POLS2094 Week 11: Illicit goods

Illicit markets

Economic activities that occur outside of official channels and violate laws or regulations.

They produce:

Market-banned goods (drugs, certain weapons)

State-regulated commodities traded illegally (cigarettes, wildlife)

Legal goods produced through illegal means (counterfeit products, illicitly extracted resources)

Services with contested legality (sex work, gambling)

Criminalisation

How states define what is illicit and why this varies across time and space.

Supply chain paradox

- Government crackdowns increase price due to constant demand and limited supply.

- Risk premium increases price and higher profit for successful smuggling.

- The most ruthless, violent criminals are more likely to be successful.

Smuggling/trafficking

To convey (goods) clandestinely into (or out of) a country or district, in order to avoid payment of legal duties, or in contravention of some enactment; to bring in, over, etc., in this way

Fentanyl

Huge spike in Fentanyl consumption since 2020, but has been increasing since 2013. Overdoses are the highest causes of death for ages 18-45 in the US. Disproportionately affects males aged 35-55. Extremely high in North America and North Eurasia.

Criminogenic asymmetries

Legal, regulatory, and economic disparities between countries create illicit market opportunities across international borders.

Money laundering

The process of concealing the origins of money obtained illegally by passing it through a complex sequence of banking transfers or commercial transactions

Guestimates

It is hard to have a complete picture of illicit markets.R.T. Naylor (2008) calls current statistics "guesstimates"

Guesstimates refers to the combination of guesswork and estimation that characterizes many official statistics about illegal markets.

Matters for:

Policy implications—Can lead to misguided policy responses.Empirical integrity—Unsure of true scope. Without reliable data, research

conclusions remain tentative and subject to questions.

Political manipulation—Can lead to hyperbole towards either government achievements or highlighting threats.

Research methodology—Understand limitations and need for more sophisticated methodologies and cross-verification.

Comparative analysis—Hard to make meaningful comparisons between different types of illicit activities or track changes over time.

UNODC

United Nations Office for Drug Control and Crime Prevention. 1997

Educates people throughout the world about the dangers of drug abuse and to strengthen international action against illicit drug production and trafficking and drug-related crime.

Tax evasion

The reduction of tax payments by misstatement of income or other illegal means.

Human trafficking/modern slavery

- Wage differences create incentives for human trafficking from poorer to richer countries.

Changing landscape: Labor exploitation - Modern slavery and forced labour in global supply chains.

Supply-side interventions

- Interdiction strategies: border enforcement, military involvement, maritime operations.

- Eradication programs: crop destruction and alternatives to illicit cultivation.

- Sanctions and embargoes are economic tools against illicit actors and facilitators.

- Tech-based controls: tracking systems, biometrics, blockchain applications.

- Mixed evidence on effectiveness, displacement effects, unintended consequences.

Counterfeiting

To make an imitation of, imitate (with intent to deceive).

Six degrees of separation

- Global commodity chains connect legal consumers to illegal production.

- Between a consumer and the original producer there are various actors including financers, processors, shippers, importers, distributors, and retailers.

- The greater our degree of separation from the illicit part of the supply chain the less responsible we feel for it.

Restriction opportunity dilemma

the more countries try to impose arms embargos/ban illegal substances, the more they "provide inroads for the creation of new criminal markets or the expansion of existing ones."

Flags of convenience

places to register ships and airlines that conduct all their international business somewhere else.

Commercialization of sovereignty

the renting out of commercial privileges and protections to citizens and companies from their countries.

Tax havens

foreigners can park their money and conduct international financial transactions with little regulation by local officials.

Name and shame campaigns

International attention to illegal and unethical practices.

Black listing

lists of businesses that are shared to spread awareness of unethical or illicit practices directly in the business or along the supply chain.

White listing

Sharing lists of businesses that are engaged in CSR, do not use unethical practices, or work in illicit markets.

Hydra effect

Effort to stop drug production/trade in one area simply causes it to sprout somewhere else.

Causes of human trafficking

Economic incentives, patriarchy, poverty, border control