Velour, Status, and Organized Crime

Today I invite you to set aside thoughts of the major stock indexes, the job market, the health of the broader economy. Instead consider symbols of status and their inherent mysteries.

The backdrop is the arraignment of some 45 men who are accused by federal law enforcement of various illegal activities, mostly on behalf of the famous Genovese crime family. The New York Times this morning describes the scene at Federal District Court in Brooklyn, "packed" with FBI agents. "The agents," Alan Feuer writes, "drew cool stares from the elderly men in velour track suits who sat outside the arraignment court. …"

The deeper meaning of track suits, particularly as it pertains to, for example, Run-D.M.C. or the 1980s, has been thoroughly worried about elsewhere. It doesn't interest me. What interests me is that every cultural tribe has its symbols of status, the trappings of conspicuous consumption and leisure meant to signify success of one sort or another. A Manolo Blahnik shoe collection. A Frederic Fekkai haircut. An Armani suit. The Feds borrow from the lexicon of status possessions by describing the Genoveses as the "Rolls Royce of organized crime."

But velour track suits? I, of course, have no way of knowing whether these men are actual made members of a Mafia family. And like anyone else with a passing interest in La Cosa Nostra, it's the endless mysteries of that world that capture my attention as much as anything else. (Although my interest is not so great that I'm willing to pay whatever it costs to get HBO and watch The Sopranos.) Of all those mysteries, the idea that what may wait at the end of the long and perilous life of crime is the opportunity to go about your daily business in a track suit made of velour—this to me is the most perplexing.

The Economics of Organized Crime and Optimal Law Enforcement

This paper extends the optimal law enforcement literature to organized crime. We model the criminal organization as a vertical structure where the principal extracts some rents from the agents through extortion. Depending on the principal's information set, threats may or may not be credible. As long as threats are credible, the principal is able to fully extract rents. In that case, the results obtained by applying standard theory of optimal law enforcement are robust: we argue for a tougher policy. However, when threats are not credible, the principal is not able to fully extract rents and there is violence. Moreover, we show that it is not necessarily true that a tougher law enforcement policy should be chosen when in presence of organized crime.

Organized Crime

Organized crime has been officially defined by the Canadian police as "two or more persons consorting together on a continuing basis to participate in illegal activities, either directly or indirectly, for gain"; it has been defined by a former US organized crime boss as "just a bunch of people getting together to take all the money they can from all the suckers they can. Organized crime is a chain of command all the way from London to Canada, the US, Mexico, Italy, France, everywhere."

There is much more to organized crime in Canada and the US than the Italian criminal association known as the Mafia, Cosa Nostra or Honoured Society. In North America, just about every major national or ethnic group and every segment of society has been involved in organized crime. American criminologist Dr Francis Ianni has developed a theory explaining how organized criminal activity is developed and passed on in North America from one ethnic group to another, based on the length of time the group has been in North America, the language and cultural knots that bind the group, and the degree to which the group's members have been assimilated into the prevailing society.

For a long time many scholars and academics did not believe organized crime was highly structured or capable of sophisticated operations. Their scepticism derived partly from a reaction to the Hollywood portrayal of the Mafia from the 1930s to the 1950s, typified in its treatment of Al Capone ("Scarface"), and partly from the fact that documented, scholarly studies and books on organized crime did not exist.

All this changed because of the breakup of a national meeting in November of 1957 of several dozens of Mafia leaders in Appalachin, NY, and of the revelations at the US Senate "Valachi" (a Mafia soldier) hearings in 1963; because of the documentary evidence from police wiretaps and bugs in the 1970s, which allowed police to listen to Mafia leaders discussing their hierarchy and operations in both the US and Canada; and partly because of the establishment of the American Witness Protection Program, by which Mafia defectors and informers could build a new life.

Through various court cases and royal commissions and through television and newspaper exposés, the existence of a highly organized criminal network in Canada became known to the Canadian public in the late 1970s. In 1984 a joint federal-provincial committee of justice officials estimated that organized crime in Canada took in about $20 billion annually, almost $10 billion of which was from the sales of narcotics. (There is no way of estimating, however, the amount of dirty funds that are "laundered" in Canada by members of organized crime in the US and other foreign countries (see UNDERGROUND ECONOMY). The committee was formed in response to a 1980 report on organized crime by the BC attorney general's office, which claimed that organized crime figures in Canada had interests in the textile industry, cheese industry, building industry, disposal industry, vending-machine companies, meat companies, home-insulation companies, autobody shops and car dealerships, among others. The joint committee calculated that the sources of organized crime revenues could be broken down as follows: PORNOGRAPHY, PROSTITUTION, bookmaking, gaming houses, illegal LOTTERIES, other GAMBLING offences, loansharking and extortion, which together brought in hundreds of millions of dollars.

Other activities, such as WHITE-COLLAR CRIMES (eg, insurance and construction frauds and illegal bankruptcies), arson, bank robberies, motor vehicle thefts, computer crimes and counterfeit in credit cards raised the estimate to $10 billion; drugs accounted for the rest.

Organized Crime, Terrorism and the Banking Crisis

One of the most interesting side effects of the current credit and banking crisis, as noted in this piece last weekend in the Washington Post, is the growing influence of those who do have money to lend – organized criminal groups that have billions of dollars they need to keep moving through the money laundering cycles.

There is strong anecdotal evidence that cartels from South America to Southeast Asia and Europe (and likely the United States, but I have not seen anything to reflect that) are stepping in to credit breach, building relations with businessmen desperate to stay in business, who would not normally look to the “informal” economy for a loan.

This will serve to extend the tentacles of these groups even further into the legal society and financial structure. As the article notes, “Stronger organized crime means a weaker state.”

The state is already hard pressed to confront organized crime, and the reasons are not hard to find. One side has resources, the other does not.

The story says a new report estimated that organized crime syndicates in Italy – including Naples’s Camorra, Sicily’s Cosa Nostra, Calabria’s ‘Ndrangheta – collect about 250 million euros, or $315 million, from retailers every day. That is about a billion dollars every three days, or about $122 billion a year siphoned out of a single economy. Is it any wonder Italy is a constant economic wreck?

This is not entirely new, especially in rural areas.

Who loans small farmers in Afghanistan money for their next crop? The Taliban, provided they meet their opium production target. Who loans the campesinos in Bolivia, Colombia and Peru money to be productive? The cocaine cartels, as long as the coca leaf is also planted. In Colombia, it is often the FARC who makes the small loans. The coca trade has given the FARC the only social base it still retains.

The state is not present in these areas, and the longer the absence of economic alternatives endures, the more reliant the economy becomes on illicit activities, providing a social base for those who run the operations, be their terrorists, criminals or some hybrid.

What is new is that the respectable business class now finds its alternatives so curtailed that a growing number of its members are also turning to criminal franchises to meet their needs.

This has a triple effect: Money is drained from the legitimate economy subject to taxes and regulation; criminal organizations make a handsome profit and; the illicit trades gets further embedded in legitimate trade, where it is able to spread like a cancer through coercion and corruption.

Given the current state of the economy, this correlation of resources is not likely to change soon. But the longer it endures, the higher the cost of moving toward a functioning, transparent economy.

Definitions of Organized Crime

This is a collection of definitions of organized crime and comments on the problem of how to define organized crime from various types of sources. Not included are definitions of the term "organized crime group" that some implicitly treat as synonymous with the term "organized crime" (see e.g. the UN Convention against Transnational Organized Crime).
If you have come across a definition of organized crime that is not yet listed below, please let me know. (Thanks to those who have already done so!)
If you are using this collection for writing a paper, a book etc., please let your readers know!

Organized Crime

How do we cripple national and international organized crime syndicates that strangle free enterprise and raise the level of violence, fraud, and corruption in our cities? By using every capability and tool we’ve got: undercover operations; surveillance; confidential sources; intelligence analysis and sharing; forensic accounting; multi-agency investigations; and the power of racketeering statutes that help us take down entire enterprises. We also work closely with our international partners—in some cases, swapping personnel—to build cases and disrupt syndicates with global ties.

This Month In Organized Crime

When you hear the words “organized crime,” the first thing that comes to mind is probably the Mafia and its five major crime families in New York City. But have you ever heard of the notorious Thief-in-Law Vyacheslav Ivankov, the Solnstsevo organization, the Young Joon Yang gang, or the Black Dragons? They’re involved in organized crime, too. Individuals associated with Eurasian and Asian criminal groups are targeting the U.S. and are a top priority of the FBI’s organized crime busting efforts.