In 1995, at the UN General Assembly's 50th-anniversary bash, the then American president, Bill Clinton, unveiled his fears about the dark side of globalisation. Organised crime and terror, he suggested, stood side by side as the twin Darth Vaders of the post-cold-war world. Since 9/11, however, terror has become unchallenged as the number one fear of Britain and the US, while organised crime has become much less of a concern. This shift in priorities is convenient for all involved, given that terror courts publicity relentlessly and organised crime shuns it. Trebles all round. Yet our obsession with terror distracts us from the much bigger impact that organised crime has on our lives.
The hostility towards further expansion of the EU - central to France's No vote in the referendum on the constitution - is at least in part a reflection of a widespread belief that embracing the Balkans and Turkey into the Union will further consolidate the power of organised crime syndicates. Supporters of Balkan membership point out that organised crime feeds on the discrepancy in wealth between western and south-eastern Europe, and that the strong borders between the two regions merely multiply criminal profits. Recent research into the use of gangsterism in the former Soviet Union and the Balkans suggests that the west contributed significantly, if unwittingly, to the phenomenon in the early 1990s. And once organised crime has begun the process known as "state capture", through which it influences policy, it is very difficult to reverse the process.
The "shadow economy" has always played a critical role in both armed conflict and violent state formation. But since the 1980s shadow activity has increased fourfold as a proportion of the global economy. According to estimates collated from the World Bank, the IMF and academic research, shadow transactions accounted for between $6.5trn (£3.6trn) and $9trn (£6trn) in 2001, which is between 20 and 25 per cent of global GDP (bearing in mind that this includes you and me if we diddle the Inland Revenue).
This unprecedented growth was ensured by two major events: the collapse of communism in 1989-90 and, immediately before that, the American- and British-led push to deregulate international financial markets. In the chaotic, overnight switch from communism to capitalism in Russia (for which Boris Yeltsin must take ultimate political responsibility), huge amounts of the country's assets were turned into cash and exported assiduously by the oligarchs and organised crime syndicates.
The oligarchs have never drawn the same degree of opprobrium as the gangsters who emerged with them throughout the for- mer Soviet Union in the early 1990s. And yet if it weren't for the mafia protection rackets, the free market would never have got off the ground in Russia, and the oligarchs were absolutely dependent on gangster capitalism as they strove to rip off billions from the state with indecent but necessary haste. Neither the KGB nor the interior ministry had any experience or notion of policing the contract law that was essential to what became the most jaw-dropping example of primitive capital accumulation in history. The gangs that made Moscow such a spectacularly violent and romantic place ten years ago were simply privatised law-enforcement agencies exploiting a gap in the market - "violent entrepreneurs", in the words of Vadim Volkov, a sociologist who has interviewed and studied mobsters over several years.
Capitalism is what the west wanted in Russia, and it got capitalism in one of its purest forms. In institutional terms, there was no difference between the oil empires built by Mikhail Khodorkovsky or Roman Abramovich and those enterprises (such as the Solntsevskaya and Tambovskaya gangs) that moved beyond the protection racket business into drugs and prostitution. "There was a general ideological climate whereby the state should withdraw," says Volkov, "and so there was no effort to exercise any economic governance. Everything was legal and illegal at the same time. Every economic activity was legitimate."
Thanks to financial deregulation, domestic and international banks alike were suddenly able to transfer vast sums across borders without governments having any hope of tracking them. The Bank of Credit and Commerce International was the great pioneer of mega money-laundering. And before long, financial institutions built on air and cunning were springing up throughout the former communist bloc and hooking up with existing dodgy operations in offshore havens such as Cyprus, Switzerland and the Cayman Islands. Their primary function was to assist Russia's new entrepreneurial class in stripping assets, turning these into dollars and then getting them the hell out of Russia. In principle, they were merely following the lead of the western corporations. Russia's new rich lost no time in signing up to the free movement of capital around the globe.
With only partial access to western markets, the new entrepreneurs of eastern Europe and elsewhere sought out and supplied the demand in sectors in which western entrepreneurs were reluctant to operate: drugs, untaxed cigarettes, prostitution and arms. In their relationship to the market, the mobs are model globalisers.
In the early 1990s, the former Dutch island colony of Aruba in the Caribbean became the favoured meeting point of mobsters from Colombia, Russia, Spain, Nigeria and, later, from the Balkans, too. After the destruction of the MedellIn and Cali cartels, followed by Plan Colombia (America's war on the coca plant), the leading players in the cocaine industry decided it was time for a shake-up. The Colombians wanted to outsource more of their distribution and even their processing work (the paste-into-powder stage was the point of production most vulnerable to raids ordered by the American and Colombian governments).
The result is expanded west European markets, along with significant growth in the emerging markets - notably Poland, the Czech Republic and Hungary. For producers and distributors, the possibility of being busted is a business risk worth taking, given the potential profits. As Lev Timofeev, an economist who has specialised in analysing Russia's emerging drug market, has pointed out, "The annual turnover in the narcotics industry in Russia is between $8bn and $9bn. The annual Russian state budget is $20bn." And drugs are just one branch of organised crime's military-industrial complex.
War has been a particularly fruitful engine of growth for the emerging mafias in eastern Europe and, more recently, in Africa. The areas that slid into armed conflict during the 1990s played a pivotal role in allowing dirty cash to be reintegrated into the regional economy, either as capital for new criminal ventures or as legitimate clean money in the form of anything from Ferraris to entire football clubs (reputation-laundering is as big a business as money-laundering).
It was not until I researched a single incident from the Yugoslav war ten years ago that it dawned on me what was going on. Nationalism, ethnic hatred and religious fanaticism were mere blinds, serving to obscure the real cause of these wars - money and human greed. At the end of May 1995, the Bosnian Serb leaders Radovan Karadzic and General Ratko Mladic seized several thousand peacekeepers in retaliation for the UN-mandated bombing of Serb positions around Sarajevo. For the television cameras, some of the hostages were chained to strategic military targets as human shields. The fragile peace deal being negotiated by the Serbian dictator Slobodan Milosevic with the Americans was heading for the crash barrier. Overshadowed a month later by the massacre at Srebrenica, it was a huge crisis that threatened a major conflict between Serbia and the west.
Milosevic sent his chief of security, Jovica Stanisic, to sort out the mess. Stanisic had witnessed more than his fair share of dirt during the war, and if anyone could cajole the Bosnian Serbs into releasing the hostages, Stanisic was your man. But not even he was prepared for what greeted him when he reached their headquarters.
Karadzic and his deputy were taking receipt of bags of cash from the government of Greece - $20m in used notes, funded unknowingly by Greek taxpayers in exchange for the hostages. Stanisic blew a gasket, telling Greek ministers more or less to bugger off, and warning the Bosnian Serb leadership of dire retribution from Belgrade if the deal went ahead. He succeeded (and was later thanked and congratulated by the British and American intelligence services for his troubles).
Some say that Stanisic's work was a Pyrrhic victory. A month after he secured the release of the hostages, the Bosnian Serb leaders, still smarting from the loss of their megabucks, launched the unspeakable attack on Srebrenica. But Stanisic's discovery unmasked the essential character of the Bosnian Serbs - small-time gangsters who, by an accident of history, were making money hand over fist as tens of thousands were dying. Indeed, the dying was crucial to their criminal enterprise.
Such opportunistic behaviour by paramilitary leaders and their political masters was given an astonishing boost by one of the dumbest western strategies in the early post-cold-war years - the imposition of UN sanctions on the rump Yugoslavia in May 1992. These turned south-eastern Europe into a gangsters' paradise. The arms embargo on Bosnia and Croatia a year earlier had already led to the establishment of criminalised channels for the import of weaponry to the two republics. But where the Croats and Bosnians were short of guns, the Serbs badly needed oil. And because the economies of the surrounding countries were both in free fall and historically dependent on Serbia as a transit route and a market, every single neighbouring state was compelled to deepen its relationship with the mob and continue trading in defiance of the embargo. Before long, criminals were providing Serbia with everything - huge lakes of petrol, mountains of cigarettes and anything else it needed. An extraordinary pan-Balkan mafia was born.
In public, the criminal bosses from the various republics were denouncing their national enemies as demons bent on genocide and extermination. But in private, the Croatian, Bosnian, Albanian, Macedonian and Serbian money men and mobsters were thick as thieves. They bought, sold and exchanged all manner of commodities, knowing that the high levels of personal trust between them were much stronger than the transitory bonds of hysterical nationalism. They helped foment this latter ideology among ordinary folk to mask their own venality.
All recent military interventions by the west (with the partial exception of East Timor) have proved a real boost for organised crime. The lessons from Yugoslavia (not to mention Plan Colombia) were crystal clear by 2001. And yet, in its rush to establish a military presence in Afghanistan following 9/11, the US created the conditions in which the producers and distributors of heroin were able to enjoy a renaissance. The pledge to eradicate the evil of heroin from Britain's inner cities was perhaps Tony Blair's most naive policy in his second term: production has increased by more than 1,000 per cent since 2001. The producers have been offered no serious alternative to the cultivation of opium, and coalition forces have no significant ability to police the opium-growing areas. To his credit, Britain's Foreign Secretary, Jack Straw, has admitted that the government's attempts to throttle opium production since the fall of the Taliban have had the opposite effect.
Rolling back the advance of states and territories once they have been captured by criminal interests is always immensely difficult, as the only solid alternative is a system of functioning democratic institutions that, even in the best environment, takes decades to create. But it is almost impossible to do so in an age of globalisation in which not even a power as mighty as the US has the capacity to police even a tenth of this shadow activity. There are signs that the penny is slowly dropping. Both the US and Britain have established new offices whose job is to develop strategies for post-conflict situations. Relatively well-resourced, they are learning from think-tanks working in development and security politics around the world. The fundamental lesson that their operatives have already learned is that intervention will always lead to a serious long-term deterioration in security, leaving room for the rise of the mob. Unless, that is, political and developmental strategies are in place to absorb the terrible impact of military action.
Misha Glenny is writing a book about transnational organised crime