The global economy reveals its dark side

By ALISON SMALE N.Y. Times News Service

In Eastern Europe, traffickers ship girls through the Balkans and into sex slavery. Russians launder money through tiny Pacific islands that have hundreds of banks but scarcely any roads. Colombian drug barons accumulate such vast resources that they can acquire a Soviet submarine to ship cocaine to the United States.

In the decade since the Soviet Union fell, there has been an explosion of international crime, which governments are just beginning to fight. And yet, on reflection, it is clear that the globalization of crime is a logical outcome of the fall of communism.

Capitalism and communism, ideologies that served as intellectual straitjackets for Americans and Soviets, allowed them to feel justified in using unsavory proxies to fight their Cold War. When those alliances dissolved, those proxies sought other outlets to maintain - or improve - their positions. The transformation of apparatchiks into gangsters or money-launderers in the former Soviet republics and the Balkans is just the most familiar example.

Angola presents another. Its civil war was cast as a struggle for democratic or Communist domination, but it rages still, financed by revenues from the very oil and diamonds that once intrigued the superpowers. (The diamonds are smuggled throughout Africa by a network run by, according to U.N. reports, a former Soviet army translator.)

Another significant boost for international crime came not from proxies, but from principals. In the Soviet Union, the authorities themselves often scrambled for new sources of income and power as the Communist Party's grip loosened, blurring the lines between officials and those who operated beyond the law.

This was by no means the first such fusion in history, but it was the first in a country with so vast a military arsenal. In the past decade, much of the American engagement with the old Soviet bloc has been an effort to stop military equipment and weapons of mass destruction - or the knowledge of how to make them - from passing to unfriendly regimes, terrorists or criminal networks.

The end of the Cold War also brought a burst of international financial growth. But wealthy nations' push toward a new, more open global economy - through the growth of communications and the lowering of trade and financial barriers - also produced a global casino in which money could be moved around easily and instantly. If it was the fall of the Berlin Wall that spurred the relatively unrestricted movement of people, it was the growth of the casino that enabled the criminals to hide and move their ever-expanding holdings.

Today, the power of immensely wealthy criminals to overwhelm weak states is one of the real challenges faced by the Bush administration. A recent report - prepared by the National Intelligence Council, a body of senior intelligence officials working alongside the CIA, and with outside experts - ranks it among the new threats to American security.

Of course, traditional organized crime was there all along. It just got bigger. When the Soviet Union collapsed, most of its institutions imploded, said Stephen Handelman, author of ``Comrade Criminal: Russia's New Mafia'' (Yale University Press, 1995). Criminal groups that had sprung up in the dying days of the Communist system ``took up where the government left off,'' he said. ``The Mafia did not spring wholly formed from the earth in 1991; it was always there, and had a close connection with government officials.''

Shady characters in East and West wasted no time establishing links after the Wall came down. Members of the well-established Italian and the newly minted Russian mafias began meeting in Prague, Budapest, Vienna and Berlin. The police observed, but were virtually powerless to act; a telling image of the early 1990s was of impoverished police in burned-out east European sedans giving vain chase to the sleek Mercedes favored by the newly monied.

These criminal groups, Handelman said, penetrated local, regional and then central government. Meanwhile, the West was shoveling over aid, hoping that Communist societies would be reborn as free-market democracies and that the newly rich would invest at home. Instead, the old intelligentsia was impoverished and became susceptible to bribes. The new middle class and the hugely rich, to avoid bad banks and impossible taxes, stashed money abroad ``We thought: `We'll give them money, and eventually it will trickle down,''' Handelman said. ``It ended up trickling out.''

That cash is hard to trace. Cyprus, for instance, became a banking haven for Russians and for the Yugoslav regime of Slobodan Milosevic. The island's government is now looking harder at the origins of the money in its numerous banks, but tracing Milosevic's funds has proven close to impossible. And, noted Handelman, ``if Cyprus shuts down, the Russians will just go to Vanuatu, or London, or New York.''

A report for the CIA, Global Trends 2015, gives some idea of the scale of the illegitimate economy: narcotics trafficking remains the overwhelming king, with annual revenues estimated at $100 billion to $300 billion. Automobile theft in the United States and Europe, by comparison, nets $9 billion, and the fast-growing trade in smuggling people $7 billion, according to the report. The Center for Public Integrity in Washington estimates that every third cigarette exported is sold on the black market.

There are less tangible costs, too. The Global Trends report estimates that corruption costs about $500 billion a year - 1 percent of the global economy - in slower growth, reduced foreign investment and lower profits.

On this shadowy stage, politicians struggle to identify crimes, to punish and control. The United Nations has adopted conventions against new crimes; a task force of the Organization for Economic Cooperation and Development publishes an annual list of money launderers. And the European Union is beginning to define the crime of trafficking in human beings and to pool resources to fight the criminals who smuggle in as many as 500,000 people a year. Thomas Bodstrom, justice minister in Sweden, which led the union for the first half of this year, is most concerned with the enforced prostitution of tens of thousands of women trafficked mainly from the poor east of Europe. In Sarajevo, he met a woman who said she had been ``sold'' 18 times.

``I think it surprised all of us that it was actually slavery going on in Europe,'' he said. ``Bosnia has just been in a war - there is not the same possibility to have authority. But what can we say in Europe? In Sweden? Or in Holland? They are selling people.'' How many people, smuggled by whom? Bodstrom was disarmingly frank. ``The truth,'' he replied, `is that we don't know.''

http://cold.jrnl.com/cfdocs/new/stories/pgfp0827200127.htm

-- Martin Thompson (mthom1927@aol.com), August 27, 2001