Illicit Transnational Enterprises and the State

Anna I Efimova

doi:10.23932/2542-0240-2018-11-1-88-105

Abstract

This article aims at contributing to the current debate over the effects of illicit transnational activities on states. Recent avenues of conceptualizing transnational organized crime call for defining it as an economic activity with the scope of profit, rather than a criminal activity. Illicit transnational business activities largely follow the trends in development of legal business. The transnational criminal enterprises emerged in parallel to the growth of multinational corporations, making use of the same opportunities as legal business did. The article discusses violence by illicit enterprises and reviews current theoretical debate on the linkages between illicit enterprises and the state. The paper then proceeds with an empirical analysis of the effects of the presence of illicit enterprises on state weakness. We have hypothesized that weak states may have higher presence of criminal businesses. The findings generally confirm significant correlation between the two variables. State fragility is positively correlated with the presence of organized crime. Testing these results against empirical evidence partially confirms the findings. However, this correlation might be weakened by the observation that the presence of illicit enterprises alone does not determine state fragility or strength.

Highlights

Along with violent rebel groups, insurgents, and militias, closely associated with intrastate conflicts, and international terrorist groups illicit transnational enterprises are widely acknowledged to pose a growing threat to the states
We hold that research on the political effects of illicit enterprises has not yet been appropriately incorporated into the literature on the economic consequences of illegal business activities
Previous research has shown that the accumulation of the means of violence by criminal enterprises challenges states – either directly or through corruption and intimidation (Skaperdas, 2001; Passas, 2003; Kugler, Verdier, Zenou, 2005; Lessing, 2015; Barnes, 2017)

Summary

Introduction

Along with violent rebel groups, insurgents, and militias, closely associated with intrastate conflicts, and international terrorist groups illicit transnational enterprises are widely acknowledged to pose a growing threat to the states. While the former are conceptualized as political actors, the latter are largely perceived as criminals in pursuit of profits. Transnational organized crime has been widely recognized as a threat to international security, and despite significant progress in addressing transnational illicit activities in general, there are still numerous gaps in understanding the phenomenon of illicit entrepreneurship and its effects on nationstates and the global economy. Illicit transnational business activities largely follow the trends in development of legal business. As Phil Williams observes, “organized crime is perhaps best understood as the continuation of commerce by illegal means” (Williams, 2001, p.106)

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