May 10, 2016

Following the Dirty Money

By Iain Whitaker, Assistant Director, Leadership Programs


 
In 2015 investigative journalist Bryan Christy embedded imitation, GPS-enabled elephant tusks into Central Africa’s shadow wildlife trade. His resulting National Geographic documentary Warlords of Ivory, which was screened at the Chicago Council on Global Affairs on April 19, tracked the voyage of the phony tusks as they passed through the hands of some of Africa’s most dangerous organizations.
 
Ivory poaching, the documentary revealed, funds notorious militias including Joseph Kony’s Lord’s Resistance Army (LRA) and the Sudanese-backed Janjaweed. Regional governments are directly implicated too, with Sudan’s Omar al-Bashir at the epicenter of activity. His armed forces conduct poaching, battle game wardens, and trade ivory for arms with the LRA, according to Christy, and the violence is spilling into neighboring states.
 
This murky and dangerous web of criminal enterprise exists because trafficking in wildlife products is highly lucrative. It is also largely illegal, of course, but from Al Capone to El Chapo the lesson of prohibition seems to be that government restrictions are rarely a match for human greed, vice, or ingenuity. Moreover, in recent decades trade and technology have transformed the shadow economy just as dramatically as its legal counterpart, providing a boon to such groups. And as international crime networks have globalized, the contraband of the twenty-first century is fueling violence from the streets of Chicago to the jungles of the Central African Republic.
 
Recent Council programs exploring these networks have looked at them through the lens of three otherwise incongruous commodities: ivory, narcotics, and counterfeit goods. These conversations highlighted the many challenges faced by governments as they seek to police shadow economies and hinted that economics, rather than law enforcement, may hold the greatest promise in tackling organized crime.
 
Council speakers all expressed the view that tackling the movement of contraband, and disrupting the networks that profit from these goods, requires comprehensive, end-to-end, coordinated action. For example, conservationist and game warden Sport Beattie, who spoke on the April 19 panel, divided the fight against the ivory trade into three phases - sourcing, transit, and demand – each involving different organizations and activities. But as Beattie’s own work to intercept and arrest poachers in Zambia’s Kafue National Park demonstrates, success in the first two phases is a long-term, costly, and often dangerous endeavor. Despite the enormous global expenditure on law enforcement, and a wealth of domestic laws and international agreements focused on illicit products, the transnational nature of today’s crime networks present a significant obstacle to enforcement.
 
In addition, combatting illegal trade flows is next to impossible in those regions of the world where state institutions are weak or corrupt, where borders are porous, and where poverty provides a compelling incentive to trade in goods whose value has been heightened by legal restrictions. Interpol’s Michael Ellis, who spoke at the Council in April 2015, described how criminal networks have taken advantage of this fragmented global authority to profit from the trade in counterfeit goods. Production, transit, retail, offshore banking, and the location of the “kingpins” in this industry, he noted, are structured to exploit the respective legal weaknesses and economic strengths of multiple jurisdictions. And when enforcement increases in one country the networks simply reconfigure.
 
In the world of narcotics too, cartels increasingly resemble multinational corporations, taking advantage of changing market conditions, consumer tastes, and lax regulation to maximize profits, according to The Economist’s Tom Wainwright who spoke at the Council on March 1. So effective is their business model that, despite billions of dollars spent and countless lives lost attempting to eradicate crops, intercept smugglers, and arrest dealers, usage of many narcotics continues to rise. Moreover the street price of many drugs have remained remarkably stable over time, despite increased enforcement.
 
Wainwright pondered whether economics may explain the resilience of shadow economies and concluded that deflating demand of an illegal commodity is often more powerful – and cost-effective – than stifling supply. Wainwright noted a RAND study that sought to calculate the return-on-investment of three counter-narcotics strategies. Spending $1 million on reducing supply in South America will result in 4 kilos less of cocaine on US streets, the study found. Spending the same amount on education in US schools will remove 20 kilos from the streets, while $1 million spent on treating addicts will mean 100 kilos less cocaine. In other words, drug rehabilitation in the US is ten times more cost-effective than drenching the Andes in defoliant.
 
In addition to highlighting the effectiveness of demand-reduction strategies, this study sheds light on the responsibility of consumer nations. As the world’s foremost narcotics consumer, America’s ability to drive down its own domestic demand would have a dramatic impact on the profits of international crime networks that have caused such chaos across Central America. Ditto China and ivory’s blood-splattered supply chain in Africa.
 
There is no easy, quick, or painless response to the challenge of international organized crime. Law enforcement and international cooperation clearly have a critical role to play, but policymakers should not overlook the impact that domestic policies to alter consumer tastes and preferences can also play in this fight. Ellis’ comment on counterfeiting could apply to all efforts to halt the trade in illegal goods: “You can’t arrest your way out of this problem.” 

About

The Chicago Council on Global Affairs is an independent, nonpartisan organization that provides insight – and influences the public discourse – on critical global issues. We convene leading global voices and conduct independent research to bring clarity and offer solutions to challenges and opportunities across the globe. The Council is committed to engaging the public and raising global awareness of issues that transcend borders and transform how people, business, and governments engage the world.

The Chicago Council on Global Affairs is an independent, nonpartisan organization. All statements of fact and expressions of opinion in blog posts are the sole responsibility of the individual author(s) and do not necessarily reflect the views of the Council.

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