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New Markets Expanding for Dirty Businesses     Print Email
Michael Mosettig

Reviewed by Michael Mosettig

When journalist and author Misha Glenny was attending Bristol University in the 1970’s, little could he realize that his generation’s motto of Drugs, Sex and Rock & Roll would, along with Russian oil, provide the foundation for a global shadow economy that now accounts for 15 to 20 percent of all economic transactions worldwide.

Glenny went on to become a widely-known and respected figure in international journalism in the 1990’s with his reporting for the BBC of the murderous debacles in the Balkans. His experiences there serve as the launching pad for an extended investigative book on international criminal and gray-market operations across Eastern Europe into Russia, the Middle East, Latin America, Africa and Asia. The laundered takings from prostitution, drugs, contraband smuggling and counterfeit music and video discs and tapes often end up in an increasingly globalized financial system – that is the darkly symptomatic side of globalization. In response, the U.S. and EU governments flail away at globalized crime with often counter-productive responses, the worst being the on-going “war on drugs.”

Glenny’s initial analysis is that the new Mafias have their roots in the collapse of communism in the East, which coincided with the opening of expanded trade and capital markets in the West. Few Western officials or institutions realized the implications of these simultaneous developments:

One group of people, however, saw real opportunity in this dazzling mixture of upheaval, hope and uncertainty. These men, and occasionally women, understood instinctively that rising living standards in the West, increased trade and migration flows, and the greatly reduced ability of many governments to police their countries combined to form a gold mine. They were criminals, organized and disorganized, but they were also good capitalists and entrepreneurs, intent on obeying the laws of supply and demand. As such, they valued economies of scale, just as multinational corporations did, and so they sought out overseas partners and markets to develop industries that were every bit as cosmopolitan as Shell, Nike or McDonald’s.

The title of his book, McMafia, reflects this global reach as criminal “corporations” aspire to penetrate markets the world over – mirroring the global goals of legal entities such as McDonald’s, Glenny explains.

The first epicenter of post-cold war international crime was Bulgaria, starting with petty racketeering such as auto theft in which the larceny was abetted by newly-unemployed state security operatives. In the ensuing 20 years, the ostensible westernization and capitalism spreading through this former Soviet satellite hardly seem to have turned the tide of rising organized crime. Now that Bulgaria has joined the EU, it has come under some pressure to clean up its act. But the corruption remains so blatant that the Justice Minister’s head was recently offered as a sacrifice by the government in a recent anti-corruption campaign. From Bulgaria, the virus spread into the former Yugoslavia, where anti-Serbian U.N. sanctions in 1992 helped cripple legitimate businesses while expanding criminal opportunities.

But the real fountainhead of international crime is Russia. As Glenny writes,

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...

Glenny is unsparing in his criticism of western economic advisers, Russian oligarchs and international institutions for what he calls, “the grandest larceny in history” that came with the transfer of state-owned assets to the oligarchs and their protection rackets. Their billions of ill-gotten profits were then laundered and dispatched all over the world from Switzerland to the Pacific island of Nauru, a tiny entity that became a notorious haven for hot money. By his estimate, at least half the Russian economy in the 1990’s was in the gray or black sectors, much of it controlled by (or paying off protection money to) various mobsters and local mafias.

The author’s most controversial argument flows from his praise of President Vladimir Putin for bringing the oligarchs to heel. He dismisses contemptuously the charges of Boris Berezovsky (in exile) and Mikhail Khodorkovsky (in prison) that Putin was creating a new Stalinist police state. He says Putin has in fact created a new political system called “market authoritarianism.” But his disdain for Putin’s foes seems to justify far too easily the authoritarianism he acknowledges. For example, he totally ignores the reality that charges against Khodorkovsky were brought only after he began a political challenge to the Russian president.

Particularly interesting is Glenny’s linking of Russia’s criminal enterprise to Central and Western Europe:

Poland, the Czech Republic and Hungary were the most sought-after destinations of Russian oligarchs and organized crime syndicates...They knew the terrain, and in the former two, language barriers were less formidable than in Western Europe. There was one thing that distinguished these three states from the rest of Eastern Europe – they were all fast-tracked to join the European Union and that was the quickest route to the gold at the end of the rainbow...
While long on vivid description and anecdotes, Glenny’s book is shorter on suggestions for curbing this tide of criminal expansion. He mentions improved international regulation, presumably of banks and other financial institutions. That actually may come about now, curiously enough, as a by-product of reactions to the mortgage-meltdown crisis. As he frequently points out, McMafia’s enterprises are a problem beyond the reach of conventional law enforcement. Indeed, the author is at his most caustic denouncing the “war on drugs” which has helped devastate Colombia while doing nothing to stop the flow of ever cheaper narcotics into the United States and Europe. Pious platitudes from politicians are useless in the face of strong demand and a source of supply.

The problem, as described by this one-time student of the 1970’s, is that adolescent fancies have transformed into adult appetites. As long as European (and especially German) men, he says, seek out convenient prostitutes, as long as the American and European demand for cocaine and other drugs remains strong, as long as music and movie enthusiasts turn a blind eye to cheap black markets for videos and CDs, as long as there are gullible westerners ready to buy into get-rich e-mail schemes from Nigeria and as long as there is a demand for cheap Chinese labor, there will be profitable enterprise opportunities for the criminally inclined.

McDonald’s may suffer the occasional sag in sales and profits, but prospects for McMafia market share and market growth loom into the indefinite future.

Michael Mosettig is a senior producer on foreign affairs at The News Hour with Jim Lehrer broadcast by PBS.
 
 

This article was published in European Affairs: Volume number 9, Issue number 3 in the Fall of 2008.