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Jonathan Yardley
The "Big Five" of global crime: drugs, arms, diamonds, energy and cigarettes.

By Jonathan Yardley
Sunday, April 13, 2008

McMAFIA

A Journey through the Global Criminal Underworld

By Misha Glenny

Knopf. 375 pp. $27.95

This immensely informative and more than slightly scary book describes in all too vivid detail the "gold mine" that the fall of the Soviet Union opened for "criminals, organized and disorganized," who "were also good capitalists and entrepreneurs." If there is a law of unintended consequences, there must also be a law of unanticipated ones, and here we have one of the clearest examples. The downfall of international communism was indeed "a great victory for the West," but "initial euphoria was soon dampened by indications, admittedly in rather obscure places, that the new world of peace and democracy would face some teething problems." That, as Misha Glenny makes plain a bit later, is putting it mildly:

"The collapse of the Communist superpower, the Soviet Union, is the single most important event prompting the exponential growth of organized crime around the world in the last two decades. Almost overnight, it provoked a chaotic scramble for riches and survival that saw virtually every citizen sucked into a vortex of violence. From the bitter wars of the Caucasus to the shoot-outs in towns and cities, this was a deadly environment as a new class of capitalists exploited the vacuum of power by seizing whole industries and raiding the state coffers. Accompanied by an orgy of consumption and decadent behavior last witnessed a century ago under Czar Nicholas, even such mighty organizations as the KGB and the Red Army became quickly embroiled in this spectacular nightmare. The transformation traveled well beyond the Soviet Union's borders into all continents of the world as money poured out of the country, looking for safe havens, some legal but most decidedly dodgy. Throbbing at the heart of these extraordinary events was Moscow."

Central to the problem as described by Glenny -- a native Czech who lives in England, has covered the Balkans extensively and is the author of The Balkans: 1804-1999 -- is that Russia's radical economic reforms opened consumer prices to the free market but kept the prices of natural resources and many commodities fixed at communist-era levels, i.e., artificially low. This meant that well-positioned and/or clever operators could get their hands on these resources and peddle them overseas in the shadow market at stupendous profits. "According to figures culled from the IMF, the World Bank, and research institutes in Europe and North America," Glenny says, the worldwide shadow economy -- including tax dodges, black market trading and other criminal activity -- "now accounts for between 15 and 20 percent of global turnover."

Crime, in other words, is now as globalized as legitimate financial and commercial enterprises, and "criminal corporations aspire to penetrate markets the world over, mirroring the global goals of legal entities such as McDonald's," hence Glenny's title. Car theft, for example, is "Europe's fastest growing industry," as "every month thousands of cars [are] stolen from the streets of northern Europe in preparation for their illegal export to Eastern Europe and the Balkans," to be gobbled up by the newly rich of these formerly drab and desolate places. Traffic in women (who "can cross borders legally and . . . do not attract the attention of sniffer dogs") for purposes of prostitution is huge; Glenny tells the dispiriting story of the pseudonymous Ludmila Balbanova, who was lured into leaving her job in Moldova and ended up in a brothel in Israel, where she "was raped twenty times a night." Untaxed cigarettes are also widely smuggled, making "smoking an entirely affordable bad habit" in the cash-poor Balkans.

There's plenty of money to be made in other illegal goods, but the big five are narcotics, diamonds, cigarettes, energy products and arms. Chilling evidence of the trade in weapons was provided only last month with the capture in Thailand of Viktor Bout, a 41-year-old Russian (of course!) who is widely regarded as the most successful and amoral arms dealer in the world, accused of supplying weapons to various forces in Africa, the Middle East, Europe and Latin America, as well as to the Taliban and al-Qaeda. "He took his Soviet military experience and used that to build a very lucrative business operation," an authority on such matters told this newspaper, and it is believed that he did so with the knowledge, and perhaps the help, of Russian intelligence operatives.

As is common knowledge, the huge military arsenal of the former Soviet Union -- including materials used in nuclear weapons -- is at play in the shadow market, with implications for international security that may well be even more terrifying than when the same arsenal was under the control of the Kremlin. Trade in weapons scarcely is limited to criminal operations -- our own government has frequently played arms dealer to the world, especially in Latin America -- but the growth of the shadow market has raised the stakes exponentially, giving rogue states and terrorists access to arms on a hitherto unimaginable scale.

The criminal trade in arms profits primarily from politics and ideology, but much of the rest of the shadow market rests on the same premise that inspired Jerome Weidman to write his immensely successful 1937 novel about the Garment District, I Can Get It for You Wholesale: the general public's insatiable desire to obtain anything and everything at the cheapest possible price, no matter what the source. If terrorists and political renegades drive the arms trade, the shadow market in consumer goods is driven by ordinary people -- by thee and me -- just as is a significant part of the market for narcotics: thus the huge international traffic in counterfeited consumer goods, DVDs now being perhaps the most popular. On the border between Shenzhen and Hong Kong, Glenny purchased "counterfeit DVDs for less than a dollar apiece (all for the purposes of research, of course)" while "customs officers were . . . strolling by unconcerned."

Those transactions, and the implicit official sanction of them, underscore the role now played in the international criminal market by China, which has spawned what Glenny calls "the Political Criminal Nexus (PCN), a profoundly corrupt relationship between the local [criminal] tycoons and party leaders."

An important part of the problem the PCNs pose for China's leaders is that they "create a lot of wealth," no small amount of which finds its way into the Communist Party of China through various channels, all of them illegal and many of them opened by party apparatchiks eager to cash in on the boom. Much the same has occurred in other countries, of course, and there is a similar but rather more complicated phenomenon that Glenny acknowledges, however reluctantly: In places that went into "freefall" after the fall of the Kremlin, criminal operations provided a semblance of structure and even a certain legitimacy: "Those who positioned themselves well in the first three years after the end of Communism were often in a position to make up the rules of their brave new world as they went along," and these "rules" produced a certain order, albeit one frequently maintained through violence.

All of which is quite enough, but coming as it does in the age of globalization, the international crime wave is far worse. "In the late 1980s, the West began to liberalize its financial markets," which was a bonanza for "the global crime fraternity." Why? Because "it was here in the huge reservoirs of the international banking system that the liquid assets of the corporate and criminal worlds mixed and mingled. Very quickly it became impossible to separate the two. While crime groups big and small took full advantage of the globalization of finance, they were not required to explain their actions before an antitrust commission, nor did they have to abide by the rules of the World Trade Organization and its predecessor." What was "very new and very different in the world" was that "money was being shifted about with an unimagined ease, and nobody was keeping track of it."

It is here that Glenny locates both the problem and its solution: "If we fail to construct an adequate regulatory mechanism -- that is, some form of global governance -- then organized crime and corruption will combine with protectionism and chauvinism to engender a very unstable and very dangerous world." If, on the other hand, a global regulatory mechanism can be brought into being, it is at least possible that the situation can be brought under control. The problem, of course, is that there seems to be little will among the world's most influential nations -- the United States most certainly included -- to address problems on an international scale, and without such will, those problems will only get worse. ยท

Jonathan Yardley's e-mail address is yardleyj@washpost.com.

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