Illicit: How Smugglers, Traffickers and Counterfeiters are Hijacking the Global Economy

Illicit: How Smugglers, Traffickers and Counterfeiters are Hijacking the Global Economy

by Moises Naim

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A groundbreaking investigation of how illicit commerce is changing the world by transforming economies, reshaping politics, and capturing governments.In this fascinating and comprehensive examination of the underside of globalization, Moises Naím illuminates the struggle between traffickers and the hamstrung bureaucracies trying to control them. From illegal


A groundbreaking investigation of how illicit commerce is changing the world by transforming economies, reshaping politics, and capturing governments.In this fascinating and comprehensive examination of the underside of globalization, Moises Naím illuminates the struggle between traffickers and the hamstrung bureaucracies trying to control them. From illegal migrants to drugs to weapons to laundered money to counterfeit goods, the black market produces enormous profits that are reinvested to create new businesses, enable terrorists, and even to take over governments. Naím reveals the inner workings of these amazingly efficient international organizations and shows why it is so hard — and so necessary to contain them. Riveting and deeply informed, Illicit will change how you see the world around you.

Editorial Reviews

From the Publisher
“Naím succeeds in presenting a clear account of how illicit commerce works and what its consequences are...he sheds light on one of the most powerful forces shaping today's world.” –Time

“Naím has gathered and sifted an astonishing range of information...Illicit is important reading for anyone struggling with the inadequacies of the "war on terror.” –The Washington Post Book World

“Intellectually invigorating and’s not solely bullets that are changing the world.”–USA Today

"Mr. Naím's ambitions are encyclopedic. If someone, somewhere is trying to get something over on their government, he wants to chronicle their evasions"–New York Sun

Stephen Amidon
In the end, Ordinary Heroes , like all of Turow's fiction, derives its considerable power from its depiction of a lawyer's disillusionment, his understanding of the dark ironies that await anyone with an absolute belief in the rule of justice.
— The Washington Post
Anne-Marie Slaughter
Illicit is important reading for anyone struggling with the inadequacies of the "war on terror." If or when the networks that allowed Pakistani scientist A.Q. Khan to sell designs and parts for nuclear weapons around the world intersect the networks of terrorists themselves, America's greatest nightmare could result.
— The New York Times
Publishers Weekly
In this sweeping and informative work, Foreign Policy editor Naim demystifies the global trade in illegal goods and services and, in the process, presents an original portrait of globalization that skillfully eschews the utopian doggerel that often characterizes such accounts. Naim provides a detailed tour of the major globalized criminal activities drug production and distribution, illegal arms dealing, human trafficking, counterfeiting, money laundering and so on and introduces a host of criminal networks that profit from them. The book is regrettably devoid of the kind of firsthand reporting from the field that would have made the subject matter really jump off the page. Yet Naim creates a picture of illicit trade which demonstrates that, far from taking place in a shadowy underworld, such activity is inextricably linked to legitimate commerce and directly affects all of us. In Naim's view, globalization's "diffusion of power to individuals and groups" and away from sovereign states has created a "smuggler's nirvana," in which the lines between legitimate and illegitimate economic activity are blurred and criminal networks possess an unprecedented degree of political influence. Making matters worse, the widening gap between global haves and have-nots what Naim calls "geopolitical bright spots and black holes" has increased the incentive for individuals and groups on both sides of the divide to participate in illicit activities. The remedy? In addition to offering a bevy of specific policy ideas, Naim urges readers to move away from simplistic moral denunciations and to focus, instead, on reducing the demand for criminals' goods and services and on weakening the incentives for ordinary people to become involved in their enterprises. (On sale Oct. 18) Copyright 2005 Reed Business Information.
Foreign Affairs
Traveling in Russia, China, eastern Europe, and Latin America, Naím, the editor of Foreign Policy, realized that "there was much going on in those regions ... that we could never understand unless we paid more attention to the role of criminal activities in shaping decisions, institutions and outcomes." He might have well added to his list of regions some of the Middle East, much of central and eastern Asia, and almost all of Africa. Terrorism, gunrunning, smuggling, corruption, and organized crime have been with us since time immemorial, but today's threat is different in both scale and scope, thanks to globalization, advances in communications technologies, and weapons proliferation. Nonstate actors now wield a level of power and influence that once was largely reserved for states, and Illicit is a good primer on the various challenges they present to U.S. policymakers.

Naím appropriately castigates the Bush administration for focusing on states rather than nonstate actors, but he could have explored further the extent of the long-term damage to U.S. national security likely to result from this ideologically driven position. He also draws the wrong conclusion from the Clinton administration's weaknesses. Unlike his successor, Clinton clearly understood the significance of malign nonstate actors, and yet he was only moderately successful in taking action against them. Naím seems to believe that this was the case because the game is fundamentally unwinnable, and he thus favors legalizing certain of the crimes in question (although he is purposely vague about which). He also believes that bureaucratic turf disputes will inevitably get in the way of effective and coordinated policies — a challenge that especially plagued the Clinton administration. But rather than throwing up his hands in despair, a more optimistic person might take heart from the long and difficult but ultimately successful efforts to force the country's military branches to cooperate under appropriate civilian control. The same could eventually happen with the law enforcement community — and as Naím's book compellingly shows, it needs to as quickly as possible.<

Kirkus Reviews
Troubling and comprehensive examination of the post-Cold War explosion in illegal commerce. Editor of Foreign Policy magazine, Na'm offers a sweeping survey that's light on anecdote. He argues that "since the early 1990s, global illicit trade has embarked on a great mutation." He explores how political changes coupled with unrestricted technologies and free-market expansion had the unforeseen effect of making the international trade in contraband more profitable than ever. Na'm discusses underground markets in weapons, drugs, human beings, counterfeit products and more. The author points to the seepage of criminality into society, represented both by well-heeled Westerners who love buying bootleg DVDs and fake purses, and by the structural transformation of criminal syndicates from cartels to networks. There is also talk of al-Qaeda: Na'm argues that illicit trade both nurtures stateless terrorists and ties them to transnational money-laundering, illegal drug producers (as in Afghanistan) and corrupted elements within states like Pakistan and China, where members of the military are known to underwrite slave-labor counterfeiting operations. Na'm terms this the "criminalization of the national interest." He depicts the response of law enforcement as provincial, outmoded and bureaucratized, and he urges greater cooperation among competing intelligence services. A strong overview for those interested in globalization's darker side, but less vivid and dramatic than other books on the underground economy, such as Charles Bowden's overlooked Down by the River (2002).

Product Details

Knopf Doubleday Publishing Group
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5.20(w) x 8.00(h) x 0.80(d)

Read an Excerpt

Chapter 1


The famous former United States president, for eight years the most powerful man on earth, was born in a small country town blessed with "very good feng shui." As an adolescent struggling to excel in spite of his modest rural circumstances, he "admired the ambition of Gu Yanwu, who said we should walk 10,000 miles and read 10,000 books." Often during his political career he sought wisdom and guidance in the sayings of Chairman Mao. As for the starstruck young intern with whom he had an affair that nearly destroyed his presidency, he had this to say: "She was very fat."

The Chinese version of Bill Clinton's autobiography My Life that hit the streets in July 2004, months before the official, licensed translation, was obviously a grotesque forgery. Its appearance served as a welcome of sorts, introducing the former president to one of the more dubious honors of modern writerly fame. In Colombia, for instance, an entire cottage industry specializes in unlicensed copies of the works of the country's great novelist Gabriel García Márquez. In 2004 a master copy of the Nobel Prize winner's first novel in ten years vanished without a trace from the printing press. Days later, a pirate edition could be found on Bogotá sidewalks, its text accurate but for the final revisions that García Márquez, a perfectionist, had been waiting until the last moment to turn in.

Laughable as they may seem, little separates these scams from others with far more dire consequences. The same "knockoff markets" sell not only bootleg books and DVDs but pirated Microsoft and Adobe software; not only faux Gucci and Chanel accessories but bogus brand-name machinery made with substandard parts that can cause industrial accidents; not only placebo Viagra for gullible mail-order shoppers, but also expired or adulterated medicines that don't cure but kill. In defiance of regulations and taxes, treaties and laws, virtually anything of value is offered for sale in today's global marketplace—including illegal drugs, endangered species, human chattel for sex slavery and sweatshops, human cadavers and live organs for transplant, machine guns and rocket launchers, and centrifuges and precursor chemicals used in nuclear weapons development.

This trade is illicit trade. It is trade that breaks the rules—the laws, regulations, licenses, taxes, embargos, and all the procedures that nations employ to organize commerce, protect their citizens, raise revenues, and enforce moral codes. It includes purchases and sales that are strictly illegal everywhere and others that may be illegal in some countries and accepted in others. Illicit trade is highly disruptive, of course, to legitimate businesses—except when it isn't. For as we shall see, there is an enormous gray area between legal and illegal transactions, a gray area that the illicit traders have turned to great advantage.

The marketing and distribution channels that transport all this contraband—and the financial circuits that move the hundreds of billions of dollars that it generates every year—aren't exactly hidden from view. Some of the physical marketplaces can even be looked up in tourist guides to the world's great cities: Silk Alley in Beijing, Charoen Krung Road in Bangkok, Canal Street in New York City. Others, like the arms and drugs bazaar town of Dara Adam Khel in northwest Pakistan or the multiproduct trafficking and money-laundering center of Ciudad del Este in Paraguay, serving the Argentine and Brazilian markets, aren't exactly leisure spots but are no less widely known. Factories in the Philippines or China that produce licensed manufactured goods may run unauthorized second shifts with shoddy components. Shipments of methamphetamine and bootleg videos and night-vision military goggles often travel in the same containers and cargo holds as loads of semiconductors and frozen fish and grapefruit. The proceeds of illicit trade merge with the greatest of ease into the vast daily flow of interbank settlements and Western Union money transfers. And the Internet not only boosts the speed and efficiency of all of these trades but expands the possibilities by, for instance, hosting online markets for prostitutes from Moldova and Ukraine destined for shipment to markets in Britain, France, Germany, Japan, and the United States.

Neither are those who benefit from illicit trade always careful to hide in the shadows. Many exercise their trade in the open, daring authorities to crack down on them—or inviting them to collude. In Thailand, a massage parlor operator ran for public office in 2003 on a platform of criticizing the police—in effect, running to defend his own interests in the trade in human beings while tapping into broader public discontent. In neighboring Cambodia, the national police are partners with international watchdogs in cracking down on the traffic in children for sex, but the local units collect payment envelopes from known traffickers in full public view. Illicit traders may have forsaken grand, hubristic gestures—Pablo Escobar Gaviria, the famed drug kingpin, in his heyday offered to pay up Colombia's entire national debt—but they have grown sophisticated in forming front companies with complex financial structures spanning numerous countries, blurring their traces so well that they can safely operate in the open. Which means that not only is illicit trade on the rise, but its interplay with social crisis—conflict, corruption, exploitation—is more complex than it has been since the abolition of the Atlantic slave trade.


Yet in the face of all the evidence, at least three grand illusions persist in the way we—the public and the politicians in whom we place our trust—address global illicit trade.

First is the illusion that there is nothing new. Illicit trade is age-old, a continuous facet and side effect of market economies or of commerce in general. Illicit trade's ancestor, smuggling, traces back to ancient times, and many a "thieves' market" survives in the world's commercial hubs. Therefore, skeptics would argue that since smuggling has always been more a nuisance than a scourge, it is a threat we can learn to live with as we have always done.

But this skepticism ignores the important transformations of the 1990s. Changes in political and economic life, along with revolutionary technologies in the hands of civilians, have dissolved the sealants that governments traditionally relied on to secure their national borders. At the same time, the market-oriented economic reforms that swept the world in the 1990s boosted incentives to break through these sealants—legally or otherwise. Not only did the hold of governments on borders weaken, but the reforms amplified the rewards awaiting those who were prepared to break the rules.

Technology enlarged the market, not just geographically by lowering transport costs but also by making possible the trade in a whole range of goods that didn't exist before, such as pirated software or genetically modified marijuana. New technologies also made it possible to trade internationally products that in the past were hard or impossible to transport or hold in "inventory"—human kidneys, for instance. Markets, of course, were also enlarged when governments deregulated previously closed or tightly controlled economies and allowed foreigners to visit, trade, and invest more freely.

The massive transfer of goods and equipment once under the exclusive control of national armies into private hands released into the market products ranging from rocket launchers to SCUD missiles and nuclear designs and machinery. Moreover, governments also boosted illicit trade by criminalizing new activities. File sharing through the internet, for example, is a newly illegal activity that has added millions to the ranks of illicit traders.

A clue to the explosion of illicit trade is the relentless rise of money laundering. Eventually, every illicit line of business generates money that needs to be laundered. And there is ample evidence that despite all the precautions and enforcement measures now in place, there is more and more dirty money floating in the international financial system now than ever before.

Yet until now, with the exception of narcotics, illicit trade has simply not been a priority in international law and treaty making, or in international police work and cooperative law enforcement. The United Nations devised common language to describe it only in the year 2000, and most countries have a long way to go in adapting their laws to international standards, let alone enforcing them. It took the advent of software piracy and the birth of "intellectual property crime" to add a fillip to international efforts against counterfeiting. And trafficking in persons—the most morally outrageous of all the forms of illicit trade—was defined in the 1990s only by academics and activists, and made the subject of a specific, comprehensive law in the United States in 2000. (Only seventeen other countries have done the same.)

The second illusion is that illicit trade is just about crime. It is true that criminal activities surged and became global in the 1990s. But thinking about international illicit trade as just another manifestation of criminal behavior misses a larger, more consequential point. Global criminal activities are transforming the international system, upending the rules, creating new players, and reconfiguring power in international politics and economics. The United States attacked Iraq because it feared that Saddam Hussein had acquired weapons of mass destruction. But during the same time a stealthy network led by A. Q. Khan, a Pakistani engineer, was profiting by selling nuclear bomb-making technology to whoever could pay for it.

Throughout the twentieth century, to the extent that governments paid attention to illicit trade at all, they framed it—to their public, and to themselves—as the work of criminal organizations. Consciously or not, investigators around the world took the model of the American and Sicilian Mafia as their blueprint. Propelled by this mind-set, the search for traffickers—almost always in drugs—led to what investigators thought could be only corporate-like organizations: structured, disciplined, and hierarchical. The Colombian cartels, Chinese tongs, Hong Kong triads, Japanese yakuza, and eventually after 1989 the Russian mafiya were all approached this way: first as criminal organizations, only later as traders. In most countries, the laws employed to prosecute illicit traders remain those born of the fight against organized crime, like the racketeering and corrupt organizations (RICO) statutes in the United States.

Only recently has this mind-set began to shift. Thanks to al-Qaeda the world now knows what a network of highly motivated individuals owing allegiance to no nation and empowered by globalization can do. The problem is that the world still thinks of these networks mostly in terms of terrorism. Yet, as the pages ahead show, profit can be as powerful a motivator as God. Networks of stateless traders in illicit goods are changing the world as much as terrorists are—probably more. But a world obsessed with terrorists has not yet taken notice.

The third illusion is the idea that illicit trade is an "underground" phenomenon. Even accepting that trafficking has grown in volume and complexity, many—not least politicians—seek to relegate it to a different world than that of ordinary, honest citizens and constituents. The language we use to describe illicit trade and to frame our efforts to contain it betrays the enduring power of this illusion. The word offshore—as in offshore finance—vividly captures this sense that illicit trade takes place somewhere else. So does black market, or the supposedly clearly distinct clean and dirty money. All signify a clarity, an ability to draw moral and economic lines and patrol their boundaries that is confounded in practice. This is the most dangerous of all these illusions, because it treads on moral grounds and arguably lulls citizens—and hence public opinion—into a sense of heightened righteousness and false security.

This point is not about moral relativism. A thief is a thief. But how do you describe a woman who manages to provide some material well-being to her destitute family in Albania or Nigeria by entering another country illegally and working the streets as a prostitute or as a peddler of counterfeited goods? What about bankers in Manhattan or London who take home big year-end bonuses as a reward for having stocked their bank's vaults with the deposits of "high-net worth individuals" whose only known job has been with a government in another country? Many American high-schoolers can procure a joint of marijuana more easily than they can purchase a bottle of vodka or a pack of cigarettes, and they know they don't really run any major risk in doing so. Meanwhile honest Colombian judges or police officers are routinely gunned down in a war on drugs that the U.S. government funds to the tune of $40 billion a year. These are not just infuriating contradictions, unfair double standards, or interesting paradoxes. They are powerful clues about how age-old human mores have acquired new hues.


Since the early 1990s, global illicit trade has embarked on a great mutation. It is the same mutation as that of international terrorist organizations like al-Qaeda or Islamic Jihad—or for that matter, of activists for the global good like the environmental movement or the World Social Forum. All have moved away from fixed hierarchies and toward decentralized networks; away from controlling leaders and toward multiple, loosely linked, dispersed agents and cells; away from rigid lines of control and exchange and toward constantly shifting transactions as opportunities dictate. It is a mutation that governments in the 1990s barely recognized and could not, in any case, hope to emulate.

The world's first unmistakable glimpse of this transformation came on September 11, 2001. Politicians would later say that on that day "the world changed." It might be more apt to say that on that day something about the world was revealed—at the very least, the incredible power now residing in the hands of an entirely new kind of international entity, inherently stateless and deeply elusive. As subsequent events demonstrated, even experts disagreed as to what they were observing, and what it might have to do with specific states and regimes.

Left unchecked, illicit trade can only pursue its already well advanced mutation. There is ample evidence that it offers terrorists and other miscreants means of survival and methods of financial transfer and exchange. Its effect on geopolitics will go further. In developing countries and those in transition from communism, criminal networks often constitute the most powerful vested interests confronting the government. In some countries, their resources and capabilities even surpass those of their governments. These capabilities often translate into political clout. Traffickers and their associates control political parties, own significant media operations, or are the major philanthropists behind nongovernmental organizations. This is a natural outcome in countries where no economic activity can match illicit trade in size or profits and therefore traffickers become the nation's "big business." And once their business becomes large and stable, trafficking networks do as big businesses are prone to do everywhere else: diversify into other businesses and invest in politics. After all, gaining access and influence and seeking government protection has always been part and parcel of big business.

Therefore not only are illicit networks tightly intertwined with licit private sector activities, but they are also deeply embedded within the public sector and the political system. And once they have spread into licit private corporations, political parties, parliaments, local governments, media groups, the courts, the military, and the nonprofit sector, trafficking networks assume a powerful—and in some countries unrivalled—influence on matters of state.

Meet the Author

Moisés Naím is the editor of the influential magazine Foreign Policy, published by the Carnegie Endowment for International Peace. Under his leadership, Foreign Policy has gained wide recognition for its cutting-edge articles, winning the 2003 National Magazine Award for General Excellence. Naím holds an M.S. and a Ph.D. from MIT and was the Minister of Industry and Trade in Venezuela, as well as an Executive Director of the World Bank. His columns are regularly carried by some of the world’s leading publications, such as The Financial Times, Newsweek, El País, and Corriere della Sera.

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