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CHAPTER 15
THE ILLICIT GLOBAL ECONOMY: THE DARK SIDE OF GLOBALIZATION
Overview
This chapter examines the scale and scope of illicit transactions in the global economy. Illicit
transactions are transfers of goods and services across borders in defiance of the laws of at least
one of the states. IPE analysts, this chapter argues, often overlook or discount exchanges that
occur in “shadow” economies, black markets, and informal economies. Drug trafficking, human
trafficking, money laundering, smuggling, and other nefarious processes have a significant
This chapter identifies key structural causes of illicit global activities, including globalization,
greed, technological change, and survival motives. The illicit global economy has a long
historical legacy. The chapter outlines a number of overarching arguments: (1) Ordinary
consumers are complicit in illicit international markets in many different ways; (2) government
efforts to reduce illicit activities often have (negative) unintended consequences; (3) effective
international cooperation against black markets is hard to achieve; and (4) corruption is
hampering development.
The chapter also provides in-depth case studies of smuggling, drug trafficking, and human
Key Terms
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secrecy jurisdictions
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primitive accumulation
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socially responsible investing
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balloon effect
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name-and-shame campaigns
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anti-kleptocracy norm
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arbitrage
Teaching Tips
• Ask students to recount if they have observed illicit activities in their own neighborhoods or
during travels overseas, or if others have told them about illicit global activities. To what
extent do they think these activities are rooted in international causes. Do they tend to identify
the main participants in these markets as non-citizens of their country?
• Students often feel that the problems they read about in the text are somewhere “over there” as
opposed to in their own country or neighborhood. Illicit economic activities especially seem
to be hidden from students’ own experience. To make illicit problems more meaningful, ask
students questions such as: Have you ever met an undocumented immigrant? Do you know
how he or she entered the country? Is there a part of your home city that you tend to avoid
going to, because you associate it with drugs and prostitution? Do you know from where on
the Internet it is easy to illegally stream music and movies?
• This chapter makes the argument that most consumers wittingly or unwittingly purchase a
variety of products and services that may have been part of the extra-legal world at some point
in their “supply chain.” Ask students how responsible they feel for knowing where the
products they consume come from and the background of those who provide services to them?
• Ask students to identify a common product in their home and try to trace where the product or
some of its components came from. Ask them to consider what illicit activities might have
occurred in the production of that product. For instance, is some of their clothing perhaps
made by workers who are in bonded labor or who are children? Could the hardwood in some
of their home floors have come from forests that were illegally cut down? Could the coltan in
their cell phones have come from an illegal mine run by a warlord in the Congo? Is a
chocolate bar made with cocoa harvested by child slaves in West Africa? This activity helps
students think more deeply about global value chains. Ask students whether they feel “guilty”
or “responsible” if they know that a product they used may have had a partially illicit origin.
• Ask students to debate whether their government should try to tackle illicit problems mostly
through supply reduction or demand reduction. For which types of illicit problems are
eradication and interdiction better strategies than decriminalization and harm reduction
focused on consumers?
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• Some feature films to consider assigning students to watch are Lords of War (2005), Blood
Diamond (2006), Maria Full of Grace (2004), and/or Dirty Pretty Things (2002).
Sample Essay Questions
1. What are some of the key unintended consequences of efforts to regulate the illicit global
economy?
2. What historical behavior did Western states condone and engage in that they now urge
developing countries to restrict, suppress, or eradicate?
3. What is the difference between white-listing and name-and-shame campaigns?
4. What does the text suggest are the major rationales that smugglers offer to “justify” their
actions?
5. Why do state have trouble cooperating with one another against illicit markets?
6. How do changes in technology affect the proliferation of illicit activities?
Sample Multiple-Choice Questions
1) Which of the following was not mentioned as a factor limiting coordination between
states against illicit activities?
2) Which of the following is the expectation that that states should prevent corrupt money from
entering their financial system and should return money to countries from which it is stolen?
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3) Which of the following does the Lacey Act prohibit?
4) Which of the following is a correct statement?
d) An elaborate program to drastically reduce coca production in Latin America.
6) What is the “hydra effect”?
a) The renting out of commercial privileges and protections to citizens and companies from
d) a major cause of human trafficking
8) Which of the following is not an unintended consequence of supply-side policies against
illicit activities?
a) the restriction-opportunity dilemma
9) An analyst of the illicit global economy would probably not agree with which of the
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d) Pressure on pariah states to crack down on illicit networks often backfires.
10) What is a “secrecy jurisdiction”?
11) The idea of the “Six Degrees of Separation” refers to what?
a) The idea that there is little separation between illegal businesses and socially responsible
12) In approaching illicit problems, the United States federal government can most aptly be
described as which of the following?
d) doing little to stop human trafficking
13) Which of the following is not a practice designed to reduce global illicit activities?
a) name-and-shame campaigns
14) Which of the following is an historical process involving the violent or coercive stripping of
assets from a class in society?
15) Which of the following is a major reason why it is so hard to eliminate illicit markets?
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Suggested Readings and Links
Hall, Alexandra, and Georgios Antonopoulos. Fake Meds Online: The Internet and the
Transnational Market in Illicit Pharmaceuticals. London: Palgrave Macmillan, 2016.
Kara, Siddharth. Modern Slavery: A Global Perspective. New York: Columbia University Press,
2017.
Audiovisual Resources
Crime Scene: Rainforest. Ichaela Kirst, dir. Tangram International GmbH for WDR and ARTE,
2011. An exposé on the worldwide lumber mafia.
CUT: The Cost of Illegal Logging. Short films by the University of British Columbia’s
International Reporting Program on the illegal Timber Trade in Russia, Cameroon, and
Indonesia. 2013. At http://www.internationalreporting.org/cut/.
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Half the Sky: Turning Oppression into Opportunity for Women Worldwide. Maro Chermayeff,
dir. Show of Force and Fugitive Films, 2012. Inspired by the book of the same name written
by Nicholas Kristof and Sheryl WuDunn.
Nightmare in Dreamland. Edgar Wolf, Eva Gruen, and Adamna Adim, dirs. Fernsehbüro, 2010.
Documents the plight of young Ethiopian women working as domestic servants in Dubai.
The Trade. Matthew Heineman, dir. Our Time Projects, 2018. Distributed by Showtime. Five
episodes. “From Columbus, Ohio to Guerrero, Mexico and countless cities in between, the
opioid epidemic has ravaged communities on both sides of the border. But what about the
lives behind the headlines and statistics? This timely, provocative five-episode docu-series
spotlights the crisis through the eyes of those most affected: the growers, addicts, cartel
bosses and law enforcement hopelessly caught in its web” (Showtime website).
Trafficked in America. Daffodil Altan and Andrés Cediel, dirs. A FRONTLINE production with
Investigative Studios in association with the Investigative Reporting Program at the UC
Berkeley Graduate School of Journalism, 2018. At
https://www.pbs.org/wgbh/frontline/film/trafficked-in-america/. “The inside story of
Guatemalan teens who were forced to work against their will on an Ohio egg farm in 2014”
(FRONTLINE website).
Virunga. Orlando von Einsiedel, dir. Grain Media, 2014. Distributed by Netflix. “In the forested
depths of eastern Congo lies Virunga National Park, one of the most bio-diverse places on
Earth and home to the planet’s last remaining mountain gorillas. In this wild, but enchanted
environment, a small and embattled team of park rangers – including an ex-child soldier
turned ranger, a caretaker of orphan gorillas and a dedicated conservationist – protect this
UNESCO world heritage site from armed militia, poachers and the dark forces struggling to
control Congo’s rich natural resources” (http://virungamovie.com/).