Book Reviews

Public goods and public bad

Moisés Naím

Illicit How Smugglers, Traffickers, and Copycats Are Hijacking the Global Economy

Doubleday Publishing, 2005, 253 pp., $26.00 (hardcover).

By now it is a cliché to say that globalization has both good and bad aspects to it-or, shall we say, assets and liabilities. In recent years, opponents and proponents have debated each other in academic writings, conferences, and official meetings and have even clashed in the streets where real or presumed problems created by globalization have, at times, led to violent demonstrations. Economists, policymakers, and bankers have, more often than not, defended globalization. Union leaders, workers, and some intellectuals have been critical of it.

This book, by Moisés Naím, adds a significant element to the liability side. The book provides a gold mine of information-some of it statistical, some of it anecdotal or impressionistic-that indicates that, especially in the 1990s and the first half of the current decade, various illicit or criminal activities went global and grew at a very fast pace. According to Interpol, "trade in counterfeits has grown at eight times the speed of legitimate trade." Other sources claim that money laundering comprises between 2 percent and 5 percent of world GDP and that the number of slaves in the 21st century is larger than in the previous four centuries combined.

If true, these are extraordinary figures.

In the 1990s, many illegal activities lost their provincial or even national character and went global. This globalization was facilitated by various changes taking place in the world. Some of these changes were political, such as the breakup of the Soviet Union. Others were technical, such as the reduction of transport or transfer costs for people, goods, and the exchange of information. Yet others were facilitated by new policies, such as the opening of frontiers to goods, capital, and, to a large extent, even people. We learn that 170 million people now live in countries other than those in which they were born. And, of course, hundreds of millions of people every year cross borders as tourists or workers or for other reasons.

Global integration has made it easier for some countries (China, India, Vietnam) to grow rapidly. However, it has also created a world market for illicit activities (activities prohibited by governments) while simultaneously increasing incentives to produce or provide these activities, with technology playing an important role in facilitating their production and distribution. This is well described in the book and is one of its strongest points. Naím argues that national borders have contributed to this proliferation because they encourage fragmentation of the supply chain that produces the final illegal product or service, thereby raising the profits derived from illicit activities. Fragmentation has also made it harder for national governments to punish those who supply illegal goods and services.

Kill demand, not supply

Governments-especially the United States-have attempted to fight the growth of illicit activities by going after supply rather than demand. According to Naím, this approach has not been successful and is not likely to be successful, regardless of how much the United States or other governments spend on it. He thinks the fight should...