Illicit Economy and Globalisation. The Paradoxical Bond

Scientific Essay, 2014

15 Pages, Grade: 69


Table of Contents


Illicit economy and globalisation

Is illicit economy globalised?

The Paradoxical Bond




Political economic globalisation has been in the realm of academic dispute since 1970s. The term globalisation, with nearly as many meaning as users, generally refers to ‘growing interconnectedness of the nations of the world following the global liberalisation of trade at the end of the Cold War’ (UNODC, 2010, p. 29). However, the over exploited use of the term global has subdued its meaning. There have been extensive studies on needs and benefits of economic interdependency and comparative advantage models for a peaceful and burgeoning existence of human kind. However, most of these works stir clear of the equally flourishing dark underbelly of this economic web (Andreas, 2004, p. 643; Levi, 1993, p. 57; Duyne, 1993, p. 10).

Although there is a dearth of authentic empirical data on the topic but according to an online estimate, the illicit market value stands at US $1.78 trillion (Havocscope, 2014a). Most of the black market thrives on the country specific definition of what is illegal. This helps the illegal non state actors to be active in one country and hide money in another (Duyne, 1993, p. 25). The very condition of such operations is to remain global. However, this does not mean that globalisation only helps illicit economy. Increased global cooperation in vigilance operations has forced these crime syndicates to constantly change their structure or fall prey to the authority.

But there is also a negative impact of illegal world on globalisation. To fight the menace many countries have had to increase border control and add extra layers on custom, immigration and trade clearances, inadvertently hindering the global trade process and legal human movement. These added checks and measures generate new barriers and create imbalance between Global South and Global North, making the comparative advantage invalid.

In an attempt to define this paradoxical relationship, this paper is distributed into three parts. The first part deals with the concepts of illicit economy and globalisation. Second part discusses the scope of global nature of illicit economy. Finally, the third section attempts to elaborate on positive and negative influences of globalisation and illicit economy on one another.

Illicit economy and globalisation

Webster’s defines illicit as ‘not permitted by law’ (Merriam-Webster, 2014a) and economy as ‘the process or system by which goods and services are produced, sold and bought in a country or region’ (Merriam-Webster, 2014b) thus, in an unambiguous form, illicit economy can be defined as a system or process by which goods and services are produced, sold and/or bought in a country or region where it is forbidden by law. Illicit economy has not been subject to extensive scrutiny by academicians. Lack of authentic empirical data and direct subject research opportunities present a handicap for researchers. However, some authors like Andreas Friman and Peter H Richard have attempted to define the illegitimate economy in global terms. For Friman and Richard, ‘the illicit global economy consists of a system of transnational economic activities that are criminalised by states in importing or exporting countries’ (Friman, 1999, p. 5). Edgar L. Feige recognises that the academics do not follow a uniform nomenclature for illicit economy and in a considerate effort to discern informal, under or unreported economies and illegal economy, he defines, illegal economy as a system that ‘consists of the income produced by those economic activities pursued in violation of legal statutes defining the scope of legitimate forms of commerce. Illegal economy participants engage in the production and distribution of the prohibited goods and services, such as drug trafficking, arms trafficking and prostitution’ (Feige, 1990, pp. 6-7).

In contemporary era, illicit economy thrives in almost as many sectors as licit economy. Major sectors which create remarkable dent in world financial system include drug trade, counterfeit goods, migrant smuggling, illicit timber trade, human trafficking, identity theft, pornography, cyber theft; money laundering and firearms trade (UNODC, 2010, p. 1).

The 2010 United Nations Office on Drugs and Crime threat assessment report on global stature of organised crime shed light at the sheer size of illicit economy. But remarkable element is that most of these sectors are not mutually exclusive. Recent studies in the US suggest that illegal migration and human trafficking are now amalgamated in terms of operators and victims, as in most cases illegal migrants do not have money to pay hefty fees and thus end up being a bonded labourer for their facilitator or are sold further (Beare, 1998, p. 85). Similarly, cybercrimes can be related to identity theft and money laundering and even terrorism. More often than not, it has been found that terrorist fund their operations

illustration not visible in this excerpt

Figure 1: Sectorial value estimates for transnational organise crimes (UNODC, 2010, p. 275)

through illicit empires like drugs and smuggling (Madsen, 2009, pp. 68-69). In some cases, the intense diversification of groups engaged in illicit activities into legitimate businesses blurs the line that traditionally differentiates legal and illegal business activities. A Moroccan human trafficker might double as a real-estate mogul in Spain or the Russian arms smuggler might be the owner of a bank in Cyprus (Naím, 2005).

This cross industrial and transnational integration of economy is the primary indicator of globalisation in illicit world. Although the term is highly disputed and exploited by almost all sectors, globalisation is defined as a historical process or a set of processes that transforms ‘the spatial scale of human social organisation that links distant communities and expands the reach of power relations across regions and continents’ (Mcgrew, 2002, p. 1). In economic terms, it is often seen in the realm of neo-liberal agenda, wherein economic interdependency, integration, liberal policies and ideologies of comparative advantage derive global value chains (Mcgrew, 2005, p. 223). While academics have long standing debate over its very existence, they do agree on the indicators. Hirst and Thompson argue that the globalisation can be proven only if it can be termed unprecedented, truly transnational, non-hierarchical and has equal geographic representation (Hirst, 1996, p. 3). In later discussion, we shall see that illegal economy is perhaps even more evident on the global economic scale than the licit economy. The exponential rise in telecommunication and transportation innovations have not just compressed the time and space for the legit social, cultural and economic realms but for their underbellies as well. Today, a terrorist sitting in caves in Middle East can plan, fund and even execute a mass murder in another part of the globe. Cars and electronics stolen in South East Asia are made available in US markets within matter of days. If globalisation is evident anywhere, it is here.

Is illicit economy globalised?

In the licit economic discussions, academics have often quoted the level of international integration of production, services and finance as the major indicator of globalisation (Garrett, 2000, pp. 941-942 Gilpin, 2001, p. 364). And as RT Naylor emphasized in his book Wages of Crime, ‘legal and illegal economic activities are very much intertwined: every sector of the licit economy has its illicit counterpart’ (Andreas, 2004). Modern tools of telecommunication and transportation have empowered virtually any individual to act as a participant of global crime network. Exponential rise of internet has presented new criminal opportunities, which do not require physical presence, such as media piracy or identity theft. Fraudsters find victims in wealthy countries while operating out of nations with little or no will to stop them. There are at least 93 countries which do not specifically address the issue of child pornography in their legislation, 24 of them do not have punishment for crime committed through computer technology (ICMEC, 2007). The money made from these operations swiftly moves through a dozen national banking systems in a matter of minutes. Such unprecedented ease of operations has changed the entire structure of the illicit world.

During the Cold War era, illicit economy was mostly seen as system of major organised crime syndicates. In his book The New War: the Web of Crime that Threatens America's Security (1998), US Senator John Kerry pointed to a global nexus of the ‘Italian mafia, the Russian mobs, the Chinese triads, the Japanese Yakuza, and the Colombian cartels’ (Kerry, 1998), that coordinated their operations with smaller highly organised gangs across the planet. However, evidence suggests that globalisation has presented a major challenge to these syndicates and such crime organisations are making way for less hierarchical and more cooperative networks of individual and grouped criminals across borders (Andreas, 2004, p. 644; UNODC, 2010, p. 3).

The clandestine side of economy also has more equal geographic presence. In the underground economy markets are concentrated in the Global North, however, production, funding and management is mostly operated from the Global South. South American drug cartels supply US and Europe; East European criminals supply fire arms to Africa, and drugs and trafficked women to Western Europe; Middle East is the major producer and supplier of heroine across the globe; South Asia supplies counterfeit products and medicines to the world and even the poorest nations like Somalia control the sea routes and hold several ships of wealthiest nations hostage every year (for discussions UNODC, 2010, pp. 3-14; Madsen, 2009, pp. 31-36; Strange, 1996, p. 117).


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Illicit Economy and Globalisation. The Paradoxical Bond
University of Sheffield  (Department of Politics)
The Political Economy of Globalisation
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ISBN (Book)
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Illicit economy, globalisation, transnational trade, drug trafficking, cartels, human trafficking, money laundering, cyber crimes, pornography, smuggling, mafia, mobes, boder security, trade controls, taxation, organised crime, interpol, europol, reginalisation, slave trading
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Arshi Aggarwal (Author), 2014, Illicit Economy and Globalisation. The Paradoxical Bond, Munich, GRIN Verlag,


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