Angelica Font's Blog

June 13, 2010

Ethics at the Frontier of Globalization: A Conversation with Moises Naim

Filed under: Uncategorized — angelicafont @ 1:34 am

Moisés Naim is editor in Chief of Foreing Policy magazine. His is a great thinker and a visionary.
In the following lecture given at Columbia University, he analyzes the astonishing but true facts about illicit traffic.


Bruce remembers what I wrote much better than I do. I had forgotten about these things and some of the descriptions which he gives of what I wrote are far more interesting and I would love to read them.

I want of course thank Bruce. He didn’t say that he and I met when we were students, and we were tortured at the same time by a faculty, and you know, you develop very strong bonds when you are in the same cubicle hating the professors there. So I am a dear friend of Bruce and I grateful to be here, and I’m also aware that I’m here thanks to the vision and generosity of Stanley Clean, I know that his wife and daughter are here. He was the early visionary that understood the importance of bringing conversations about ethics into business schools, and the importance of injecting these kinds of reflections whenever. That is was not on only cash flows and discounted cash flows. The capital asset pricing model, it’s not everything, that other things needed to be included, so I’m here thanks to that and thanks to Columbia University.

I was also told that rather than a long boring lecture I should try to give a short non-boring one, to have as much time as possible for a conversation and exchange with you. So that’s what I’m going to try to do, I’m just going to lay out some thoughts and ideas and then hopefully we can then exchange views and talk about these issues.

I’m going to make several bold assertions: The first is that the frontiers of globalization are defined by illicit networks. If you really want to know how the world is connected and how very remote places in the mountains of Afghanistan are connected to Manhattan, or how very remote little towns that are manufacturing towns in china are connected to the international market of counterfeits: Prada bags, toys or electronics you better look at the illicit traders, that are faster than anyone else in detecting opportunities, that have the resources, the mobility, the logistics, the infrastructure, the money, the political contacts, the power to really make these things happen.
{3:05 min}
If we do a business case study here, and I ask you, let’s develop a business plan to set up an exporting operation out of Kandahar. You know, let’s develop that, and we are going to export things, would you invest with me?
Well, we will go and you entrepreneurial business school students that you are, well, you will go and do the due diligences and look for details, and then discover that is impossible, that you would not invest in a business venture in Kandahar. Or in some places in Bolivia, yet there are entrepreneurs that every year make billions of dollars in sales around the world exporting from places like Kandahar that are unreachable, dangerous, not well connected in a formal way, but splendidly, very effectively connected in very informal, very powerful, efficient ways. These are, of course I’m talking about, the traders, the producers and exporters and distributors of drugs, but you would not be able to run a legal business of any other commodity out of these places.

{4:27 min}
This begins to give you a flavor of the sort of ideas that I think need to be a factor into conversations about globalization.
So the first assertion is that if you really what to understand who is at the frontiers of the global integration: in the way in which markets, people, politics, technology and culture are being tight together by commerce and other forces, look at the illicit traders not just of drugs, but of people, human organs, weapons and counterfeited products of all kinds.

This means and this brings me to the point of today’s conversation about ethics. The contours, the frontiers of some of the thorniest ethical dilemmas face in humanity today are also found in the spaces were illicit trades intercepts with their alliances with politics, with finances with commerce, with war, with poverty with inequalities and with the way in which some countries try to integrate with other in ____ ways. A lot of the very difficult challenges face in humanity, are at the center of these illicit trades.

And therefore, if you dissect them…
I always smile when I hear people talking about corporate social responsibility it has become of course a very important issue, corporations that have to become corporate citizens, good corporate citizens that should not pay bribes, and should not dirt environment and so on. Yet, some of the largest business operations in the world today do not have corporate social responsibility because they are criminal enterprises.
And that starts showing some of the contradiction in which we are going to be living, but again understating the anatomy of these trades, how they work, what they are, how the colonize, influence and shape aspects of where we live, how we live, how we trade and how we do politics. It’s very important and is very interesting to look at those issues from this angle, which is a very improbable different way of looking at this.

My fourth final bold assertion is that this trend, the trend whereby illicit traders are growing and touching everyone and everything is far more important as a defining trend of our time than terrorism.
{7:41 min}
Illicit trades are more important than terrorism. If I ask you:
How many of you have been directly touched by terrorism? Please raise your hands: one, two.
How many of you have been touch by some kind of illicit trade?
I ask that question everywhere I go around the world and the people, individuals that has been (unless you count of course making long lines in airports) but if you exclude that (that is a way in which terrorist has touch us all). But if you go around the world and ask: Have you been influence, touch directly?
Has your life being affected by terrorism?
Very few, very few.

If you go around and say:
Have you been in touch? Have you been anything to do with an illegal work?
Have you had friends or acquaintances?, Have you seen drugs, narcotics? And so on…
Have you ever bought a fake Rolex or a counterfeited Gucci bag or scarf?
So that gives you a sense of the proportion, the volumes, the grows of these things.

{9 min}
The added complication is that…
I have now been studied this for more than a decade, and I have look at this in different countries, in all continents and in all trades.
I can tell you that I have not found, I could not give you one example, in which governments are succeeding in containing the growths of these trades, let alone stamping them out.
Show me a government around the world that can claim that for all its efforts has been able to eradicate drug traffic and consumption, or the traffic in counterfeits, or the traffic in illicit weapons, or money launder. Show me, there is no one. Then show me one that has been able to contain the growth of any of these trades: There aren’t any.

So the illicit traders are winning in this tension between society and its governments and the illicit traders.

I order to begin to understand these trades, I think there are three illusions that are very dear and very ingrained in the way that we think about this issues:

The first illusion is that there is nothing new under their side.
It’s nothing new, you know, crime have been there since time memorial. You know, crime its part of human experience.
International of crime, criminals that move across borders, you know, as old as recorded history.
Smuggling, you know, buying something here and moving it along, across a line defined by an authority where it has a different price, you can find the reports of that in the pyramids.
So smuggling and the internationalization of criminals it’s nothing new.
And therefore, there is the mafia of course, born in Italy a few and transported to a few blocks from here, nothing new.
Well, that’s an illusion; there is plenty that is new. International crime has change in very important ways, it has be driven, it has been amplified, it has been transformed and it has gained unprecedented potency, thanks to globalization, and thanks to technology and thanks to political changes, cultural changes. Thanks to all sort of things that we can discuss.
We are living in a time in which international criminals have acquired unprecedented powers, influence in our history and I can elaborate more about that, if you want.
{12 min}
It includes not only technology. When you think about this you need to think about the collapse of the Soviet Union, you have to think about the ascent of china, the integration of china to the global economy, the ascent of a lot of emerging markets. You have to think about the great awakening where by now you have millions of people with new rights with new activism.
This is a phrase Brzezinski uses, “we are living at a time where is easier to kill a hundred million people that to govern a hundred million one”.
That element of difficulties in governance, in which government are constantly facing new constraints in their abilities to do things: From access to funds and fiscal constraints, to limits in what they can do and all sort of constraints are part of an environment that has provided illicit traders with this unprecedented opportunities.
So the first illusion is that there is nothing new, the second illusion this is about crime:
These are criminals period.
And if what do you do it’s something that is criminal well you called the police, this is a matter for the police, and then you call the police and you say: Criminals, put them to jail!
So it’s a matter of forces and the police.
Well, it is that we also called it corruption. But as you will see by the way we develop de conversation, these of course is corruption, but is far beyond corruption.
And in fact corruption is maybe the wrong way to describe it, because corruption evokes the wrong kinds of mental associations.
When you hear corruption you typically think about a government official that is getting a kickback from somebody building a highway, or purchasing staff for the government, which is that. But here we are talking about a complete different ball game.
In one of the phrases that you hear from me, that I think is very important is that:
We are witnessing as a byproduct of this growth of the illicit trades, we are witnessing a global trend characterized by the politicization of criminals and criminalization of politicians. By that I mean, we are not just talking about a group of government officials that looks the other side when a container full of contraband goes by. We are talking about the possibility that the head of that government is the head of that operation.
Recently I was talking to the head of the Bulgarian intelligence service and he was telling me, you know, “It used to be that countries have mafias, in our country the mafia has a country”.
And in Eastern Europe, in parts of Asia, in parts of Latin America and the Balkans that happens to be the case. And we constantly see examples in which top government officials are jailed or captured on recording camera as they are in fact not just part and passive accomplices and bribe takers but they are the leaders of the criminal corporation.
{15:50 min}
So this is just to say that we are no longer in Kansas, we are not in Kansas anymore, this is not just about crime, this is far bigger, and is going to touch ways in which the societies are organized, is going to touch politics of countries.
In a lot of Latin America’s countries these days, if you don’t have access to moneys coming from these illicit traders, you are going to have a very hard time for getting elected to anything.
The funding of political campaigns in a lot of countries in Latin America, in Asia, in Europe is now…
Where is the big money?
In Afghanistan, if you think that 90% of world’s heroin comes from Afghanistan, It’s something like 60% of that country’s GDP.
Who do you think are the tycoons there?
Who do you think are the big money people?
It’s not Goldman Sachs, these are people involve in the most important economic activity in the country.
So if you going to run an election in Afghanistan and you need to fund posters and rallies and everything else. Who do you think you have to go to get the money from?
I’m using Afghanistan but I could use several other governments.
So it is not true that there is nothing new, it’s an illusion that this is just about crime and the other third illusion is that this is something that is underground, that is others’ do, that is deviance, that is offshore…
There are all sorts of phrases and words that give the illusion that this is separated from us. This is what others do, this is what people with low ethics, or unethical people, criminals, all sorts of people with deviant behavior do.
{18 min}
Well, that is also an illusion.
If you think that about 8% of china’s GDP is produced by the manufacturing and export of counterfeited products, you are talking of millions of families that they depend on their wellbeing on the world on producing something that we think is criminal.
If you think of countries in which very large chunks of the economic activity is related to this illicit activities, we are not taking about something that is neither underground nor is deviance, nor is offshore: It is at the core of what that society is.
These three illusions blurred and make confuse, what I called the three blurrants, that are happening, that are hard to pinpoint but are very important.
We have and you are talked in your daily classes of companies that are legal they exists to be lawful companies. And the world is divided between lawful legal companies that exist to created good for society and produce goods and services that are sold legally and then there are bunch of criminals.
It’s quite clear, at here in your classrooms. It’s not clear in the rest of the world, it’s not black and white, the world it’s not divided into clean companies and criminal companies.
In a lot of places in the world there is a hybrid, there is a grey zone where you have a complex hybrid, that is a mixture of illegal activities with very legal operations. And in fact a lot of these illegal activities could not exist without the active strategic alliance with legal companies. The amounts, the volumes in terms of tonnage of illicit trades that are move every year does not happen in submarines, happens using the main trade, freighters and routes around the world.
The banking system where money is being launder does not happen in some remote islands in the Caribbean, it also happens in an island called Manhattan and it happens in a northern island called England. In fact there is a fantastic editorial from the Financial Times that says what is the story about money laundering and clamping down on Nauru, an island in the pacific, which is a money laundering heaven, when in the city of London is where you got a lot of the money laundered and in the city of Manhattan; the island of Manhattan is another island paradise for money laundering. And that happens in the same banks where you are probably going to work, or already work, or you are back.
I’m not suggesting that all of these banks are criminals. I’m just suggesting that perfect lying with “the word is divided into black companies with black hats and white companies with white hats” is an illusion.
There is another blurring, which in a blurring that occurs with companies trying to influence governments.
It goes without saying that if you are running a company and the bottom-line of your company is highly dependent on decisions made by governments, you are going to find ways to influence those decisions.
In some countries that is called corruption, on other countries is called lobbing, but it happens everywhere. So if you are a pharmaceutical company, or if you run a telecommunications company, or if you run an university; your performance, your financial performance is related to some decisions that some regulators would have made.
And that applies to a lot of sectors, so in every single sector where your bottom-line is driven or is greatly impacted by regulatory decisions, that company uses part of its proceeds, part of its revenues to influence that government: It’s automatic, is accepted, is how the world works.
So, It’s that true for all companies that are affected by regulators imagine how much more valid it is for companies whose life depends on the benevolence of governance, or governments closing an eye on what they do, or governments allowing their existence.
So, if you are an illicit trader of weapons or counterfeits, or drugs, or human organs or endangered fauna or flora, you need to be close to governments; you cannot afford, you cannot survive if you are not in cahoots with governments. And again the volume we are talking about, the physical volumes and financial volumes are of such scale that such continuity over time…
This is not a one-off deal; these are deals that happen 24 hours, seven days a week, 365 days per year, thay are constant in great volumes, with a lot of money, with great tonnage. It’s that is the case, you don’t simply deal with a poor guy that happens to be at customs that afternoon when your container is going through; you have to own the customs.
That means and that brings me to…
You know, if all regulated companies use part of their revenue to influence regulators, then illicit traders have to spent massively to control the government and the politics, therein the politization of crime and the criminalization of politics. Because the next thing that happens is that the people that run the country discovers that they could run the illegal trades too. And they better get in partnership with the illegal traders.
{25:15 min}
The third behavior, note that I’m talking about that there are three kinds of behavior that are very common in private sector, they are part of the strategies that any private enterprise will use:
The first I mentioned, the burring of the line between legal and illegal, that is just a reflection, a natural behavior of any company which is recenting diversification, you have to diversify risk, so if you are into a high risk high yield business like trading with human organs and you are making a lot of money, you will have a strong incentive to diversity into a lower risk lower return activity. Or if you are into drug traffic and you get huge returns at some point you are going to use the proceeds you have, the money you have to diversify, so you end up buying a construction company, or you know if you are the mafia you end up doing garbage collection, or casinos or…
You diversify, and there inlays the high risk that I was talking about.
So the first blurrying is driven by the need to diversify, the second burry is driven by the need to influence regulators: So big companies that make a lot of money doing business they diversify and the try to influence regulators to lower the impact.
What is a third thing that large companies do to legitimize their existence, when they are actively involved with society?
They are philanthropist, the give money away, corporate social responsibility, so they pay for orchestras, social entrepreneurs, good works, poverty alleviation and fight climate change, protect human rights and fund soccer clubs: That’s what criminals are doing too…
Why not?
Remember, you might not remember but when Pablo Escobar Gaviria which one of the original visionaries of these trades, he was one of the first Colombians that in the seventies and in the eighties discovers that he could go global with trading of drugs and he was one of the big innovators in these things: he developed new distribution channels, he developed new packaging systems, he developed new agricultural systems, new financing mechanisms, new connections with the markets, he was truly…
You know his vision has a room in this building as an innovator.
But he was the biggest criminal: he was an assassin, he killed people randomly, he blown up plains out of the sky and so on. At one point he offered to buy and repays Colombians external debt.
He was from a city called Medellin, and he was the main provider of philanthropic services in Medellin, he owned the soccer club, he owned all sorts of social services, so if you lived in Medellin at that time, it was very likely that medicines and health units and schools and I said the soccer club, and so on would be founded by Pablo Escobar Gaviria. He was a pioneer on that but he has other followers:
Russians, many of the Russian oligarchs as you know are now the owners of many of the big sport franchises.
And when Rumania was trying to be accepted to be a member of the European Union, one of the conditions for the Rumanian authorities was that they have to jailed one on the biggest criminals, who happen to be the owner of the Rumanian international soccer club, and the Rumanians simply couldn’t do it, so they had to negotiate and find ways to .. But he was a very important player into that arena.
And it is the same everywhere, in the fabellas of Brazil in Sao Paulo, in Rio de Janeiro very often the state does not have a presence, so if you live in a fabella, in the very poor neighborhood, barrio in Sao Paulo or Rio the people that control your neighborhood, the people that provide safety and provide schooling, even sport activities and of course health are the people that control the drug trading in that barrio, fabela.
And, why?
Because that’s the way to develop even deeper…They’re deeply ingrained in the fabric that community.
So you know all philanthropists are not philanthropists.
The three blurrings again are driven by diversification and influence in regulation and trying to buy.
When large companies become large philanthropist there is always behind this some business strategy and there business justification, you know, if you want to gain legitimacy, social acceptance..
It’s part of your branding strategy, and is the same with these illicit networks they build brands, they build access, they build legitimacy and they build deep connections with the community in which they work. And that provides protection very important interesting ways.
This of course creates a plethora of challenges for society and first the obvious questions is:
What to do?
And how to develop initiatives that contain the growth of these activities.
But before even thinking in what to do we need to think about what are we doing already and what are the ways in which society is trying to battle and combat these trades.
So think about this: one of the ways in which this country is, for example, penalizing one of the activities of two of the big activities, in try to curb the international trade in narcotics the importation and distribution of narcotics and of people, so if you are caught in the border between The United States and Mexico, you are caught with a kilo of cocaine or you are caught trying to smuggle an illegal alien:
Which of the two crimes will take you to jail longer?
Which one should take you longer and ends up taking you for a longer time in jail?
If you just walks a few block from here and strolls the cities of Manhattan and you stop and buy from one of the many peddlers there a Gucci bag,
What risks are you running?
Do you feel at risk?
Do you feel you are running any risk?
Do you feel you can go to jail for that?
Do you feel that you are committing a crime?
No, most people that do that don’t feel they are committing a crime.
Now, what do you think can happen to the person that is selling to you that bag?
That person is probably an illegal alien, he is as illicit as the stuff he’s selling and he is under constant threat by the law. But he is there because of the people that are buying it.
He would not be there if he didn’t have a very large market that feel absolutely comfortable buying and wearing and flaunting fake watches, or bags or whatever.
So, you graduated from here, you are married, you have a very busy life, you have plenty thing to do, places to go, new positions to acquire and the two of you, you and your couple, have children, someone needs to take care of the children, so you will hire, probably, an illegal alien that is probably a woman from Central America or Mexico that has abandon her family not because she doesn’t love them but because she needs to put food on the table so she probably has babies the same ages of the babies she’s take care of, she goes through a harrowing journey, where she is probably raped, she’s probably robbed, she’s probably abuse, beaten up from multiple trucks, from multiple shelters and she ends up in Manhattan working for you, she is a criminal if the police catch her she will be locked in jail and the extradited, if you are caught, nothing happens, there are no penalties, there are penalties but rarely. Do you know anyone who has been, other than people that want to work in government and don’t pay taxes for legal workers, other than that?
Do you know anyone; do you have any acquaintances that have any rush with the law for the fact of having a nanny that is a illegal worker?
You don’t, but every day there are hundreds of these women and men that are rounded up and then sent back to the countries, and they are threaded like criminals.
{36:30 min}
Anything more horrible than trafficking organs that is one of the fastest growing trades in the illicit world.
Because of technology, there are new technologies: It used to be that having a kidney transplant was very dangerous, mortality rates were very high or a liver transplant, now you don’t hear that much, the mortality rates for these kinds of transplants or for corneas are just very low.
The other thing that new technologies have produced is the ability to store the merchandise by that I mean that it used to be that if you had one of the organs, the time in which you could use it was very short, you have to get the thing and moving quickly, now there are technologies that allow you to store, you can have somehow, somewhat of an inventory, and if you have an inventory it means that you can move it long distances and there are people that are willing to sell you a kidney or a cornea some of them do it voluntarily, some of them no.
That should be banned, right?
That traded should not exist, or should it? It is very easy to take de moral high ground when I not talking about you, but if I tell you..
Your daughter, your five year old beautiful daughter is going to die unless we change, unless we find the liver, a new liver for her, and that liver will save her life, but if you do legally is going to take longer and she’s going to die, unless…
I have an option for you we can take her to Thailand where American trained doctors, this is the way…
This is ugly, you can look it up in the web their advertised American trained doctors, in Thailand or in India of in south Africa will give you a transplant and save the life of your daughter, your beautiful five year old daughter is going to die. Take the moral high ground there.
{39:13 min}
Illicit trades are at the center on the some of the thorniest problems face in humanity and I have just given you a few examples, but I can give you a hundred of examples. This is just goes to show that this is an arena and because of the three illusion, there is nothing new, it has to do with crime… It’s not sufficiently recognize as one of the important trends of our time and therefore we have not developed a narrative, we have not developed a conversation, that will allow us to tackle.
{40:05 min}
I believe that these kinds of issues are now where the climate change was five years ago: Five year ago climate change was controversial, it was an issue but not really at the center of the political debate and it became so, now for a variety of reasons that go from Al Gore to Katrina, actually the general feeling that things are changing but mostly about the science: We now have science and data that we didn’t have five year ago that make it very hard to be skeptical on these things ever if you are a scientist.
And therefore today climate change is a part of the national conversation, indeed the global conversation, in ways that it was not there five years ago. I believe that five year from now these issues the illegal trades and what to do about them, will become part of the general conversation and issues like the one we have discussed, and the one that I hope we can discuss now will become far more common, thank you very much.


1 Comment »

  1. Hi, this is a comment.
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    Comment by Mr WordPress — June 13, 2010 @ 1:34 am | Reply

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