The Illicit Economy

http://globalsociology.com/2009/08/24/the-global-illicit-economy/

The video above is a 28-minute speech addressing the Global Illicit Economy, the underbelly of international trading which deals in goods and services primarily deemed illegal by most governments. The talk gives an overview look at some of the international black market’s main cash cows, and how the legal economy and illegal economy are two parts of the same whole, more synchronized than I think most of us thought.

The orator, Nils Gilman, of Global Business Network, defines deviant globalization, the main concept discussed, as the unsanctioned global flow of goods and services that violate bourgeois ethical sensibilities. These include activities such as international drug dealing, kidney trafficking, toxic dumping, smuggling illegal aliens/ sex slaves, arms trafficking, money laundering, and international identity theft. Gilman says that traditionally, these crimes are thought of as independent of each other, but in actuality, they all come together to form an interwoven illegal economy that typically is two to three times more profittable than the publically traded global economy.

Gilman states that the idea of rogue bands of drug smugglers or people in dark basements hacking into bank computer databases are far off the mark. We are seeing an increasingly professional illict network and that ,"in a professionalized industry, risk and reward are strictly and strongly correlated, and in so far as governments attempt to criminalize certain types of activities and apply law enforcement in one part of the supply chain, they are going to drive innovation in that part of the supply chain, but they are also going to increase the profit margin."

Gilman also compiled a list of principles about the Deviant Global economy, and they are as follows:
1) Perfectly legitimate forms of demand can produce perfectly deviant forms of supply
2) Uneven global regulatory structures create arbitrage opportunities for deviant entrepreneurs
3) Pathways for legitimate globalization are always also pathways for deviant globalization
4) Once a deviant industry professionalizes, crackdowns merely promote innovation
5) States themselves undermine the distinction between legitimate and deviant economies
6) If unchecked , deviant entrepreneurs will overtake the legitimate economy
7) Deviant globalization presents an existential challenge to state legitimacy

This was a fascinating topic to look at briefly. I vaguely knew of the economic command that the international drug trade held, but never knew how much the role of weak centralized governments play in acting as a host to the cancer that can metastasize throughout the international community. I think this would be an interesting topic to further explore and research.

Gilman concluded the speech with this: "The underlying political process... is really about the disaggregation of the sovereignty bundles of power associated with the high modernist liberal state. In many places, the state is no longer, if indeed it ever was, the de facto governing authority, in the sense that it no longer has control over the delivery of political goods, such as security and infrastructure and education and so on... They simply want operational space, what I like to refer to as temporary autonomous zone, where they can do their business and make money and they become the big men in their communities, and as far as they're concerned, this is a political system that is working. This is why I think it's important that we stop talking about failed states. These places may look failed from the point of view of the very civilized shores of Washington DC or from London, but as far as the people who are the leaders in those places, from their perspective, its not necessarily failed at all, in fact its working quite well... These people are a reflection of the failures of the promises of development I believe, and these people have given up because they don't believe there is any truth to these promises that the West is going to deliver them if they follow the West's prescription of an inclusive, democratic, welfare state. They are post-modern in that they don't believe modernity will ever include the likes of them. I want to leave you with one final thought on these guys, we typically like to think in the West that we represent the future and that the developing world represents the past, and that somehow if they develop properly, they are going to look more like us, as we continue on our glorious technological way. I'd like to submit to you... that the developing world represents our future, not the other way around. And that these kind of phenomenon which are being pioneered in the Niger Delta, may in fact be alot more like what our world looks like in the next 20 to 30 years."

Unemployment Fallout

Over the past couple months, worries about the US unemployment rate hitting 10% frightens politicians and the public, as it would not only be the highest percentage of Americans out of work in years, but the double-digit figure would also be a psychological milestone of how real our declining prosperity and economic hope is. Despite concerns, the unemployment percentage dropped in July from 9.5% to 9.4%, suggesting that unemployment was on the decline and a bottoming out of the recession. However this notion is inaccurate. Unemployment figures only account for those who are jobless and seeking employment, so the 800,000+ unemployed Americans who have given up looking or are on some form of government assistance are not included in the equation. If that population of discouraged workers were included, real US unemployment would be around 16%. When it comes to economic distress though, we are far from alone.

The UK is also having significant struggles in creating and sustaining job opportunities. Across the Atlantic, approximately 2 million children live in homes with no income-earning parents, rounding out to about 1 out of every 6 kids in the country. That's the equivalent of sitting down in class next week and having four of our peers whose families aren't making any money to support themselves. Currently in the UK, 17% of households are unemployed.

The aftermath of the global financial meltdown is still being felt in force, as the new figures for joblessness have settled around 4.8 million people. The most shocking of all statistics though, is that 40.4% of all single-parents are now out of work. Thats a mind boggling figure. John Atkinson of the Institute for Employment Studies, said that, "Eighteen months ago, worklessness was in decline. Government programmes encouraging lone parents and the long-term sick back into employment were a part of that success story. Today we can see that the recession is unravelling much of that progress."

The short term effects of unemployment on the 2 million children in question are saddening, but the longer term effects rise real concerns for the UK, and in analogous situations in countries throughout the world. The United Kingdom is hitting its highest dropout rates in 30 years, with less of the under 16 population attending school and less of the 16-21 population holding employment or receiving vocational training. Crime rates will surely increase, as the country's youngest generation is now being faced with increasing poverty and bleak opportunities for legitimate sources of income. With the increased secondary education drop out rates, this generation of UK citizens will be less formally skilled and have less diplomas than their parents and grandparents, opening up a possible regression in the UK's ability to compete in the international market.

Something else that is really troubling, is how countries far less economically affluent in comparison to the US, the world's biggest economy, and the UK, the world's 6th biggest economy, are coping with the ripple effect. The countries and regions that were already barely hanging on before the economic collapse that originated out of the US in September of last year. Places in Africa, the Middle East, Latin America, and Asia, (ironically, much of which was colonized by the UK) where 16% unemployment would be incredibly desirable. People around the world have lived in far worse conditions than the recently unemployed of the world's most successful countries, but now when poverty starts to frighten us and is within striking distance of us, thats when we begin to care about it. And even then, the care is only for self. Being unemployed would suck but it could always be worse.

The Network

I just watched this movie called Network, made in 1974. It talks about the inner workings of the business behind television and the prevasion of the news as entertainment. The two monologues in the video below are one of the most interesting things I've seen in a long time and I wanted to share it on here because it speaks specifically to what we're going to be studying. I strongly urge everyone on here to go rent the movie.

"The world is a business Mr. Beale."

Global Currency

At the recent G8 Summit on July 10, held in Italy, Russian President Dmitry Medvedev announced the concept of a global currency, the United Future World Currency. Medvedev spoke of this development as part of understanding and appreciating "how interdependent we are," and said that a supranational currency would be a significant instrumental in tackling the global financial crisis, rising doubts about the future of the US dollar as the standard of international trade.

On the United Future World Currency website, the group states on its frontpage that:

"[The coin] is a necessity and a challenge. What seems an impossible dream becomes an inevitable historic, economic and social process. It is an event which is intertwined with the fate of human evolution... A single currency becomes the premise for an increasingly global planet. A virtual currency capable of speaking a single, comprehensible language to foster humankind's innate desire to go farther, to surpass boundaries, and move towards true principles of peace, freedom, brotherhood and understanding beyond issues of race, political and religious beliefs and party interests."

The organization behind the conceptualization and promotion of the coin, started in 1996, cites the Euro as setting a historical precedent of uniting politically and culturally differing countries, with histories of war and conflict, under one economic banner for the benefit of all participating parties. A ten-part manifesto outlines the project's agenda and set of roles, all of which hinge on the idea of bringing the peoples of the world together as one. Highlighting the United Future World Currency's guiding principle of uniting the governments of the world, and therefore the people which they represent, the coin displays the slogan "Unity In Diversity" on the back. The project says that the national-transcendent money would, "symbolize not only the economic, but also the human, social, political, and spiritual bonds between the Nations of different Continents that hold similar ideals." The coin is still in early development and promotion of the idea of the single global monetary system still needs a significant amount of ground gained in public and political support before the project can substantially materialize.

The adoption of a unified currency would be a huge step for humanity, one that I am very skeptical would ever happen. From everything presented on the United Future World Currency's website at this point, everything is still very general, broad, and philosophical. Uniting the people of the world under one currency would create a more concrete sense of interdependence, and it would symbolize a tremendous sense of global progress. The positives on paper are very appealing. More potential for international economic stability, more potential for multi-lateral diplomacy, and more potential for cultural understanding in a tense 21st century climate. The negatives of the proposal are also very vivid. With a centralized, global currency comes less national autonomy and less domestic control over their system of money. The question of how the United Future World Currency's governing body, the future global Federal Reserve, would deal with issues like inflation, circulation, taxes, etc., would be very difficult. What if one country or a region was suffering an economic crisis that demanded more coins to be pressed or coins withdrawn from circulation to stabilize the economic, how adversely would that affect the rest of the global economy? Would a global currency alleviate poverty, or make it more rampant and intense? How would political power be separated equally amongst all nations and how would the possibility for corruption and manipulation be monitored and curtailed? How would prices be set for goods and services accurately and fairly across the entire global market place? What would happen to countries that didn't adopt the new money? Would they be unable to participate in the global economy? It would probably end up being similar to what happens with the WTO or G8, where countries that don't participate don't get a voice in the decision making process of decisions that will effect them anyway.

In the near future, I think this is highly unlikely. From an American perspective, our country doesn't like to submit any of our power to a foreign entity, especially one based in Europe, so I think there would be a significant backlash. If we can't pass a progressive health care reform bill without individuals drawing comparison between President Obama and Hitler, there is no way we'd be able to convert the dollar to a global currency. People would be up in arms, with some merit, about the slippery-slope of a world government, loss of independence, and the rise of authoritarian communism. It makes me think of some form of Marxist economics where we could lessen the gap between the have's and the have-not's and produce a fair, progressive global economy based on some European hybrids of capitalism and socialism, but all I can think of the potential for abuse by the world's richest individuals and most influential politicians to make themselves more rich and powerful. There's tremendous potential for a positive outcome and tremendous potential for a negative outcome, though I don't see it coming into fruition. Its an interesting idea nonetheless, and I think there should be a debate, at some level, regarding the merit of converting all the world's monetary systems into a single, unified currency.

Recession Bailouts

In the wake of the major economic crisis that arose in Fall 2008, the US Federal Reserve initiated a series of financial bailouts to wall street firms including Bear Stearns, Fannie Mae and Freddie Mac, AIG, Citigroup, and Bank of America, and to auto makers such as GM and Chrysler. The rationale for these bailouts was that these organizations were too important to the domestic and international economy to fail, and therefore we, as a country and participant in the global economy, had no choice but to give them the capital necessary to get them back in the black. In addition, the Emergency Economic Stabilization Act of 2008 was passed, giving the federal government the ability to use up to $700bn to purchase toxic debts and stimulate the economy. Stimulation would come through a two-pronged recovery. First, stabilize the economy the short term by trying to stem the tide of unemployment and encourage consumerism, and second, a series of long term investments that would create a more sustainable economy and sound infrastructure in the future. The concept of investing money in the future of the country is great and I definitely support that, but handing out billions upon billions of dollars to corporations because they are too big to fail is foolish to me.

This process doesn't allow for capitalism's Darwinian process of natural selection and survival of the fittest to occur. Without this, the "free hand of the market," one of favorite buzz-terms of proponents of capitalism, ceases to exist, and capitalism is no longer capitalism. According to political pundits and financial experts, during the eight years from 2000-2008 under the Bush Administration, the financial sector saw less and less federal regulation, allowing an economic bubble to grow in the real estate market and artificially low interest rates set up the current credit crunch. These factors contributed to the massive collapse of the NYSE average, inducing several 700+ point drops, and the subsequent economic terror that ensued. Since the stimulus package was passed, we've seen the majority of the sky-is-falling, financial fear quelled, which has helped the largely psychological aspect of the stock market to give the American public optimism about our predicament. In addition, the majority of analysts believe we've seen the bottom of the stock market with the Dow Jones Industrial Average now above 9,000, with few days resembling those back in September and October. Despite this, with US unemployment at 9.7% as of June, increasing .6% since May on a collision course with the 10% milestone, and with US public debt at $11.3 trillion, America's economy is still looking very troubled with the problem having no solution providing instant grafitication, which has become one of the pillars of American culture and one of the leading contributers to the economic meltdown itself.

Looking at the problem further, an interesting question to ask is what are we saying as a country when we say these companies are too big to fail? The Obama Administration promised change, change from the old, the entrenched, and the status quo. Obama's my dude, but I really wish he came on TV in the wake of the wall street collapse, in his calming, assured demeanor to say, "We've got ourselves into a gigantic predicament through lack of regulation, dogmatic faith in invisible hand of the free market, and our excessive lifestyle of over consumption and materialism. There isn't an easy solution to this, this is going to hurt and we're going to need to scale back our quality of life to return some equilibrium to the economy and the American way of life in general." With the huge amount of political capital and positive energy behind his campaign and election, he could have appealed to people's rational side and gone through a step-by-step explanation of what happened and how it happened, what they were going to do to fix it, and what they anticipated would happen as a result. Instead, the majority of Americans are confused about the mystery of how the bailouts were supposed to work, and why these companies, who have done terrible jobs managing their investments (and are supposed to be some of the best and brightest individuals our educational system has to offer), are receiving more and more money from us to stay afloat. There is still a definite air of apathy towards the political process, and I think people in general have so much on their plate as it is, its become really mentally taxing. We don't have all the time or the energy necessary to research everything and stay informed with all the breaking news, and frankly nor should they. This would probably to more harm than good, more anxiety and stress than it would reassurance and security. But I think the bottom line is people want things to work and things to make sense, and the system certainly wasn't working, and the bailouts certainly didn't make alot of sense.

There's a Chinese proverb that says, "One generation plants trees, the next generation gets shade." I think this is the way we need to look at our approach to solving the recession, with specific regards on how to avoid or diminish the negative aspects of capitalism for our children and children's children. We could move to Sweden if all else fails.