overwhelming king, with annual
revenues estimated at $100 billion to $300 billion. Automobile theft
in the United States and Europe, by comparison, nets $9 billion, and
the fast-growing trade in smuggling people $7 billion, according to
the report. The Center for Public Integrity in Washington estimates
that every third cigarette exported is sold on the black market.

There are less tangible costs, too. The 2015 report estimates that
corruption costs about $500 billion a year - 1 percent of the global
economy - in slower growth, reduced foreign investment and lower
profits.

On this shadowy stage, politicians struggle to identify crimes, to
punish and control. The United Nations has adopted conventions against
new crimes; a task force of the Organization for Economic Cooperation
and Development publishes an annual list of money launderers. And the
European Union is beginning to define the crime of trafficking in
human beings and to pool resources to fight the criminals who smuggle
in as many as 500,000 people a year.

Thomas Bodstrom, justice minister in Sweden, which led the union for
the first half of this year, is most concerned with the enforced
prostitution of tens of thousands of women trafficked mainly from the
poor east of Europe. In Sarajevo, he met a woman who said she had been
"sold" 18 times.

"I think it surprised all of us that it was actually slavery going on
in Europe," he said. "Bosnia has just been in a war - there is not the
same possibility to have authority. But what can we say in Europe? In
Sweden? Or in Holland? They are selling people." How many people,
smuggled by whom? Mr. Bodstrom was disarmingly frank. "The truth," he
replied, `is that we don't know."