Nils Gilman and Deviant Globalization: The Graying of the Markets

We watched a Long Now talk last night by Nils Gilman, entitled Deviant Globalization.  I first ran across Gilman in a shorter talk from a couple of years ago about the global illicit economy — black markets.  He describes deviant globalization somewhat differently.  Trade can be perfectly legal, and still deviant.  He used the example of US men arranging trysts with 14 year old girls in Canada… which amazingly could still be considered legal until 2008, since 14 was the nationwide age of consent.  Sure, it was legal, but who really thought it was okay?  So deviant globalization represents a kind of moral arbitrage.  Demand exists for goods and services which are proscribed in different ways, to different degrees, in different places.  Sometimes they’re socially taboo, and sometimes they’re outlawed, but in all cases there exists a kind of moral disequilibrium gradient that can be exploited.

What united all these extralegal commodity flows […] was the unsanctioned circulation of goods and services that either because of the way they are produced or because of the way they are consumed violate someone’s ethical sensibilities.

One of his main points is that the steepness of that moral or regulatory gradient translates pretty directly into profit margins.  Cocaine increases in value by 1400% when you bring it across the US border.  This creates incredible incentives to get around the rules, even at great risk.  This is why Prohibition rarely works as a policy.  Any attempt at eradication financially empowers those who are willing to continue taking the risks you’re able to impose.

He listed nine industries with dark twins: Tourism (sex tourism), Pharma (illicit drugs), Waste Disposal (toxic dumping), Military (arms dealers… hmm, actually, those are kind of the same), Commodities (illegally harvested, but otherwise legal natural goods), Healthcare (human organ trade), Software (malware and botnets), Immigration (human trafficking and illegal immigration), Finance (money laundering).  The scale of these industries, altogether, is of the order trillions of dollars, or of order 10% of the global GDP.  They are not marginal, informal activities.  They are a non-negligible component of globalization.  they are a couple of orders of magnitude larger than all foreign aid, and an order of magnitude larger than international remittances.  They are organized, and they do the same general kinds of business planning that you’d learn about if you got a Harvard MBA.  They are also, in a perhaps uncomfortable sense, “actually existing development programs“.  400,000 people are directly employed by the Mexican drug trade.  That’s more people than any other industry in Mexico except tourism and agriculture.  Deviant globalization is real globalization.  It’s real money.  It’s real jobs.  It’s a real way for people to get by, and whether we happen to like it becomes at some level immaterial.

In extreme cases, these organizations end up hollowing out the states or regions in which they operate.  The FARC in rural Colombia.  The pirates of Puntland.  The Kurds in northern Iraq.  We are not accustomed to dealing with places that aren’t part of some state or another, and businesses that aren’t subject to legal jurisdiction, but that’s just because we live now.  Five hundred years ago, this would not have been such an unusual situation to find yourself in.  There’s nothing magic or inevitable about the Westphalian state.  Historically, that kind of jurisdictional uncertainty and physical insecurity has created huge transaction costs, and inhibited commerce.  To trade, you needed your own private army.  However, today information and transportation technologies, as well as some remnant state based infrastructure and control, have enabled relatively easy flow of goods and services even where it’s not entirely clear who is in charge.  Who cares whether it’s legal or not: once the oil is in the tanker, we’re good to go.

Another key point is that these actors have little to no interest in actually replacing the states which they happen to be undermining.  They are not revolutionaries.  Providing social services like roads and electricity and education and healthcare isn’t generally part of the business plan.  It may in some cases be a good idea, in order to build political support for your organization among the local constituency… but it’s not the reason your organization exists.

It seems like at some level there’s a continuum being populated, from state-like businesses to business-like states.  What is the FARC really?  Is it actually a revolutionary army?  Or is it the domestic security division of a transnational biopharmaceutical company?  What is Blackwater Worldwide (aka “Xe Services LLC”)?  Is it part of the US military or is it part of e.g. Halliburton?

I like the framing of deviance as not corresponding directly to legality or illegality, because it’s actually not entirely clear who it is that’s making the laws in a lot of the world, including the US.  If drug cartels were involved in the legislative bodies deciding whether or not drugs were going to be illegal, and how illegal they were going to be, would you still think that legality was the right way to decide whether their activities were acceptable?  But oil and coal companies are intimately involved in the rule making processes which end up regulating them.  The finance industry appears to have little meaningful oversight at the international level because they’ve integrated themselves so completely with the regulatory framework.

It might seem strange, but almost any piece of the global economy, from somebody’s point of view, is deviant.  We think that Shell pumping oil out of the Niger delta is fine, because we get the oil.  MEND begs to differ.  Who gets to decide?  What about children working for less than a dollar an hour in southeast Asia, sewing shirts for Banana Republic?  Is that ethically questionable?  Some of us think so.  It just so happens we don’t care enough to change the laws.  Or help organize labor over there.  Or to avoid buying those shirts.  Or to blow up the stores, shipping containers, and factories.  It’s not so much whether or not anyone finds your segment of the global economy ethically objectionable, it’s how much and what kind of power those who find it objectionable wield.  If the US government, or equivalently, major transnational corporations domiciled in the US, think what you’re doing is “morally objectionable” (not in their interests), then you’re often screwed.  If a bunch of hippycrunch trustifarians think you should shut down your coal fired power plant, well, who gives a shit?  Nobody, until one of them breaks in and takes down 500MW of generating capacity.

Not incidentally, the “how much power” these folks wield is pretty directly correlated with whether or not they can find a business (or tax) model that thrives on the moral disequilibrium in question.  We like to think that the governments are the morally legitimate actors, and the others are the deviants.  Governments define the “rule of law” after all.  But when lawmakers are captured by corporate interests, the rule of law becomes suspect.  Its validity is diluted.  What’s right, what’s legal, and what you can get away with are entirely different things, and at some level it seems to me that there are those arguing from the point of view of what’s right, and those who are arguing from the point of view of what you can get away with, are both fighting for control of what will end up being legal, or whether “legality” continues to be a significant characteristic of any economic activity.  When the main economic actors are intimately involved in determining whether some economic activity is legal or not, the designation of economic activity as “black market” vs. legitimate becomes moot.

In other words, if corporations effectively make the laws, all markets become gray.  It is only by separating the rulemaking bodies and the economic actors that we can effectively decide what kinds of economic activity we would like to sanction, and what kinds we would like to discourage.  As Gilman points out, even if we do make that separation, there’s only so much we can do to influence the shape of trade, as the potential for arbitrage tends to scale with the effectiveness of enforcement.  So we are left with hard questions as to which kinds of (perhaps) objectionable activity we would like to put up with, and where.  There are other kinds of order besides the “rule of law”.  A lack of law does not necessarily mean a state of anarchy.

One thought on “Nils Gilman and Deviant Globalization: The Graying of the Markets”

  1. This is an excellent piece in many ways, highlighting the glaring but increasingly systemized dissonance in our legalities and our moralities. The “Rule of Law” has in modern history attempted to argue some basis in moral and ethical grounding, but as you so clearly point out, when business takes over the state and business’ god is clearly profit above all else, it’s pretty obvious morality is slashed to “sale prices” and increasingly cleared out completely from the conversation. Laws are easily wielded to increase private profit over common good and your “Democracy” gets sold, very cheap.

    But I feel your analysis, like so many clear and cognitive analyses about this reality, fails to ask the most obvious question, “Why have all those who still claim they believe in morality, ethics or universal norms of “common or public good” been so passive in accepting this state of affairs with nary a moral “peep”? Why no significant public “outing” of the greatest cognitive dissonance enshrined in all this legalized dissonance — the billionaire Religious Right who argue their greed and brutal inequity models with such moral righteousness while none point out that Jesus himself could not be more clear on this issue of the “money-changers”? Or the trillionaire corporate Business models Doing-Wrong, that nonetheless are thanked for their .01% return to the public of the money they arguably looted from that very public? Perfectly “legally” by their bought and paid for “laws”. But no one is throwing them out of the “temples” or even claimed ‘democratic’ halls of governments around the globe?

    Yes, as you state, “A lack of law does not mean a state of anarchy”. But clearly and increasingly a lack of morality and human rights underlying the modern legal state without concurrent clarity, courage and outrage to fuel its exposure and resistance, (which less dissonantly is where the emotional intelligence girding true morality is actually to be felt and acted upon), a lack of anarchy certainly does not mean a presence of any moral order.

    As Hitler historically taught, when made Chancellor by the legal and duly elected government in Germany 1933, laws themselves can easily be used to further the destruction of your enemies and any semblance of democracy. It is simply done, by having the power to make illegal anything that does not serve your interest like actual “free” speech, when you control and effectively rule the government. And…educate to control and confuse people’s understanding of the kind of courage it actually takes to stand against that power to claim moral coherence in their lives and for others.

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