Merchant of Death
Money, Guns, Planes, and the Man Who Makes War Possible

Blood from Stones

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Organized Crime, Terrorism and the Banking Crisis
One of the most interesting side effects of the current credit and banking crisis, as noted in this weekend piece in the Washington Post is the growing influence of those who do have money to lend-organized criminal groups that have billions of dollars they need to keep moving through the money laundering cycles.

There is strong anecdotal evidence that cartels from South America to Southeast Asia and Europe (and likely the United States, but I have not seen anything to reflect that) are stepping in to credit breach, building relations with businessmen desperate to stay in business, who would not normally look to the "informal" economy for a loan.

This will serve to extend the tentacles of these groups even further into the legal society and financial structure. As the article notes, "Stronger organized crime means a weaker state."

The state is already hard pressed to confront organized crime, and the reasons are not hard to find. One side has resources, the other does not.

The story says a new report estimated that organized crime syndicates in Italy - including Naples's Camorra, Sicily's Cosa Nostra, Calabria's 'Ndrangheta - collect about 250 million euros, or $315 million, from retailers every day. That is about a billion dollars every three days, or about $122 billion a year siphoned out of a single economy. Is it any wonder Italy is a constant economic wreck?

This is not entirely new, especially in rural areas.

Who loans small farmers in Afghanistan money for their next crop? The Taliban, provided they meet their opium production target. Who loans the campesinos in Bolivia, Colombia and Peru money to be productive? The cocaine cartels, as long as the coca leaf is also planted. In Colombia, it is often the FARC who makes the small loans. The coca trade has given the FARC the only social base it still retains.

The state is not present in these areas, and the longer the absence of economic alternatives endures, the more reliant the economy becomes on illicit activities, providing a social base for those who run the operations, be their terrorists, criminals or some hybrid.

What is new is that the respectable business class now finds its alternatives so curtailed that a growing number of its members are also turning to criminal franchises to meet their needs.

This has a triple effect: Money is drained from the legitimate economy subject to taxes and regulation; criminal organizations make a handsome profit and; the illicit trades gets further embedded in legitimate trade, where it is able to spread like a cancer through coercion and corruption.

Given the current state of the economy, this correlation of resources is not likely to change soon. But the longer it endures, the higher the cost of moving toward a functioning, transparent economy.
POSTED BY DOUGLAS FARAH
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