‘Illicit global economics 101’ with Peter Andreas

DAN RICHARDS: From the Watson School of International and Public Affairs at Brown University, this is Trending Globally. I'm Dan Richards. Watson political scientist Peter Andreas has spent decades studying and writing about the global economy, but not the one you read about in the business section or taught in Econ 101. His focus is on the illicit global economy.

He's written about everything from pirates in colonial America to the smuggling of industrial technology during the Industrial Revolution, to clandestine migration and illegal drug trafficking today.

His newest book, The Illicit Global Economy, Everything You Need To Know, is both a concise primer on the topic and an argument for why you can't understand our global economy today without understanding how it operates on both sides of the law.

So on this episode, illicit global econ 101 with Watson political scientist Peter Andreas, we discuss how it works, correct some of the myths you might have about it, and explore how it intersects with some of the most pressing issues in our politics today.

Peter Andreas, thank you so much for coming back on the Trending Globally.

PETER ANDREAS: Thank you for having me.

DAN RICHARDS: How do you define the illicit global economy?

PETER ANDREAS: Basically, anything that crosses a border that has economic importance, but is unauthorized. So it's basically trade that breaks the rules.

DAN RICHARDS: Your book, it challenges a lot of assumptions, I think, many readers might have about the image of an illicit global economy. It certainly challenged a lot of assumptions I had, and I want to get into a few of those. And one of the most prevalent is who exactly makes up this economy? Who are the main actors or types of actors in this economy?

PETER ANDREAS: Well, it's a great question because they only exist, if there's some authority defining them as unauthorized or illegal or illicit. So states are arguably the most important players because they basically define who is in and who is out of the illicit global economy. At the same time, the state creates the game, but it can't control the play or the players entirely.

So the players can range from large criminal organizations involved in a variety of illicit cross-border trades, such as drug trafficking or migrant smuggling. But it could also be petty smuggling. You and I buying a Rolex in Switzerland and not declaring it, even if it's worth more than $10,000 when we come back into the United States, we've technically violated US laws and engaged in smuggling.

DAN RICHARDS: You have an example in the book of senior citizens in America going to Canada to buy meds and bringing them back into the United States.

PETER ANDREAS: That is a type of drug trafficking, we typically don't think of as drug trafficking. But these are drugs, and it is trafficking across borders. But basically, the costs are very high in the US. And it's not surprising that some customers are going to seek cheaper alternatives on the other side of the border, whether in Canada or Mexico or elsewhere.

DAN RICHARDS: What first got you interested in this topic? You've written and studied a lot of different facets of illicit economic activity. What got you interested in it originally?

PETER ANDREAS: Yeah. It goes back more than three decades. The initial interest was in the topic that a lot of people first get interested, which is international drug trafficking, the war on drugs, and so on. I diversified to an interest in also the smuggling of people across borders, especially the US-Mexico border, money laundering, arms trafficking, cigarette smuggling, antiquities, endangered species, and so on.

So some of my teaching in this area is also fed into and vice-versa in my research and writing interests.

DAN RICHARDS: Is there any way to measure or quantify how big a part of the total economy illicit economic activity is?

PETER ANDREAS: Yeah. I would discourage anyone from coming up with a global--

DAN RICHARDS: GDP

PETER ANDREAS: --GDP of the criminal economy. But unfortunately, there have been efforts to come up with such a number precisely because it draws attention to the topic. There are some things that can be measured. For example, seizures will tell you various things about drugs, but seizures can also be very misleading. Are you seizing more drugs, because there's more drugs to seize? Or are you getting better at your job?

One thing we can definitely measure with some confidence is the purity levels of drugs and the price of drugs because they do undercover bust and buy operations, for example.

DAN RICHARDS: Yeah. And what do those two factors, the purity and the price, how can that help us make sense of it? It's growing--

PETER ANDREAS: Typically, the pure the supply, the more oversupply there is, the less supply, the more dealers are going to cut it. The price is high. It suggests less supply. And the price is lower than it's-- and so the history of various drugs are quite illuminating. So cocaine was much more expensive, ounce per ounce, kilo per kilo in the '70s than it is today.

And the explanation for this change is just the extraordinary success in supplying the market. In fact, it's oversupplied, oversaturated. Other things that can be measured is the price of being smuggled as a migrant from point A to point B, it's maybe for obvious reasons, a lot more expensive to be smuggled from Afghanistan to Canada than it is from Mexico to the United States.

And also, but even within the same region, prices are being smuggled across the US-Mexico border have gone up significantly in recent decades, not just recent years. Prices go up when risks go up. So the price tends to correlate with risk. Smugglers are going to charge more if the operation is more difficult and more costly, but also a higher chance of being apprehended and penalized.

DAN RICHARDS: So there are these proxies that can give us a sense of certain types of economic activity, illicit economic activity, whether it's growing or shrinking. But you're saying, it's just not a thing you can measure that clearly because it's secretive--

PETER ANDREAS: By definition, it's trying to make the invisible visible.

DAN RICHARDS: Yeah.

PETER ANDREAS: Yet there's pressures to do so. If you're an NGO or an international organization, and you want to draw attention to this issue, this realm, there's an imperative to try to quantify, to come up with a number, even though it's, by definition, extraordinarily difficult to measure.

At best, these are guesstimates. So the UN, at various times, has tried to come up with a total value of the global drug trade. In the '90s, they came up with a number of $500 billion. And everybody noticed that number. It was a nice big round number and got a lot of attention and media coverage.

But then when UN officials were really pushed, like, how did you come up with that number? Well, it's an inexact. They'll acknowledge that. And then, actually, the next year, it was lower. And then the next year after that, it was lower. But the question is, did the drug trade actually shrink? No one was arguing that the drug trade had actually gone down. So it's squishy stuff.

It's clear that this is a large global economic activity, the illicit side, and shouldn't be ignored. But at the same time, it shouldn't be exaggerated or overstated or given some memorable statistic to give it an aggregate number.

DAN RICHARDS: You explain in the book how there are two broad buckets for thinking about illicit economic activity. And one is the trade of illegal commodities, like illegal drugs, like heroin. And the other is the trade of legal commodities, but being done in illegal ways, which we've already touched on a little.

But one example that really stood out to me of that was the illegal trade of cigarettes. And you write that it's one of the most important smuggled commodities. So how does that work? And why is it such a big part of this type of economy?

PETER ANDREAS: It's interesting because it doesn't get nearly as much attention as say, fentanyl, or heroin, or cocaine, or methamphetamines. But it's a hugely important component of the international drug trade. It's just not classified, typically as part of international drug trafficking. But it's hugely important because it's basically massive tax evasion.

Some countries set cigarette taxes much higher than other countries. And so there's enormous incentives built in to smuggle low-tax zone cigarettes into high-tax zone cigarettes. And it's especially high incentives if these are neighboring countries. So there was actually a point in history a few decades ago where Canada responded, especially Quebec, responded to cigarette-related health crisis by significantly increasing already high tobacco taxes.

And what Canadian tobacco manufacturers did is they started to export large quantities of their product to the United States, even though there's actually no market in this country for their product. They were exporting it tax free from Canada, and then it disappeared into the black market in the US, only to be smuggled back into Canada tax-free, sometimes through Indian reservations, for example, in upstate New York.

And so this was a circular trade, arguably with some form of corporate complicity, because they know that there's not a US market for their product. And the Canadian government responded eventually by lowering tobacco taxes.

DAN RICHARDS: Just giving up.

PETER ANDREAS: Well, not entirely. But yes, lowering taxes to reduce the problem. And in a sense, smugglers won. But they responded by trying to take some of the incentive away from massive cigarette smuggling. The same problem exists in Europe, East European countries smuggling large quantities of cigarettes into, say, Italy, and then from Italy onward or into the UK or whatnot.

When I first got interested in illicit trade issues, I visited the German-Polish border before the EU was around. And I thought the German border, the Bundesgrenzschutz, the German Border Patrol would be preoccupied with stopping illegal drugs. But their main concern at the time was stopping cigarettes. It was a huge nuisance.

DAN RICHARDS: Another nuisance or just an aspect of this economy that I was surprising to me, at least, was the extent to which states can, at times, participate in it. And like you said, states fundamentally set the rules for what is legal and illegal. But even once they've been set as illegal, states can still be participating in it.

And one example you write about is North Korea. How does North Korea interact with the illicit global economy?

PETER ANDREAS: Well, it's a fascinating case because officially, North Korea is completely isolated and ostracized from the global economy. All sorts of sanctions and trade controls and export controls and so on. Some of which they themselves impose on their own citizens from engaging with the rest of the world.

But at the same time, there's, basically, counterfeit currency, drug trafficking, the smuggling of North Korean workers into China. Some of them who then make their way into South Korea. There's a whole range of illicit or gray market economic activities that go under the radar and are not part of North Korea's official trade relations with its neighbors, but that are hugely important.

And some of them are not only state tolerated, but state promoted. Some of them are suppressed aggressively. For example, if you're trying to escape from North Korea, people do every year, often through China. And that's something that's an embarrassment to North Korean government. And so they try to suppress that.

DAN RICHARDS: You cover two sectors of the illicit global economy in greater depth in the book. And those are drug trafficking and what you call clandestine human mobility.

First off, why did you want to dedicate an especially large amount of this book, which, as you write in the intro, is a concise primer to the whole topic? What made you want to give these two an extra close attention?

PETER ANDREAS: The book covers a lot of ground. I do devote a chapter to the drug trade and chapter 2, unauthorized migration, especially organized through human smuggling. And the reason is that these are the two leading hot button issues in the illicit global economy, the most politicized, get the most media attention, the most policy attention, caused the most angst and concern, public's concern, and also policy concern.

They're the source of the greatest tension between different certain countries, US and Mexico, for example, but also the EU with some of its neighbors. So there's so much myth and disinformation and misunderstanding, distortion on those two topics that I felt it was important to join that discussion in debate with talking some common sense into a debate that often has a lot of nonsense.

DAN RICHARDS: All right. Well, so let's turn to those topics then. One of the things that both of those examples touch on is the tension states face when looking at the illicit global economy, and if they want to reduce that type of activity, whether to put pressure on reducing the supply of whatever commodities we're talking about or reducing the demand.

And especially in the United States, there's more of an emphasis on pushing back on the supply than the demand that is created to bring these commodities and services into the United States.

PETER ANDREAS: Yeah. That's fair. I would say you can globalize that comment. I would say, in general, there's a lot of variation across the world, but, in general, across these sectors as we describe them, the response, the policy approach to combating them is overwhelmingly on the supply side.

You see this current in today's crackdowns on unauthorized migrants in the US overwhelmingly. Not entirely, but overwhelmingly in the US as cheap labor. And the crackdowns have been intense, in some ways, unprecedented. But they're not throwing the employers in jail. The employers might be grumbling or complaining, but they're not the ones that are being picked up and deported.

Same with drugs. Obviously, drug consumers are not what's filling our jails on drug charges. It's, basically, those on the supply side. And also you just look at budgets. You look at how much the US and other countries too. But let's take the US, puts into supply reduction versus education and treatment and prevention measures on the drug issue. The supply side of that gets a lot more funding and mobilized attention.

DAN RICHARDS: Well, you brought up how these are fitting into our politics today and how these two examples, specifically, are such hot button issues. And I think reading this book, I couldn't help but think about the way our current president seems to more so than many previous presidents, maybe any has really made the threat of unauthorized immigration and the threat of illegal drugs coming into the United States really core to his politics or day in and day out.

How do you think about the role the illicit global economy plays in President Trump and his followers politics?

PETER ANDREAS: That's a good question. His first presidency, he got to office significantly by promising to build a wall. People remember back a decade ago when he was first campaigning, his big promise was to start building a wall the minute he got to office. And that was the centerpiece of his campaign. A lot of other things, too, of course.

But Trump round two, it's actually not so much about building or finishing his wall, but about actually deporting the people who are already here. And so that's season two of Trump. And so it can't be exactly the same theme, he focused on the first time. It's a variation of it.

So essentially, he's thickening the wall, and basically extending it inward. And the wall, in some ways, in the first Trump administration, arguably, it's a defensive move, stopping people from coming. And the current iteration of the anti-immigration agenda is offensive, in the sense, that you are actively seeking out, rounding up, and deporting as many people as you possibly can, especially if they're of a particular color and coming from particular parts of the world.

On the drug trafficking front, it's interesting. It was just not that long ago that they blew up a boat allegedly engaged in drug trafficking from Venezuela.

DAN RICHARDS: This was just a week or so ago, as of us recording.

PETER ANDREAS: Quite a startling move. It's unclear, actually, what was exactly going on and might have actually been smuggling migrants or maybe none at all. The idea that you're innocent before proven guilty is, in this case, literally blown up that notion. And US relations with Mexico have become tense over the threat of US use of force to stop major Mexican drug trafficking organizations.

And that stems from having, now, classified certain drug trafficking organizations as terrorist organizations. And that move, legal move, basically, opens up the possibility of using military force from the US perspective, more legitimately than in the past.

It's interesting, in his first administration, he threatened to designate these traffickers as terrorists. And he backtracked after talking to Mexican officials, his own advisors recommended that he take that off the table for now. And they said, well, we may revisit it later. And yes, they did revisit it years later. And now, they've opened that door to basically merge the issue of counterterrorism and counter-narcotics in a new and different way.

DAN RICHARDS: And this merging of narcotics and counterterrorism and other aspects of the illicit global economy with international terrorism, it's being done in a new way now. But as you write in the book, people have tried to make that connection before in our politics.

PETER ANDREAS: In some ways--

DAN RICHARDS: Not like this.

PETER ANDREAS: --not quite like this. An interesting example is the FARC insurgents in Colombia. Before 9/11, the US was very careful to distinguish between assisting in counterinsurgency in Colombia versus assisting in counter-narcotics. And the US, they would make sure to claim is in the business of counter-narcotics.

After 9/11, FARC was designated as a terrorist organization and the revival of an old term, actually, narco-terrorists. Then, it basically made possible and legitimated more a clear merging of a war on terror and a war on drugs in Colombia. But this is a new legal determination to basically call drug trafficking organizations terrorist organizations.

And it opens up a whole can of worms. Aiding a terrorist organizations has far greater penalties than say, being found implicated unintentionally, even of facilitating a drug trafficking group. So I would say, there could be some unintended consequences because in the case of Mexico, they're mostly armed by US guns. So most of the guns confiscated in Mexico and that the drug trafficking organizations use against the government and against each other and against civilians come from the US.

So if there are terrorist organizations, then arguably a great facilitator of their terrorism, if you want to call it that, implicates US gun manufacturers.

DAN RICHARDS: You're saying it opens a door and opens a door to potentially unintended consequences. But what do you see as the risks? And are there any benefits, as a defender of Trump's policies might say, last year, some 80,000 Americans died from drug overdoses? If that's not a national security threat, what is? What do you see as the risks and potential, if there are any, benefits to this type of increased military activity?

PETER ANDREAS: The use of military resources to combat drugs is not new. And so we actually have a lot of history to draw from in terms of what we can learn from past experience. And it's not encouraging. It might look good and sound good and sound tough and, symbolically, be appealing because you're taking this threat seriously by devoting the military resources to combat it. In practice, soldiers don't make good cops.

And the danger is you classify something as a national security threat. You describe something as a nail. Well, then you're going to use the hammer. And the hammer is the military. And so this debate goes back, at least, to the '80s, when the US sponsored international war on drugs really got heated up. And that involved assisting Latin American countries to use their militaries to fight drugs.

But military resources did not significantly impede the flow of drugs and had the unintended or not so unintended effect of militarizing the criminal justice systems in a number of countries. And in Mexico, the drug war there is quite literally a war now, in the sense of just the sheer number of people who have died and the firepower used, and the fact that the Mexican military is the front line force being used to combat drug trafficking there.

But the results, if the ultimate aim is to reduce the flow of drugs and reduce the consumption of drugs, there's no evidence that it actually works, whereas it does have a lot of unintended, even counterproductive negative consequences.

DAN RICHARDS: What, in your opinion, would be a better way to think about or approach stemming this type of illicit economic activity, if for no other reason, because of its health effects on Americans? Or is it something that we should give up on attempting to reduce this type of activity?

PETER ANDREAS: Well, certainly no one's advocating throwing up your hands and giving up. At the same time, there's no magic bullet, no silver bullet. And no one's pretending there is, unless you're basically-- in the Trump world of basically saying, my wall will stop drugs. My SWAT teams will stop drugs or sending in special forces into Mexico to take out a particular trafficking organization in Mexico will stop drugs.

There's no history to suggest that these things will do that. So what do you do? Well, treatment, basically, that is itself, not a magic bullet, but actually access to treatment is woefully inadequate. And right now, if anything, access to treatment is shrinking, is declining. So at the same time, you're responding to an overdose crisis, which is first and foremost a public health crisis in this country. It's the surgeon general, not a military general who really should be leading the way.

But resources going into that is definitely not growing and, if anything, is under threat in this current administration.

DAN RICHARDS: You mentioned the myths that exist around the illicit drug trafficking and unauthorized migration as being especially potent in American politics. What do you think are some of the biggest myths about unauthorized migration in the United States?

PETER ANDREAS: There's a number of them. Some of them apply to the US and some of them apply more globally. For example, there is a perception and some of it is based in reality, but you have to give it some context, is that borders are under siege. And that states have lost control of their borders and a flood of migrants using natural disaster terms like floods, and earthquakes and so on. And that, therefore, we have to take emergency measures to put it to a stop.

And I think it's amidst that crisis language of refugee crisis, a migration crisis, a border crisis. We need to step back and take a deep breath and realize that overwhelmingly, the world's population is sedentary. I asked my students this every year in teaching. I said, well, what percentage of the world's population do you think is on the move? Literally, how many people live in a country where they were not born?

What do you think is the number is?

DAN RICHARDS: I don't know. 10%.

PETER ANDREAS: It's 2% to 3%. So that's important. It's, obviously, a lot of people, 2% or 3% of the world's population is a lot of people, but it's still 2% to 3% of the overall population. And then so that's important to realize. And then the second thing important to realize is the percentage of the world's population that lives outside its country of origin hasn't actually changed that much for decades.

So what's really new is population growth. So basically, if you take into account population growth, yes, more people are on the move than ever before. But you have to qualify that by saying, look, it's still a tiny percentage of the world's population. And it's not a significantly higher percentage than it was decades ago.

The other thing to realize is that, overwhelmingly, people are on the move within their own countries. And actually, there is as much migration within the Global South as there is between the Global South and the Northern industrialized countries of the world. Most of the media attention and policy concern, alarmism is about Northern borders being overwhelmed and under pressure.

But the idea that borders are out of control and need to regain control, the very language of regain control suggests that there were some historical moment in this mythical past where they were under control, and that's just nonsense. There's no golden age of earlier eras of state control, where everything was perfectly sealed. These were not major issues.

DAN RICHARDS: You write how just like in the rest of the economy, changes in technology and in transportation, especially, really have outsized impact on how the economy looks and acts and where value is found and created.

And I wonder, as you look ahead, what are the biggest changes technologically that you think will be impacting the illicit global economy?

PETER ANDREAS: We can look at our crystal ball and try to gaze into the future and see--

DAN RICHARDS: Yes. Take it out. Let's go for it.

PETER ANDREAS: And see what it looks like. The thing you have to realize is any conversation you have about the future of the legal global economy, the illicit global economy, you can have a parallel discussion about the illicit side. OK. The proliferation of cryptocurrency or AI. What's AI going to-- and so some of these things completely parallel with trends in the perfectly legal economy.

So faster ways of moving goods or people or information across borders is going to also apply to the illicit realm, whether one likes it or not. It's the truth. And there's a positive side and a negative side for various developments in technological transformations into the next decades of the 21st century.

Take AI, we're just trying to get our heads around what the implications will be for future employment of our students. The projections of unemployment globally from AI are quite startling, to be perfectly honest. It's not controversial at all. But most people don't think about it is that some of those people are going to find alternative employment in the illicit sectors, because that is one function or role of the illicit global economy is to absorb people and economic activity displaced from the legal economy.

But it works both ways. So there's that displacement effect, possibly from AI. But you can also, every time you think about what's going to be the impact of a new technology on the illicit global economy, you should also think about state efforts to police those activities. So the possibilities of use of AI for surveillance and for whether it's law enforcement or military or whatnot, have striking ripple effects potentially in policing unauthorized cross-border flows.

Troubling implications for profiling and surveilling communities in ways that massively increases from what we've experienced in the past. And that's just AI, for example. But we need to take a deep breath here and say, we've been talking about what the impact of new technologies going to be. We've been talking about this for centuries.

So it's not actually clear to me that anything we're talking about today is actually have a more transformative effect on the illicit or illicit economy than say, the invention of the steam engine, or the airplane, or the automobile. And so we do need to realize, as much as we talk about globalization and hyper globalization, everything transformative and sped up that this is an old debate and conversation. And it's fascinating to look back at the grumblings of police agencies when the telephone was invented because it can facilitate a smuggling operations.

And guess what? That justified wiretapping. Automobile greatly facilitated bootlegging. And oh, well guess what? We can now have greater search and seizure powers to look inside car trunks and so on. Or smartphones and computers, and so on, greatly facilitating all sorts of illicit economic activity.

At borders, they can now seize your phone and look inside of it. And it's a whole new realm of confiscation and surveillance and so on. So not just think about ways in which new technologies facilitate the illicit, but it's also facilitates the policing of the illicit or the suspected illicit.

DAN RICHARDS: Did writing a wide ranging introductory book on this topic change at all how you see or think about the topic? Did it make you see any parts of it in a new way for putting it all together like this?

PETER ANDREAS: In some ways, it did. I hadn't done it before. On the other hand, these are bits and pieces that I've worked on for decades and teach a large lecture course here at Brown called the politics of the illicit global economy. So in some ways, this book is inspired from teaching.

And by my students asking lots of questions in class and trying to come up with answers, teaching about this stuff really has forced me to think of this globally. Whereas a lot of the previous work I'd done, books I'd written focused on particular time periods or particular illicit economic activities or countries. And this was a real first effort to have a truly global story.

DAN RICHARDS: What do you hope for readers of this book, and maybe also, since it's so inspired by a class you teach here at Brown, what do you hope your students take away from either your course or in the case of readers, this book, what do you hope they take away as a new understanding about this part of our world?

PETER ANDREAS: At a minimum, I would like readers, whether students or policymakers or journalists or concerned citizens or just interested people take away from it is just to be more educated consumers of the barrage of information and images they're getting in daily headlines or YouTube videos or pronouncements from the White House or whatnot.

So just more critical consumers of what they're hit with every day. And then to see connections between these various illicit economic activities. Often, they're treated as OK, we're just going to look at drug trafficking now. But there's a utility in looking at the big picture. And so seeing, just like we talk about the global economy, I also think there's utility in thinking about the global illicit economy.

And so when you do tha, you see, oh, there's antiquities trade. And sometimes they use the same mechanisms and routes and networks as smuggling some other activities. There's also such fascinating variation across these illicit trades that I want people to be reluctant to just make gross generalizations about the illicit global economy, such as, oh, it's just a bunch of mafia organizations, or that some unprecedented threat we've never experienced before.

When you really dig into it, you just see how extraordinarily diverse and wide ranging and not fundamentally new from the past. So I guess one takeaway is take a deep breath. The sky is not falling and pay more attention to the issue, but without getting caught up in the often alarmist and hyperbolic language used to describe these activities.

DAN RICHARDS: Well, I can say your book definitely does that. It gives a tremendous amount to think about, but also in a way that pushes back on that alarmism, where we're prone to seeing when these subjects come up.

Thank you so much for writing it and for coming on to the show and talking with us about it.

PETER ANDREAS: Yeah. I appreciate the invite. Thank you.

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This episode was produced by me, Dan Richards, and Eric Emma. Our theme music is by Henry Bloomfield. Additional music from the Blue Dot Sessions. If you liked the show, leave us a rating and review on Apple, Spotify, or wherever you listen to podcasts. And if you haven't subscribed to the show, please do that too.

If you want to learn more about and purchase Peter Andreas new book, The Illicit Global Economy, Everything You Need to Know, out from Oxford University Press, we'll have a link in the show notes.

And if you have any questions or comments or ideas for guests or topics for Trending Globally, send us an email at trendingglobally@brown.edu. Again, that's all one word, trendingglobally@brown.edu.

We'll be back in two weeks with another episode of Trending Globally.

Thanks for listening.