Large-scale illicit economies and intense organized crime have received intense attention from governments and international organisations since the end of the Cold War . The end of Cold War brought a permissive strategic environment that allowed many states to focus on a broader menu of interests in their foreign policy agendas, such as the fight against drug trafficking and production. The reduction of Cold War aid to countries in the midst of the competition between the United States and the Soviet Union exposed the great fragility and institutional underdevelopment of many of these states, a deficiency perhaps exacerbated by globalisation. At the same time, criminal and belligerent actors of significant power but previously hidden in the shadows of Cold War politics were spotlighted by the international communityâespecially when their activities were associated with the emergence of new situations of intensely violent organized crime or trafficking-related corruption.
The focus on organized crime, illicit economies, and the multiple threats they pose to states and societies further intensified after 9â11 when it became obvious that belligerent groups, such as the Taliban in Afghanistan and Pakistan and the so-called Islamic State of Iraq and al-Sham (ISIS) in Iraq and Syria , derive multiple benefits, including extensive financial profits, from participating in illicit economies, such as the drug trade. In addition to expanding the resources of terrorist and belligerent groups, the persistence and growth of illegal economies also have come to complicate post-conflict stabilisation and reconstruction efforts in countries that have emerged from civil wars âbe they Cambodia or Haiti.1
Increasingly, the United Nations Security Council has highlighted organized crime as an issue requiring the coordinated focus of various UN bodies and of the Secretary General.2 The escalation of violence in Central America where weak states have been overwhelmed by the intensity of organized crime, the emergence of drug smuggling in West Africa , which contributes to its cauldron of other illegal economies and poor governance , and the deep penetration of illegal economies into the political and economic life of Afghanistan and Pakistan ; massive poaching of animals in Africa and East Asia ; ISIS illegally trading in antiquities and oil ; and cybercrime around the world have captured policy attention. After leather-clad biker gang Night Wolves helped Russian special operations forces annex Crimea in 2014 and other criminal gang âvolunteersâ directed by Russian intelligence agents played a crucial role in Eastern Ukraine , the North Atlantic Treaty Organisation (NATO) too has come to focus strongly on so-called hybrid threats.3 There is no one accepted definition of hybrid threats, but they all feature the âmerger of different modes and means of war ,â4 such as an overlap of non-state militant actors working for or with state military forces or mixtures of insurgency and criminality. The use of organized crime actors by states during conflict or for political control is, of course, nothing new: United States forces invading Sicily in the Second World War relied on the mafia for combat intelligence provision as well as post-invasion stability; Chiang-Kai Shek depended on Du Yueshengâs Green Gang for fighting the Japanese and even made Du, the worldâs most accomplished drug trafficker, his minister of counternarcotics.5
Yet despite the fact that the intersections of crime, conflict, and political rule are not new and that states often have intimate knowledge of using organized crime for their purposes and exploiting illicit economies, many policy interventions to combat organized crime and illicit economiesâwhether linked to violent conflict or its absenceâoften have not been highly effective. Paradoxically, at times the policies have turned out to be counterproductive with respect to other objectives, such as mitigating violent conflict, fostering good governance , and promoting human rights , and at times even counterproductive with respect to the objective of weakening criminal groups and their linkages to terrorist organisations.
This is because although illicit economies pose multiple threats to states, even as they are used by them, their effects on societies are often highly complex. Indeed, large populations around the world in areas with inadequate or problematic state presence, great poverty , and social and political marginalisation continue to be dependent on illicit economies, including the drug trade, for economic survival and the satisfaction of other socio-economic needs. For many, participation in informal economies, if not outright illegal ones, is the only way to satisfy their human security and to provide any chance of their social advancement, even as they continue to exist in a trap of insecurity, criminality, and marginalisation.
A Multifaceted Challenge
Large-scale illicit economies generate multiple threats to states. They can threaten the state politically by providing an avenue for criminal organisations and corrupt politicians to enter the political space, undermining the democratic process. These actors, who enjoy the financial resources and political capital generated by sponsoring the illicit economy, frequently experience great success in the political process. They are able to secure official positions of power as well as wield influence from behind the scenes. Consequently, the legitimacy of the political process is subverted. The problem perpetuates itself as successful politicians bankrolled with illicit money make it more difficult for other actors to resist participating in the illicit economy, leading to endemic corruption at both the local and national levels.
Large illicit economies with powerful traffickers also have a pernicious effect on the judicial system of the country. First, as the extent of the illicit economy rises, the investigative capacity of the law enforcement and judicial systems diminishes. Impunity for criminal activity also increases, undermining the credibility of the judicial system, its crime-deterring role, and the authority of the government generally. Second, powerful traffickers frequently turn to violent means to deter and avoid prosecution, killing off or bribing prosecutors, judges, and witnesses.6 Of course, efforts to suppress the production of illicit drugs sometimes also lead to an increase in government human rights abuses.7
While the detrimental effects of intense crime and large-scale illicit economies on the political processes are apparent, it is a significant and often inappropriate leap of analysis to assume that the emergence of organized crime and extensive illicit economies will always necessarily challenge political stability and threaten the existing governments and power of ruling elites. To the extent that external drug traffickers make alliances with former or existing rebels not linked to the official system or young challengers who seek social mobility in an exclusive system, the traffickers will develop a conflictual relationship with the state, and political instability may well follow. To the extent that the governing elite captures the new drug rents, a symbiosis between external (and internal) drug traffickers and the ruling elites may develop. Drug traffickers will enjoy a sponsored safe-haven; and while democratic processes and institutional development of the county will be threatened, (ironically!) political stability and the existing political dispensation may well be strengthened.
Illicit economies also have large economic effectsânot all of them negative. Drug cultivation and processing, for example, on the one hand generate employment for the poor rural population, numbering frequently in the hundreds of thousands. Moreover, not only does the drug economy allow the impoverished poor to make ends meet, it also facilitates upward mobility for many participants.
But a burgeoning drug economy also contributes to inflation and hence can harm legitimate, export-oriented, import-substituting industries. In Gambia, for example, the influx of external dollars from the illicit drug trade set off significant inflation. It encourages real estate speculation and a rapid rise in real estate prices, and undermines currency stability. It also displaces legitimate production. Since the drug economy is economically superior to legitimate production not only in price profitability, but also requiring less developed infrastructure and not imposing large sunk and transaction costs, the local population is frequently uninterested in, or unable to, participate in other forms of economic activity. The existence of a large illicit economy thus complicates efforts at local development and crowds out legitimate economic activity. The illicit economy can thus lead to the so-called Dutch disease where a boom in an isolated sector of the economy causes or is accompanied by stagnation in other core sectors since it gives rise to appreciation of land and labour costs. Finally, it appears that the small share of the final profits that is captured by the country producing the illicit commodity is used mainly for unproductive consumption by the traffickers, rather than productive economic investment.8
Certain illicit economies also create environmental threats. Poaching and smuggling of wildlife throughout Africa as well as South East Asia , for example, depletes biodiversity and contributes to the demise of endangered species. Illegal logging in East and West Africa leads to further soil erosion and desertification, making land inhospitable for agriculture. In the Congo and Amazon, illegal logging and mining decimates some of the worldâs last rain forests, contributes to carbon release and global warming, and species loss. Coca cultivation in Latin America too results in deforestation, and the processing of coca leaves into cocaine leaks highly toxic materials, such as kerosene, into the w...