BOOK REVIEW: ILLICIT by Moises Naim

Moises Naim, the editor of Foreign Policy Magazine, has an excellent new book called Illicit on the rise of global smuggling networks. It's a must read.

Globalization Melts the Map

Moises copiously documents how globalization and rampant interconnectivity has led to the rise of vast global smuggling networks. These networks live in the space between states. They are simultaneously everywhere and nowhere at the same time. He shows how these networks make money through an arbitrage of the differences between the legal systems (and a desire to prosecute) of our isolated islands of sovereignty. He also shows how their flagrant use of corruption can enable them to completely take over sections of otherwise functional states.

By all accounts the amount of money involved is immense. In aggregate, the networks that form this parallel "black" global supply chain, have a "GDP" of $1-3 trillion (some estimates are as high as 10% of the world's economy) and are growing seven times faster than legal trade. These networks supply the huge demand for:

• Drugs (both recreational and pharmaceutical).
• Undocumented workers (for corporations, home services, and the sex trade).
• Weapons (from small arms to RPGs, many come from cold war arsenals).
• Rip-offs of intellectual property (from digital content to brand named consumer goods).
• Laundered and unregulated financial flows.

This supply chain isn't run by the vertically integrated cartels and mafias of the last century (those hierarchies are too vulnerable, slow, and unresponsive to be competitive in the current environment). The new undifferentiated structures are highly decentralized, horizontal, and fluid. They specialize in cross border movement and therefore can handle all types of smuggling simultaneously. They are also very reliant on modern technologies to rapidly transport and coordinate their global operations.

The similarity between these commercial networks and those of modern terrorism (my global guerrillas) is not incidental. These networks are optimized for the melted map we currently live in. There is also considerable crossover between these networks since terrorists/guerrillas use these networks to both fund and execute their operations - and - smugglers see terrorists/guerrillas as a means to free areas from state control.

My suggestion? Get this book and reserve a couple nights in your favorite chair. Moises will provide you with a compelling and well written story. One that will certainly radically change your view of where our "flat world" is headed.

Comments

[Ole Stromgren]

Thanks.

I've been using Naim in some of my Globalization courses at Copenhagen Business School,(www.cbs.dk) and also regularly read the magazine. On your recommendation, it's a sure buy.

On a more personal note, It was great to meet you in Pittsfield this summer at the Boyd symposium

[jclavijo]

Hi John,
I have just read today in El País an interesting article writted by Moises Naim about 'ilegal' workers in USA.

He also relates the weight of smuggling from Latin America in 'formal' economies and how it contrasts with the protectionistic policies applied by the USA.

You can read it in:
http://www.elpais.es/articulo/elpporopi/20051118elpepiopi_6/Tes/continente/ilÌcito

[Cardenio]

This is great but where's J. Robb's book ?

[tim fong]

John,
I skimmed it at the book store. Liked his descriptive part, the presecriptive part less so. I was severely underwhelmed by his assertion that technology was going to make it more difficult to counterfeit goods.

[Adam]

Looks like a fascinating book. I'll pick it up.

One thing that I note is that you use some awfully loaded terms (rouge, illicit) to describe folks who are going their own way. We might be far better off accepting much of this trade between willing participants than trying to stem it.

[John Robb]

Tim, glad you liked it. I wasn't that enthusiastic about the prescriptive part either, but I think Moises was in a trap. He details a trend that is going to cause a deep structure change. There aren't any real solutions for this type of change, but he is obligated to provide some suggestions (which will always fall flat for those people that really understand what is going on).

Adam, just a quick note. Some of these guys do deserve a bullet in the brain stem. Particularly those in the human slavery business.

[Adam]

John,

Lest anyone become confused it appears that we now have two Adams on the boards. Personally all I thought was that I'd see if the book popped up in the library and have a look at it.

[The Second Adam]

Hi John,

I agree that trading in humans is despicable, but might suggest other punishments that fit the crime better.

However, when I look at "illicit money flows" or "trade in intellectual property" or even drugs and weapons, I see people who disagree with the state's right to tax them, or control what they trade. The state's desire for control does not legitimate that control. The desire to tax at 50 or 60% of income used to lead to revolutions. The extension of copyright from 14 years, with a registration requirement, to life of the author + 70 years may not be morally justifiable. Telling people they can't choose their own medicine (or poison) or defend themselves may not jibe with everyone's ideas of morality.

Really, the core of this is that the state passing a law does not make that law moral. Most of the trades you list have components that I see as reasonable, and components that I think are evil. Calling them "illicit" imposes one set of morals onto the argument. (You even touch on this, by acknowledging the importance of arbitraging different rule-sets.)

[tim fong]

John,
Okay, I can see the trap Moises was in. He's a bona fide part of the establishment, and he can't exactly come out and say "well guys, if we stay in this paradigm we are doomed."

Maybe this is something that happens commonly to people in his position, smart establishment guys who see the future yet don't want to accept (or can't publicly accept) the consequences, which would be the elimination of said establishment.

If you have a week or so, check out Mary Wright's classic book, The Last Stand of Chinese Conservatism. She details the ultimately unsuccessful struggle of Qing dynasty scholar officials to modernize China.

There is a pretty good review here: http://orpheus.ucsd.edu/chinesehistory/pgp/wright.htm

[NJE]

Joint Ops Disrupt Terrorists in Baghdad
WASHINGTON, Nov. 20, 2005 — Iraqi and American forces in Baghdad and Tikrit have launched a series of operations this past week that have thwarted terrorist activities and disrupted terrorist cells in these two key cities, officials say
http://www.defenselink.mil/news/Nov2005/20051120_3392.html

Published by Multi-National Force - Iraq
http://www.mnf-iraq.com/Publications/TWII/Current.pdf

Total Trained & Equipped ISF:~211,700 November 16, 2005
http://www.defendamerica.mil/downloads/IraqWeeklyStatus%20Report%20-16November2005.pdf

[NuSapiens]

Second Adam, I recommend Hernando De Soto's "The Mystery of Capital" on how many market transactions in the West (especially the U.S.A.) are legitimized black markets.

The problematic interstitial "grey area" that now exists between sovereign States includes not just black markets, but also "grey people" such as nonstate combatants. International Law much come up with some answers on how to handle these problems - and if done properly, what might emerge from this process will be a world order where the rights of State sovereigns wanes in favor of more autonomous individuals under International Law.

This process is ongoing. But aside from state bias, markets have their own bias, and favor liberty by favoring individual choices and transactions - and therefore whatever merchants connect people to what they want.

[Eugene Plawiuk]

I would reccomend Robert Naylors Hot Money, though dated, from the 1970's, it was one of the first to talk about International Finance and the black market and its impact on the bank meltdowns like BCIC and the connection of the banking industry to the black markets and their involvement in the debt crisis in the developing world. It was published by Black Rose books.

[mark]

John's description of the book has more clarity than the book itself.

While the book addresses some of the systemic issues, it never explores the relationship between smuggling and violence. Violence is the unmentioned elephant in the room.