A general theory of Billionaires - II
by Bhaskar Menon on 17 Jul 2018 3 Comments

Black Market Business


Drugs constitute the highest volume of business in the global black market. The Geneva-based UN Office of Drugs and Crime has estimated that the Afghan opium/heroin trade is worth some $60 billion a year. It also estimated the overall street value of all forms of mind altering drugs to be $500 billion. It backed away from that figure under challenge but much expert opinion continues to affirm it.


In the post-Cold War era the global black market boomed with two forms of organised crime, gunrunning and trafficking in people. As major Powers downsized their arsenals by selling off millions of weapons at fire-sale prices, brokers channeled them to conflict areas in developing countries. A UN report in 2003 said that in the decade since 1990, arms trafficked into areas of conflict in West Africa had been used to kill two million people, 90 percent of them civilians. It said that in East Africa the boom in supplies had made weapons so cheap that in Uganda an AK-47 assault rifle cost no more than a chicken. Most African conflicts were (and continue to be) “commercial wars” serving as cover for the large-scale theft of natural resources ranging from diamonds and precious earths to hardwoods and gold.

Meanwhile, in Eastern Europe, a new traffic developed to supply women and children to brothels in Western Europe and Asia. The European Union estimated in 2000 that about half a million women from outside the region were working as prostitutes in its member countries and that an estimated 175,000 were being trafficked in every year. More recent statistics show a continuing decline in those numbers, but new flows are emerging from Asian trouble-spots. People from at least 127 countries are estimated to be trapped in involuntary servitude in 137 countries. The proceeds from their misery are estimated in the billions of dollars per year.

An altogether new form of organised crime developed in the last quarter of the 20th century as governments put in place laws to protect the natural environment. With almost total impunity corporations set about breaking air and water pollution laws, ignoring guidelines for the treatment of hazardous wastes, trading in ozone-depleting chemicals and endangered species, and stealing the natural wealth of poor countries. African countries caught in conflict and thus unable to defend their territorial integrity, Somalia in particular, became dumping grounds for European toxic waste.

The exploitation of endangered animals is also big business in the global black market, with demand for animals or their body parts mainly East Asian, and supplies coming from Africa, Latin America and the rest of Asia. The money generated by the grisly trade in tiger parts, rhino horn and elephant ivory is not large by world standards, but is enough to drive those animals towards extinction. Tiger parts are estimated to generate sales of $5 million per year. Poachers kill between 5,000 and 12,000 African elephants every year to supply the market with between 50 and 120 tons of ivory, valued at about $62 million. Rhino horn sales of some 800 kilograms generate some $8 million per year.

The trade in hardwoods is much more lucrative, with supplies valued at $2.6 billion going from East and South East Asia to the European Union, and another $870 million supply chain bringing stolen South-East Asian forest products to China. Criminal counterfeiting has piggybacked on the trend to outsource production of luxury brands from the industrialised world to China. According to the World Customs Organisation two-thirds of counterfeit products are shipped from China. The main market for these products is in the European Union, where vending them involves people who are themselves victims of traffickers. Based on seizures by police and consumer surveys, the EU has estimated the trade at over $8 billion per year.

On the ground, all the illicit activities described above are in the hands of violent thugs, but those who manage them are not the snatch-and-grab captains of earlier generations. A UN report on the State of Crime and Criminal Justice Worldwide in 2000 noted that in response to “changing structures of trade, finance, communication and information” criminals had become businessmen. They had “established networks in their home countries as well as abroad in an effort to carry out activities more effectively in both licit and illicit markets” and were “able to infiltrate financial, economic and political systems of countries all over the world.” They had “adopted corporate-like structures … employing highly skilled persons and mechanisms to assist in generating and concealing profits.”


Shell Games


Every one of the illicit activities described above involves shell companies - corporations with unidentifiable owners and assets - doing business through “secrecy jurisdictions.” There are several million shell companies and some 70 secrecy jurisdictions. The money they process passes into the world’s most illustrious banking centers with a nod and a wink. This internationally distributed system, most of it developed since the 1960s, has been directed from The City (financial center) of London, and constitutes a new British Empire. It subjects the rest of the world to massive exploitation. 


Global Financial Integrity (GFI), a Washington-based non-governmental organisation run by a former World Bank economist, has estimated that over the last decade developing countries have lost $5.86 trillion in illicit transfers. The London-based Tax Justice Network (TJN) has estimated that offshore tax havens hold assets of over $30 trillion, with the world’s High Net-Worth Individuals owning over a third of that. In 2010 the International Monetary Fund estimated that just the “small financial centers” (i.e. excluding Switzerland and London), held some $18 trillion in secret assets.

The overall size of the underground economy is anyone’s guess, but there have been expert estimates of its magnitude at the regional and national levels. About 50 to 60 percent of economic activity in sub-Saharan Africa is off the books; in the Russian Federation it is 40 to 50 percent, in China about 20 percent, the United States eight percent, and Japan six percent. The United Nations estimated money laundering in 2010 at two to five percent of global GDP: $800 billion to $2 trillion.

The United Nations Conference on Trade and Development (UNCTAD) reported in its 2010 World Investment Report that the flow of Foreign Direct Investment (FDI) from Hong Kong in 2009 was more ($52.2 billion) than those of mainland China ($48 billion). Tiny British Virgin Islands had more outgoing FDI ($26 billion) than all of oil-rich West Asia ($23 billion) or the “Tiger” economies of South-East Asia ($21 billion). In comparison, India’s outflow of FDI in 2009 was $14.8 billion. As for FDI stock (cumulative total), Hong Kong was reported to have $834 billion and the British Virgin Islands $224.8 billion, dwarfing China’s $229 billion and India’s $77 billion.


Corruption in the UN System


Since a new head of UNCTAD took over in 2013 such invidious comparisons have not appeared. At the United Nations too, the appointment of particular senior officials has dramatically changed the level of the Organisation’s functional integrity. A striking example was the preparation of the development goals of Agenda 2030. Developing countries had campaigned hard to have the 15-year development agenda take cognizance of money laundering, drug trafficking and terrorism as three interlinked problems, each a major obstacle to sustainable development.


Britain said nothing on the three issues (each with an important role in its foreign policy) but had the last Secretary-General appoint as coordinator of Agenda 2030, a Nigerian national raised in Britain by her British mother. She went through all the motions of consulting with governments and then produced a set of goals that devoted just 25 words to the three issues in the 15,000+word Agenda 2030.


The same official, promoted to the high rank of Deputy-Secretary-General by the incumbent UN Secretary-General, omitted those issues altogether from the UN’s main benchmark report in 2016. In 2017, she had the text of Agenda 2030 quietly rewritten to separate terrorism from money laundering and drug trafficking; it was placed in a new paragraph, alongside national crime. This is standard high corruption at the UN: poor countries have their concerns routinely ignored while senior officials bend themselves into pretzels to please the powerful. In May 2018 the incumbent UN Secretary-General thought nothing of making a major speech on global corruption without a single mention of offshore tax havens, most recently exposed amidst much scandal in the Panama Papers in 2016 and the Paradise Papers in 2017.

No UN agency has attempted even a tentative mapping of the global underground economy or tried to bring into focus the mechanisms and elite groups which launder and manage illicit money. International Conventions have been adopted against Transnational Organised Crime (2000) and Corruption (2003), but action against money laundering has been stuck at the level of intergovernmental coordination based on guidelines agreed among major industrialised countries. Most of the estimates about the flow of funds into tax havens have come from non-governmental organisations, with the World Bank and the IMF occasionally playing catch-up.


The Emptying Black Market


Over the last decade, as the United States and the European Union have tightened the screws on money laundering, Britain has responded by seeking to escape oversight and control. Brexit has been the most significant move in that direction. London has also packed the ranks of senior United Nations officials with its own officials (far more than any other state). Among the latest is the head of Public Information ahead of a major review of drug policy in 2019.


However, the hacking of millions of confidential records and their exposure in the 2016 Panama Papers and the 2017 Paradise Papers have made those maneuvers largely immaterial in protecting British interests. It is difficult to see how the Humpty Dumpty of the global black market can be put together again. And without the black market it will be impossible to run the global drug trafficking empire or sustain terrorism networks from Afghanistan and Latin America to major markets.

That brings us to why there is a sudden surge in the number of billionaires. With no future for the global black market, all its trillions of dollars have to go somewhere. The bid by Bitcoin and other crypto-currencies to become a virtual secrecy jurisdiction having clearly failed, there is no alternative but to park the money with deserving individuals. As the money flows into hedge funds and is traded in world markets through computer trading algorithms, we have a global market system dominated by oligarchs and profiting them predominantly. The more that system grows, the less democracies have a chance of survival, especially if Britain uses its assets methodically to create political and economic chaos. 


Looking Ahead


In looking ahead, it is necessary to keep in mind the following points:

-        Britain already has deep ties to the full range of “Islamic terrorist movements” dating back to the colonial-era founding of the Muslim Brotherhood in the British-controlled Suez Canal Zone of Egypt. See here 


-        London has close ties to Pakistan’s Directorate of Inter-Services Intelligence (ISI), which was founded by a serving British officer to coordinate action in the first Kashmir war. See here


-        One of the startling revelations from the Osama Bin Laden Files seized by the United States is that Al Qaeda and Iran have very close ties. See here for (May 2018) video discussion of the files. [Given the Sunni-Shia situation in the region, this could only have happened if the two arch enemies had a go-between arguing the common good. In my view, London is the only possible broker - after winning Tehran’s trust with its anti-American stance on the JCPOA.]


-        Also contrary to expectations, the Osama files showed that Al Qaeda and the Taliban in Afghanistan have very close coordination. [That too could not have happened without British consent, for it controls the money flow to the Taliban.]


-        The roles of Cambridge Analytica, “former MI6” agent Christopher Steele and “music promoter” Rob Goldstone in manipulating the last American presidential elections point to the need for all democracies to keep a wary eye on London. The United States as it approaches the 2018 midterm elections and India as it nears the 2019 general elections have to be especially watchful for its proxies, especially among the super-rich. The fluidity of party loyalties induced by large amounts of money might need new rules by those in charge of conducting orderly elections.




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