International

It’s not attracted all that much attention, but a few weeks ago the United Nations published its annual report on organised crime internationally. It is estimated that in 2009 criminals earned some €1.5 trillion, almost 4% of the world economy. For Italy the sum was €116 billion. This is money that will not be counted in the formal economy, on which no tax will be paid, and that will not benefit the people who really need it. Organised crime in Italy accounts for 7.7% of the national income, whereas the comparable figure for Germany is 1.3% and for the US 2.3%. I hope then that Super Mario (Monti) in Rome isn’t looking only at spending cuts, but transforms himself into Superman to take on organised crime. That would be a lot fairer as well as being necessary if Italy is to tackle its structural problems and get back on its feet.

Crime in itself is bad enough. The criminals in question are involved in illegal dumping of waste, with people smuggling and the smuggling of hard drugs. Each of these crimes has victims. You only need to consider the degrading conditions in which people, most of them women, end up when they are forced by the people smugglers to work as prostitutes, or of the victims of hard drugs, or of people who become ill from the effects of illegal waste.

Such things are well enough known, for the most part. Too little attention is, however, paid to the economic effects. In the short term these may not seem so bad. Criminals have to put their money somewhere and they often ‘invest’ it in small business, such as cafes and restaurants or, in the Netherlands, in those small shops from which people can make phone calls, or so its is rumoured. They hide their illegally-earned money too in property. Collectively all of this is known as ‘money laundering’, which is itself a criminal offence, but in the short term it means that there is a slight increase in economic activity. The problem is that in the long term the economy suffers only damage through such criminality, because the criminals involved can only launder their money if the small firms in which they hide it aren’t real firms at all. They don’t have to make a profit, because for these ‘investors’ that’s not what it’s about. So they often charge far lower prices than do legal businesses, which means bad money drives out good. What’s more, these criminals are responsible for a great deal of bribery of the employees of regulatory authorities, enabling them to continue their laundering practices undisturbed. These firms’ bookkeeping is by definition not in order, because otherwise it would be clear where the money came from. And they don’t pay any tax. Consider that: 1/15 of your economy run by criminals. It can’t be good. So, Superman Mario, get on with the job!