Good globalization = $20T in annual trade; bad globalization = $130B in annual criminal trade
Thursday, July 1, 2010 at 12:11AM 
Fabulous chart in FT story meant to disconcert you: global crime gangs' muscle growing--yet another thing for me to fear!
So I look through the article for the summing up dollar figure and get $130B, with $105B of that being drugs.
Then I check the size of the global economy, because the number I have stuck in my head from my NewRulesSets.Project days with Cantor at the start of the 2000s is $30T. Well, the global economy is now twice that size, or about $60T, and despite conventional wisdom, all that money didn't go into the pockets of Goldman Sachs (about $12B in profit in 2009).
Of that global economy, about 1/3rd is traded ever year. For example, in 2008 (and 2010's numbers will be roughly similar after recovering from 2009) the global merchandise trade (stuff) came to $16T and the service trade was almost $4T, so a total of $20T (see this WTO report). So you put $130B over $20T and get rid of all those matching zeros, and your equation becomes 130 over 20,000 (please catch any mistakes here), and when I reduce it further, I come up with 65 over 10,000, then 13 over 2,000, and then 1 over about 150.
And then my heart rate slows and I don't feel so freaked out. Global crime equals less than 1% of global trade?
Now let's assume the UN calculations are way off, and the global crime numbers are 5 times larger!
So I start with $650B and I come up with a fraction more like 1/30. Does anyone expect to live in a world where there isn't crime that equals 3% of legal economic trade (understanding that means the UN stats miss 80% of all global crime)
Again, please tell me where my math is wrong.
Does it sound to you like criminal gangs are running the world?
Yes, there are aggregate estimates of illicit activity that run higher than the UN's focus here, and they're always bulked up overwhelmingly by estimates of illegal financial flows (for example, there are credible estimates of $1T a year of illicit financial flows from developing to developed markets). If you want to run with such aggregate estimates, fine, but the UN's record on statistics is pretty good, and here I'm comparing apples (smuggling stuff and people) to apples (legal trade in merchandise and services), not adding in money flows and then comparing that fantastically boosted total to just global trade--a typical misleading trick of those who like to scare people. Because if you add up global financial flows, you're into a whole new scale and if you engage in legitimate apples-to-apples comparisons there, your percentages will yield the same small fractions.
Reader Comments (6)
Hey Thomas,
Do not mitigate the human cost however. The tipping of several Mexical states towards failure in their efforts to combat violent crime related to the drug trade should not be forgotten and much of it is collateral injury/death to individuals outside crime circles.
Bryan
Rational analysis as usual. But what jumped off the chart to me was the piece related to smuggling migrants into North America which pegs the number at 3M!!! That is is 3X what conventional wisdom in the media have put it at to my recollection. I'm not a hyper anti-immigrant type, but running the numbers as you did wrt to crime vs. trade this would indicate that we are gaining 1% in population through illegal immigration EVERY YEAR. As a security type I'm a bit surprised you didn't note this.
Explain to me again why we're insisting that drugs be illegal? Two quick observations based on that chart: 1) illegitimate heroin trade is funding the very insurgency we're fighting in Afghanistan and 2) illegitimate cocaine trade is responsible for thousands of deaths every year in an endless drug war in Latin America and responsible for thousands more being incarcerated in the United States every year for funding the other side of the same conflict.
The innovation and initiative of criminals in international markets has been a pattern throughout history. It might be worthwhile reviewing what strategies and tactics worked in the past to reduce the problem.
It is ironic to me that we seem to be unable or unwilling to take necessary actions to curtail the drug trade from Mexico and Afghanistan when we have technology, information and vital interests to act.
Tom: It's a late post and slightly off topic but have you noticed that the Director of the FBI had been completely below the radar for the last year?
He was in the news very often during the Bush years. His term is going to end fairly soon and there has been no mention of that in the press. Even the recent round up of Russian spies was announced without an appearance by the Director.It seems odd.
Ted
Maybe the Pres has hired Doctor Who?