A worker carries charcoal through a slashed and burned area in eastern Sierra Leone, April 20, 2012. Logging is illegal in Sierra Leone, but remains the leading cause of environmental degradation, according to the European Union. Population pressure, common slash and burn methods and illegal logging mean the country’s bountiful forests could disappear by 2018, according to the Forestry Ministry (Finbarr O’Reilly/Courtesy Reuters).
By Stewart M. Patrick June 26, 2012
Today, the Internationalist is writing from the floor of the United Nations in New York, where Secretary-General Ban Ki-moon and the executive director of the UN Office on Drugs and Crime, Yury Fedotov, among others, have gathered for the hundredth anniversary of the landmark 1912 Opium Convention and the 2012 International Day against Drug Abuse and Illicit Trafficking. To mark the occasion and attempt to progress in the world’s fight against transnational crime, today’s thematic debate focuses on drugs and crime as a threat to development. Below is a summary of my prepared remarks to the panel.
Transnational organized crime is particularly damaging to developing countries. Global Financial Integrity reports that illicit outflows from developing countries—including the proceeds of corruption, crime, and false transfer pricing—are “approximately 7-10 times the amount of official development assistance (ODA) going into developing countries.” That means that for each dollar of foreign aid, several dollars are lost through illicit outflows.
However, it is important not to allocate all resources and political will to fight crime in weak and failing states, despite the conventional wisdom that transnational crime flourishes disproportionately in such countries. The connection between crime and state weakness varies enormously by sector, as my book Weak Links explains. Crime is particularly prevalent in weak states when it comes to piracy, coca and opium production, arms trafficking (for destination countries), and some types of environmental crime. But other transnational crimes, such as money laundering, cyber crime, and intellectual property theft rarely occur in the world’s weakest states.
From the perspective of transnational criminals, weaker is not necessarily better. Criminals generally prefer to operate in countries with at least a modicum of political order, and with ready access to functioning infrastructure, including roads and banking systems. Traffickers value geography, convenience, exploitable infrastructure, and easy access to global markets at least as highly as they do the benefits of state weakness. The ideal drug hub has one foot in the developing world and another in the modern economy. (Mexico is a case in point.) Similarly, South Africa is a more promising hub for transnational crime than many of its neighbors.
Across the board, transnational organized crime—to say nothing of local crime and corruption—is a huge obstacle to sustainable development, including the Millennium Development Goals. Crime and corruption degrade already weak state institutions, as criminals use resources from illicit activities to bribe law enforcement officials, neutralize courts, purchase or intimidate politicians and journalists, and engage business leaders in criminal activities. Cumulatively, this tears at the social fabric, undermines the legitimacy of the state, drives out licit economic activity, endangers public security, and can fuel insurgency and disorder.
At the macroeconomic level, as the IMF emphasizes, crime and money laundering undermine the stability of financial institutions, increase the volatility of capital flows, and dampen foreign direct investment. Crime drains resources from more productive economic activities, and can even destabilize neighboring countries, as the spillover of weapons, drug trafficking, migrant smuggling, and violent gangs across Central America attests.
The welfare losses are staggering. Throughout the developing world, billions are siphoned away from urgently needed public services like health care, clean water, and infrastructure. High levels of crime are heavily correlated with inequality, as the World Bank reports, as well as with a “brain drain” of the urban middle class to other countries. Estimates suggest, for example, that if Jamaica and Haiti could reduce their homicide rates to the levels of Costa Rica, their growth rate would increase by 5.4 percent annually. And yet countries are caught in a trap, because the narcotics street value exceeds the value of the entire legal economy, creating enormous perverse incentives for people to engage in crime. Organized crime directly hinders achievement of the MDGs in a number of ways:
- Where crime is rampant, MDG 1—lifting humanity out of poverty—can be a mirage. Over the past twelve months, Afghans paid an estimated $2.5 billion in bribes—a sum equivalent to nearly a quarter (23 percent) of Afghanistan’s GDP.
- Crime can also devastate public health. One quarter of all HIV/AIDS cases in Central Asia, China, and Russia stem from IV drug use, primarily heroin. Increasingly, counterfeit medicines also undercut efforts to fight treatable illnesses. A 2012 study revealed that one third of anti-malarials in Africa and Southeast Asia were fake, leaving patients without proper treatment as well as contributing to the growth of resistant strains.
- Rampant environmental crime undermines sustainable development. For instance, Global Witness has documented rapacious illegal logging in many countries, not least Cambodia and Myanmar. Illegal fishing, a multibillion-dollar enterprise, has emptied many coastal waters off Sub-Saharan Africa, costing African countries billions.
- Given trends in demography, human settlements, and resource scarcity, crime is likely to become a greater threat to development in the future. Rising global population and rapid urbanization will facilitate increased crime. Growing competition for essential commodities like food, fuel, and water will encourage black markets—and associated violence—to grow.
Despite these devastating effects of crime on development, efforts to mainstream combating transnational organized crime into development initiatives remain in their infancy. Both national governments and international institutions need to prioritize cooperation between development and anticrime initiatives or agencies. Community policing, border control, judicial and corrections reform, anticorruption measures, and alternative livelihood programs must be mainstreamed into development interventions.
Another controversial reform would be to expand the Security Council’s repertoire of multilateral sanctions beyond terrorists to include the listing and sanctioning of known criminal individuals and organizations—a strategy which the United States has now employed against groups like the Yamaguchi-gumi in Japan.
In addition, countries can feasibly reduce the attraction to criminals of conflict and post-conflict environments. Rather than treating it as an afterthought, UN peacekeeping missions or other international forces should have an explicit mandate to address serious criminal activity and to share intelligence with international bodies such as INTERPOL and UNODC.
Furthermore, countries need to bolster multilateral tracking of money laundering, policing financial havens, and recovering stolen assets. Beyond expanding Financial Action Task Force efforts to expose non-cooperating jurisdictions, countries also need to allocate more resources for the UNODC/World Bank StAR Program to assist transitional governments in obtaining assets stolen by kleptocratic regimes. The G20, OECD, and Financial Stability Board should also push for new rules requiring major banks to report any deposits that are potentially the result of corrupt practices—just as they already do in potential terrorist financing cases.
To fight corruption, UN member states should look to a promising pilot project, the International Commission Against Impunity in Guatemala. By 2010, CICIG had helped to oust thousands of corrupt policemen, ten prosecutors, three supreme court justices, and an attorney general. Moreover, the innovative use of technology can empower citizens to fight corruption and improve transparency. The Program on Liberation Technology, for example, at Stanford University is researching the use of mobile phones to text individuals facts on government spending (per public record), so as to empower local communities with the knowledge of what they should receive and what they do receive. Other examples, such as Ipaidabribe.com, cell-phone medicine verification to detect counterfeits, and anonymous crowd sourcing technology, allow citizens to fight back against crime. These technologies also promise to provide sounder data that can inform better policies.
Culled from http://blogs.cfr.org/patrick/2012/06/26/how-transnational-crime-hinders-development-and-what-to-do-about-it/?cid=otr-partner_site-devexNo tags for this post.