Nils Gilman: Deviant Globalization

Hi, I'm Alexander Rose, the executive director at the Long Now Foundation. Every month we have been trying to find a Long Short, a short film that exemplifies long-term thinking. They seem to be all coming in as time lapses at this point. But, this month we do have a time lapse, but it is a reverse time lapse. This was done by the folks at the Chicago field museum, and it is of their site at the museum. It is several tens of thousands of years, I believe. Stewart Brand: Good evening, I'm Stewart Brand from Long Now Foundation. Was that a mastodon or a mammoth? I don't know either. If it is a mammoth we can now re-create them with genetic engineering. Their fur has been collected from the ice and DNA in there is attack, the idea is to collect some of that, blended with elephants, work it down until you have a mastodon embryo, mammoth embryo, bring it to term in a lady elephant and they are back. Talk about running the clock backwards. Also in the bay area a couple of months ago was a meeting at UC Berkeley, I forget what the title was, but the subject was applied history. Basically, addressing the idea that what if policy makers actually talked to historians when they made decisions. They talk to economists and get misled. They talk to themselves in terms of what they learned 40 years ago in high school about history and imagine everything in it's terms either munich or man on the moon and one is to be avoided and the other is to be sought. But real life is seldom like that so they make bad decisions because they never talk to historians. So we had a gathering of historians to think through what historians might bring to the policy making process. One of those speakers will be coming later in the summer, Frank Gaven, talking about six ways to learn from history. And one of them is here tonight. Nils Gilman was trained as an historian at Cal. I've work would not only in that conference but on many things that we have done at global business network. And what I think is exceptionally interesting, when people think about global business, after that matter network, they think about the thing you read about in the paper, the numbers are kept track of, you have a sense of, things are going up or going down. But it is sort of like overlooking the billion people that live in squattered cities and slums. And a few years ago when Rob North came through and talked about squatter cities, it was like, wow, there is another whole civilization scale metabolism going on out there that we are not taking into account. Nils Gilman has something like that for you tonight. Please welcome him. NILS GILMAN: Thank y'all for coming. Well, in the interest of trying to contextualize this talk, let me talk about a little bit where I came with these set of ideas from to begin with. My first book which came out about seven years ago was intellectual history of something called modernization theory. About the 1940s through the 1970s modernization theory framework that US foreign policy makers and foreign policy intellectuals used to think about what they hoped they could achieve in what they call the third world, and today I'll be referring to as the global south. Modernization theory argued that the goal development both normatively and imperially was for other countries to essentially emulate the historical path of the United States. The idea was that if we encouraged each individual country to create a strong public goods providing, welfare providing, industrial democracy, this would eventually create an international community of like minded states who would compete at a business level but would be bound together in an actualization of dream of perpetual peace. This was kind of the dominant idea about where developments was going during the first half of the Cold War. It is pretty obvious this vision didn't pan out. All you have to do is read the newspaper to know that the global south, much of the global south anyways the languish in poverty, oppression and in many cases conflicts humanitarian emergencies. Basically by the 1990s, when the Cold War was over modernization at least as an official doctrine, had long since been abandoned in much of the world, and it had been replaced by what we now refer to structural adjustment programs which basically focused on downsizing social support systems, and this produced various forms of semi-permanent marginality relative to the industrial core of the global north. That is sort describe in my first book. That marked that history from about the 1940s through about the 1990s. After I was done writing that book, I was still left with some nagging questions, which was what happens to people after they give up on the dream of modernization or after the dream of modernization gives up on them? What happens when people stop thinking their states, or at least trying to provide them with the frame work where they can work hard, keep their noses clean and get ahead? What happens especially when people confront the realty like that in the context of increasingly globalized economic system? I didn't have any answers to this. But this was sort of the last question I was left with at the end of the book. So this was one set of concerns that came out of my academic interest. The second -- this set of academic questions then merged with another set of questions which had been really been the focus or a primary focus of my business consulting practice which deals with emerging security threats of one sort or another. And Monitor 360, which is my outfit, we look at big intractable security problems and we try to find new ways to conceptualize them, to reframe them, confront them, hopefully, solve them. We ask questions like the war on drugs. Failed states. How they fit together? And what are the better ways to try and conceptualize the relationships between them? As it turned out as we were looking across one incident after another that has been taking place over the last 15-20, we saw at the root of many of these issues were trades and illicit commodities. This was true whether it was blood diamonds or blood oil creating horrible civic conflicts in Africa, it was true if we looked at the war on drugs and the way that was providing a prop for regimes like the Taliban in Afghanistan back in the 1990s or the fork in Columbia, where the drug war was going on in Mexico right now. We also looked at things like the sanction busting scandals that happened around Iraq and the UN oil for food program prior to the invasion of Iraq in 2003. And we even looked at things like evolution of improvised explosive devices in the combat theaters of Iraq and Afghanistan and these things had been sourced, as many of you know, as the majority of coalition casualties over the last seven years. This is what we refer to as intractable problems or dilemmas. And we feel like the (inaudible). In globalization is one that really helps us make some sense of that. So these two streams of thought came together a couple of years when I taught in the course I taught, with a couple of my colleagues at Berkeley, Steve Weber and Jessie Goldhammer, on the topic of what I am now calling deviant globalization. What united all these extra legal commodity flows which unpinned so many of these current emerging security threats 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 violates someone's ethical sensibilities. That course then prompted us to put together a book on the topics which will be coming in the fall, which consisted of a collection of essays written mostly by journalists mostly academics that basically look at a variety of individual instances, and I'll be talking about most of these over the course of the talk today, whether it is the drug trade or the sex trade or human trafficking or the global circulation of human organs or what have you. A series of articles coming out on that. But we also try, and I'm going to try to summary the discussion here today, to see whether there are emerging patterns that we can find across these different illicit market places, whether there are certain structural common patterns, in that, think of what it all kind of means in terms of global politics and the future development in the global south. That is what I'm going to try to talk about today. So first, what is deviant globalization? Deviant globalization in a word is the unpleasant under site of globalization. For every legitimate industry that is out there, there's a deviant counterpart. Let me give a few examples. Tourism, obviously, this is a poster child for globalization. Something like a $300 billion a year industry, globally, and of course, there is a deviant counterpart to it. In the sex tourism industry, there is literally millions of men every year, and a few women also, who annually try to places like Thailand to Jamaica to the Netherlands, to Cuba, to the Philippines to enjoy sexual pleasures that are presumptively are unavailable to them in their home countries. Likewise you look at the pharmaceutical industry, there is a deviant counterpart in the narcotics trade. Drugs illicit drugs, with possible exception of oil, the single most globalized business in the world. Worth somewhere between a quarter and half a trillion dollars a year. Waste disposal. It has a deviant counterpart in what we may call toxic dumping. Sometimes illicitly, just as often legally under the guys of recycling, quote/unquote, global north ships literally millions of tons of toxic waste battery, chemical, end of life merchant ships and so on, to the global south, where it provides incomes for many of the people who find ways to reuse these materials but also causes massive physical and environmental insults for the countries that receive these goods. Just to give you a flavor for what I'm talking about, some of you may have heard of the Trafigura case, this involved an Anglo-Dutch company, Trafigura, which in the summer of 2006 had a ship cargo full of extremely toxic waste in one sort or another that it was trying to get rid of. This ship literally sailed all over different European ports trying to find somebody who would take on these chemicals. And they were being told they would have to pay something like $100 million to take these chemical and dispose of them legally in Europe. Needless to say, the company was not too pleased about having to pay that kind of rate, so what they did, was they managed to find a gentleman in Cote d'Ivoire who set up a shell company, and who offered to buy this from them for a million. So they sailed this ship down, in the dark of night, quite literally, unloaded all this merely on to barges in the port and sailed away. In the meanwhile, this fellow took all this stuff and simply dumped it into the sewers and waterways. The result was not only incredibly horribly smelling mess, apparently the stuff that was in this cargo hold is the stinkiest stuff in the world apparently there scientists out there that measure stinkynism and this is the stinkiest stuff. So the whole city stank, but it was extremely toxic. Over 100 thousand people had to seek medical assistance and, in fact, several dozen people died as a result of this. So that is an example of deviant waste disposal. Then there's the military which takes the forms of arms trafficking. Arms dealing is needless to say the lynchpin of so many of the so called new wars that have been ruling much of the world from Afghanistan to Burma all across Africa. These weapons sometimes reach their recipients through black-markets but more commonly there is a kind of gray market that is going on here where militaries from nation states are interested in supporting some rebel group or another, usually indirectly and by the way, a lot of these military officers are interested in making a dollar on the side, and so weapons off the back of a truck and end up in the hands of some resistance group. And I think, most of you will either remember or have read about the Iran contra-scandal back in the 1980s, classic example of this. US, Congress had said we couldn't support the contras directly and so we sold weapons to the Israelis who shipped them to the Iranians who gave money to the Israelis who Iranians who gave the money to the contras. So that they could fight an insurgency against the regime in Nicaragua. Classic case of deviant globalization. More recent example, some of you may have seen the Nicolas Cage film, Lord of the War, which was a dramatization of the life -- well a loosely based on the life of the Ukrainian arms dealer Victor Booth who was probably the biggest single arms trafficker of the last 15 years got arrested about a year ago in Thailand and he has been fighting expedition into the U.S. ever since then. Then there is commodities. Commodities is obviously a lynchpin at the global economy, circulation of oil, metals, goods, and stuff like that but, it also takes deviant forms. This is partly illegally harvested commodities, but one of the things that is worth thinking of specifically is exotic wildlife tracking which is a much bigger business than what you might expect. Whether it is European wildlife collectors looking to round out their collection of Komodo dragons, that would cost you $30,000 or $30,000 Chinese men looking for powdered rhinoceros horn, that is about $1,500 or San Francisco, interior designers who are looking to get you a better price on your Brazilian hardwood floor, there's a enormous industry in harvesting the circulating many specialty natural goods, many of which are from highly endangered species or even or ecosystems. In fact, illicit commerce, this brings up a very important point about deviant globalization which is that illicit commerce in otherwise legal commodities almost certainly dwarfs the size of purely illegal market despite the size of the drug market. So trafficking under the radar of goods like timber or oil, or minerals or diamonds these things are huge sources of illicit revenues for people in the global system. Perhaps one of the most disturbing deviant globalization deviant health care. So with the invention of Cyclosporin in the late 1970s and then being brought to market in the early 1980 said, Cyclosporin is basically a drug that suppresses the immune of rejection response for organ transplants. All of a sudden organ transplantation went from something that was unusual last ditch kind of procedure in 1960s and '70s, something that became very mainstream in the 1980s and 1990s. I suspect almost somebody in this audience who has a transplanted organ. Unfortunately, there's a huge gab between a demand for these organs and the supply of these organs. In most of the global north, organs are supplied from cadavers and people have to be opt in to being a organ donor. The result is there is just not enough organs relative to the number of people who are demanding organs. Of course, the demand for organs has increased steadily over the years as populations age, as the amount of hypertension patients age, and so there has been a steady increase in demand but not much of an increase in supply. The result is many people languish many years on a waiting list, waiting on somebody to motorcycle crash so they can get an organ. But there is an another option. As people get desperate, going through dialysis for many hours three time as week, four times a week it becomes a more and more reasonable option for them to consider which is that you can fly today to a variety of places in the global south and buy yourself an organ. Well you don't have to do it yourself, an organ broker will take care of it for you. And for about $150 thousand, you can get yourself a new kidney. The organ donor themselves don't get that much, they typically get 1-10,000 of those $150 thousand. Another thing that is interesting about the global circulation of organs there is -- it is not a completely globalized market place. There are several regional market places. So the U.S. most common place for U.S. organ donors or recipient in this market place to go is the Philippines and Brazil. The Philippines and the Brazil, they actually source their organs locally. They are local donors mostly. For the Europeans, most popular place is Istanbul and South Africa. In South Africa they mostly fly in Brazilians to be organ donors because Europeans are afraid of getting African organs because of HIV, but there may be other reasons there. In East Asia it is a different market place. The focus there, there are a lot of organ transplant facilitates in South Asia. Many in India, specifically, and they get a lot of their organs locally. There's also a lot of Chinese and Japanese businessman that go to the Philippines like Americans do to get these organs. There's a complex global network of these organ dealers supplying and demanding these organs. Well there's also the software industry, obviously, another big globalized industry. I'll be talking about this a little bit more later. But the obvious, deviant counterpart to the software industry is the MALWARE industry. Stands for malicious software, this is trogons, viruses, things that take over your computer that steal your data personal data or turn your computer into a zombie so they can run spam and so on. Then there's immigration. Immigration of human trafficking. An estimated 3-4 million people annually illegal immigrant from one country to another or at least without formal license from one country to another. And these movements are facilitated by a huge network of brokers and logistic professionals who for a fee will help move you from wherever you want to go to wherever else you want to go. So for example, today people pay between 30,000 to 17,000 dollars to be moved from China to the United States usually through Mexico these days. They were coming through Europe until a couple of years ago. But Mexico is the main transition point. Some of the Mexican drug cartels sort of diversify their business by getting into the human trafficking thing. If you want to get from Cuba to the U.S. that would cost you about $10,000 which is actually the same price that a gang of Iraqis were charging to be transported from Baghdad to Great Britain. So there's again, all sort of global networks brokered by people who are willing to make these things happened. And finally, most importantly there's the deviant finance industry, otherwise known as money laundering. The reason why this might be the most important industry is this is the industry that allows all these other guys who are doing this illicit stuff to bring their money back into the day light. So basically, the size of the deviant finance industry is at least equal to all the other deviant industries put together. I'll mention this later, but estimates of the size of the money laundering industry globally arranged range between 1.5 and $5 trillion annually. So that is between 4 and 12 percent of GDP globally. So it is a pretty significant business. This is not an exhaustive list of deviant industries. There are many other illicit market places most of which are thoroughly globalized. Another one that I just learned about recently is that the third largest illicit market place in terms of cash transfers and the third after drugs and human trafficking is the stolen art market. It is worth an estimated $10 billion a year. There are whole law firms in the United States, UK and in France whose business is focused exclusively discretely arranging the necessary ransoms to get your stolen art back. Again, these guys don't want to publicize what they are actually paying for these things, you need to look at the numbers skeptically, but it is a big, big problem. In addition, as I have kind of pointed out with some of these examples, a lot of these businesses are sort of overlapping. This great essay in the book that is coming out by Johnny Steinberg, South African journalist talking about the illicit abalone business in South Africa. Abalone is a large tasty snail, a sea snail. It turns out it is particularly considered a delicacy in south China. Unsure -- abalone furthermore, it is fairly tightly controlled -- it is easy to over fish abalone so it is fairly tightly controlled fisheries. In South Africa, it is controlled but not so much by the state. But rather than by Chinese gangsters who basically control the abalone trade between south Africa and (inaudible). What is really interesting about this is that it is not that the illicit abalone business but the way they pay for their abalone to the people who are harvesting the stuff in south Africa they pay them with crystal meth, which is produced in China. Then it fuels the huge drug problem in many of the townships and slums. That in a nutshell is what deviant globalization is all about. The main thing I want to leave you with for this part of the presentation is that deviant globalization is not marginal phenomenon, it is a huge phenomenon. And by all indications it is rapidly growing. I want to give you a couple of examples of some of the ways in which we know it is growing. These numbers also tell us a little bit about a nature of the trade. So let me talk about cocaine prices, this is kilo equivalent. In 1997 a kilo of cocaine in Peru cost about $650 that has dropped $250 a few years ago. These numbers by the way come from UN office for drug control. Then after it gets ships for processing to Columbia it costs about one thousand dollars. Then once it is imported into the United States, it costs about $15,000-- now, again, all these numbers are continually dropping over time -- once it is wholesaled, in the United States, it goes up again, to about $21,000 and finally at the retail, street price of kilo cocaine once broken up into gram size packages, it goes for about (inaudible). These are 2005 prices. You can see the numbers are generally declining over time. Now, most of you may not be economists but generally speaking with prices are declining and demand as we assume it probably is for a commodity like this, that generally means the supply is increasing. The other thing that I point out that is important to recognize, look at where the profit margin is highest. It is specifically at the stage of importation. Why is that? That is because that is where that is the most pressure on the supply chain from the narcotics regulators, the DEA. So the narcotic regulators they think they are in the drug eradication business, they are actually the drug regulation business. And by increasing the risk for the people who are importing the stuff in, they increase the ability of those who stay in the business to demand premium prices, and to actually raise the profit margins for the people who manage to survive in the business. So if you are able to control that part of the business by say corrupting a border agent and there's been 80 border agents in the last three years in the U.S. that have been convicted of corruption of one sort or another, then you can make 1400 percent profit margins. Some of you may not be business people but almost every business people in the world would kill for a business for a business with those kind of margins. In fact, these guys do. Another piece of data that is useful for getting a sense of the growth of this is the growth of MALWARE. These are new malicious code signatures, and new variance of MALWARE in terms of thousands of cases, and you can see between 2003 and 2009 there has been about 200 percent a year annual growth in the number of MALWARE cases. There is a lot of stuff that is going on with it. But a big part of this is where these MALWARE cases are originating from. Increasingly, they are originating from the global south. That's directly correlated to the fact that Internet adoption is increasingly rapidly in the global south. If there is one thing that is almost an iron law, within 6 to 18 months of a country getting a big fat broad band access, it is likely to emerge as a new hot bed of hacking. Now to paraphrase, Nicholas Negroponte who runs the media lab at MIT, or used to run the media lab at MIT, a lab top for every child means a as hacker in every hut. Now, I could proceed with some more examples, but I think you get the point. I tend to be pretty skeptical a lot of statistics that we hear about deviant globalization. Mainly because everybody who is involved in this has an incentive to lie about the size of the these things. These last two sets of statistics, cocaine pricing and MALWARE signatures, criminals have to come out in the open to do their business so you have some confidence that these numbers are pretty accurate. But a lot of the other numbers are probably not particularly reliable. On the one hand, the deviant industries, themselves, do everything they can to remain out of sight if the state authorities or anybody else is really trying to measure on a consistent basis what they are up to. On the other hand, most of the state organizations that are in charge, or supposed to be in the charge of paying attention to this stuff have a vested interest in both of exaggerating the scale of the phenomenon and in exaggerating the scale of their success against the phenomenon so all in all, there is not a lot of confidence in the statistics. Because deviant globalization takes place in the shadows of the global economy and outside of the purview of the state, generally speaking, the best way to try to get your head around this problem is to look at the ethnographic accounts. Some of this is done by journalism, by academics, sort academics, and if you see the book, it reflects that. There is a series of books that I read just in the last couple of years that have really illuminated this idea for me Gomorrah by the Italian writer Roberto Saviano which is also made into a great movie that I recommend if you haven't seen, about the way the mop has infiltrated every aspect of daily life in that part of Italy. Then the Snakehead by the Patrick Radden Keefe which is a brilliant account of the dynamics of illegal Chinese immigration. The New Yorker which is currently edited by David Rimnick who cut his teeth on this 20 years ago when he wrote a book on the class of the Soviet Union which was a hotbed of Stage 1 deviant globalization. He's been having a whole series of writers do really interesting stuff. One of the best pieces I read recently is by (inaudible) on the illegal timber trade in Siberia. And finally, I have to recommend Carolyn Nordstrom's book Global Outlaws which is an ethnographic account of what the war economy of Angola is like and how it actually works. It is a brilliant book. So these are the kind of sources that I have used to get my head around this stuff. In addition to doing a lot of interviews when people are participating in these kinds of activities. So. What makes deviant globalization possible? In a word, we do. You do. I do. The essence of deviant globalization is moral arbitrage. Let me unpack that. Emile Durkheim, a French sociologist, observed a long time ago, that societies are to a large extent defined and made up of and defined by their taboos. That is by what they prohibit either morally or in the case of modern societies, legally. But in the globalized world economy, the functional effect of taboos and prohibitions and not so much necessarily to readies demand, so much as it to reduce supply in particular locations which in turn creates market opportunities. Moreover, the prohibition or their effective enforcement varies tremendously from one locale to another, creating price gaps between different locations. Taking advantage of these kind of price differences for a given commodity between two different market places represents exactly what economists refer to as arbitrage opportunity, an opportunity to make a market between two places where the places aren't aligned. This is precisely what deviant entrepreneurs are doing with respect to deviant commodities. They are connecting suppliers in one lightly regulated or controlled market place to customers in a different more heavily controlled market place. Sometimes that means moving the commodities from -- closer to the consumers. Drugs or what have you. Other times that means moving the consumer closer to the product. Sex tourism, the organ trade and so on. State regulations, and here is the key point, state regulations which embody the moral inhibitions of the people they represent or at least some of the moral inhibitions of some of the people they represent, are the things that create the opportunities for the deviant entrepreneurs. Sex tourism only exists because people can't get that kind of sex at home. Drug dealing makes the highest profits precisely where people decide to -- where the regulators decide to put the most pressure. Or consider cigarettes and boos. There are huge black markets on cigarettes markets grow in very statistically measurable ways every time you increase the prices, the taxes on cigarettes and boos. There are huge businesses in eastern Europe, -- I mean, cigarettes in Europe costs 7, $8 a pack, they cost 40 cents to produce, so there is huge cigarettes smuggling businesses based mostly just outside the European union that basically supply between 15-30 percent of the cigarettes to western Europe. Same thing is going on in the western hemisphere, cigarette smuggling is a hot bed, one of the key industries in the tri-border area between Brazil, Argentina and Paraguay in South America, and a lot of these cigarettes end up on the on the San Francisco. So here is a key point, it is our moral inhibitions, or our attempt to enforce them, inevitably enforce them unevenly that creates the opportunities for deviant entrepreneurs to make the money that they do. Now, I want to make a couple other points about the structure of this trade. Deviant globalization is not identical to illicit trade. What really defines deviant globalization is not so much whether it is legal or illegal, as what you might refer to as the yuck factor. Let me give you an example of that. A perfectly legal activity which definitely is deviant globalization. Until 2008, the age of consent in Canada was 14. It was only raised to 18 a couple of years ago when the story that I'm about to tell became a scandal in Canada. Turned out that 2005, 2006, 2007, there were all these men primarily in border states in the United States, Minnesota, Michigan, New York, who were using chat rooms to meet 15, 14 year old girls from Canada online and arrange it to where they will go meet them in hotels rooms in Toronto or Montreal or what have you in Canada. This was obviously a way of getting around the underage sex laws in the United States and it was perfectly legal, but also perfectly deviant. Same thing is going on right now, that has changed because they have changed the laws in Canada. But the same thing is going on right now in the heart of Europe. Right now the age of consent for paid sexual relations in Switzerland in 16. In Italy and France, it is 18, and in Germany, it is 21. Unsurprisingly, Switzerland, has emerged as basically, entropro for men who like sex with under age girls, or young girls I should say. Has become a magnet for it. This is all over the newspaper. This is all over the newspapers in France. Second thing I'd say, deviant globalization is not identical to the informal economy. We shouldn't confuse it with disorganization. Yes, it is run off the books and outside government oversite. Most deviant globalization enterprises, are anything but mom and pop shops. In fact, most of the participants in deviant globalization operate in large complex and carefully managed organizations run by roofless entrepreneurs whose basic business strategies would be familiar to any reader of the harbor business review. The big guys are constantly are trying to increase their market share, they try to be number 1 and number 2 in every market they enter why the little guy seek monopolies. They work out strategies for creating barriers to entry. They develop channel strategies so once they built the pipe for moving one kind of illicit commodity, why not pump all sorts of other illicit commodities so those gangsters who start out by being cigarette smugglers during the 1990s then became sanction busters against the sanctions against Siberia now become the primary traffickers of women for sexual slavery in western Europe, taking poor women out of the poor villages in eastern Europe and Russia and bringing them across the borders in western Europe. Finally, they often leverage the information technology that, in 2 million a Columbian drug lords house was raided, and they found in his basement a mainframe that was being used to run the complex spreadsheet and future forecasting for his entire business. I don't know where he got a consultant to run this thing, I guess, he wasn't the guy running it himself. But somehow managed to get this thing to run his very complex business. Now, I don't know want to exaggerate this, there is a lot of -- lot of deviant businesses, not necessarily run with profit maximization as their focus. Political power, prestige, business stability, business continuity, these are often imperative things. But at the same time, the same exact thing is true of aboveboard businesses. The notion that all businesses are profit maximizing to the exclusion of everything else, is a completely. Everybody knows people make tradeoffs about work life balance. About what businesses they want to go into. These things are not just governed by profit motives but all other sorts of things. So, that in a nut shell is what deviant globalization is. What I'd like to do next, is talk a little bit what deviant globalization means. I have two propositions, each are meant as provocation. The first thing I'd like to say, deviant globalization is development. Let me start by reading you a quote by Milton Freedmen which I think is quite telling, he said, "The black market was a way of getting around government control, a way of enabling the free market to work, it was a way of opening up, enabling people." Now, I'll confess. That quoting him in this way, is a little bit shaky. But he is making a very important point for us. Which is that deviant globalization is not necessarily all bad news. If you like entrepreneurship, innovation, then you got to like deviant globalization. The guys who organize the markets of deviant globalization are in many case brilliant innovators. They are constantly building new businesses. They know how to thrive in the chaos of contemporary capitalism. All the clichs you read about, radical innovation, apply in spades to deviant globalization. Second, and just as important, deviant globalization represents an extremely significant flow of money and resources from the global north to the global south. There is a large amount of resources that come this way. Almost certainly, several organizers of magnitude bigger than the foreign aid that flows in the global north and the global south. Almost certainly an order of magnitude bigger. This is a major way of bringing wealth from the global north to the global south. What these two ideas suggest is that in a peculiar way, deviant globalization is enabling precisely the sorts of grass roots empowerment and non-dependency that have been calling for the last 60 years in development. Let me give you another example to kind of frame this for you. There is an article in the Atlantic monthly that appeared in December, where he noted that the Mexican narcotics industry currently employs 400 thousand people. Directly, employs 400 thousand people. That is more than finance industry, that is more than the oil industry. That is more than every single industry except for tourism, and agriculture. This is a major part of the Mexican economy. My colleague, who is the coeditor of the book, was in Mexico a couple of years ago, he noticed that everybody in the village had a brand-new house, a colored T.V., and a satellite dish. He was a little surprised by this. These seemed to be poor peasants, who were just farming corn and what not. He started asking some questions about where all this stuff came from. At first he got a lot of cold stares, not a lot of answers, finally, he was told to shut up and stop asking questions. This is a way that people can get rich, or at least stop being as poor as they were before. And this is also fully recognized by many of the states where this stuff is going on. There is a number of states that have embraced deviant globalization as an explicit development strategy for themselves. Probably the most obvious example is way the sex tourism has actively encouraged by a number of states in south East Asia. Thailand, basically, became a global place for sex in the 1960s when it basically offered to be the host for American soldiers on rest and recreation for the Vietnam war was also known as intercourse and intoxication. And, this helped start the Thailand economy. A lot of money came in. It was a significant source of revenue. And many countries that are neighboring Thailand are today emulating that same exact pattern, whether it is Cambodia, or Philippines, these guys see themselves -- encouraging or putting up with sex tourism as a way to jump start economic development. In some ways, this is not that different in kind from the way third world countries are happy to start a polluting factory in a way of attracting investment and jump starting growth. Just the same way, it is basically, a question of whether you want to accept physical pollution or a kind of social and moral pollution. So beyond the states in question, deviant globalization also represents the personal enrichment strategy for those who participate in the trade. I don't want to say coercion is not part of the equation, for those who participate in the trade. I don't want to say that coercion is not part of the equation in many cases, it is certainly is. But the majority of the cases, people who sale their organs or become a drug mules, or decide to have a few middle age foreigners, aren't doing it because they are forced but because it is the fastest, best, easiest way to make a dollar and it is better than staying back in the village. So from that perspective, deviant globalization can be seen as a survival strategy of the weak. To say this again is not to deny the awfulness of the exploitation and the oppressiveness that in many cases deviant globalization represents, for the line workers within deviant enterprises but simply recognize it with rare exceptions. Most of the participates, child prostitutes aside, have some degree of agency in this. Becoming a wildlife smuggler or a drug runner, or an organ donor is a choice. It is not a very pleasant choice but are you go sure it is a worse choice than becoming a coal miner in China? Every week on average more people die coal mining in China than died in that mining accident in west Virginia last week. So let me step back now and talk a little bit about what the back story to deviant globalization is. This returns to the them I started with, my dissertation, which I then turned into a book. Which was about the failure of why that book referred to high modern development schemes. Getting into that is a topic for another day. But I have to provide a brief thumbnail in order to make this make sense here. High modernism refers to economic development as a process that government spear head-on behalf of their populations as a whole and that aims to create a broadly inclusive set of public goods around health security, education healthcare soon. From the point of view of the global south the Cold War was from one perspective a debate about whether communism or liberal capitalism offered better prospects for building precisely such prosperous, public goods providing welfare states. Now diverse economic strategies as we all know, were attempted, were tried in order to realize this dream. Collective ownership of the means of production in communism countries, laissez-faire, import substitution, industrialization, export led growth and diverse political programs went along with this. What almost all of these strategies have in common with a few exceptions in each Asia is that they failed. Communism failed most spectacularly but again for a few countries in the pacific realm, capitalism didn't do much better for most of those countries during most of this period. Not in terms of headline growth, not in terms of poverty reduction, not in most measures of human development that is measured by the united nations. When communism died in 1899 what died was not just the particular collectivist economic system and authoritarian politics of the soviet union and satellites, cremated along with that corpse was the broadly public civic mind of notion of development as the central defining responsibility of the post colonial state. What arose in instead in the 1990s, was what can be known as the Washington consensus. Now the Washington consensus represented the dominant neoliberal economic program for the global south during the 1990s as promoted by the IMF and the U.S. government Harvard economists, Dani Roderick, is has defined it this way. He says, "stabilized, privatized, and liberalized, became the mantra of a generation of (inaudible) who cut thirtieth in the development world and of the political leaders they counseled." Wasn't hard to understand why this particular view of what the state should or shouldn't be doing made sense. It was not hard to point to the undeniable corruption, the inessentials, the rent seeking and predatory behavior of many post colonial states in the global south. And neoliberalism had a solution that definitely addressed those problems. It sought to dismantle these states by slashing public bureaucracies, foreign aid, trade barriers, and so on. Where such programs were successfully imposed, which includes, almost all of Latin America, much of south Asia, much of Africa, it led to what might in a nutshell may be called the hollowing out of the state. What I mean by hollowing out you still have in these places, the physical and institutional infrastructure of a state. You still have the capital building, you still have representatives that go to the European union, you still have a constitution that this that and the next thing is supposed to go on. But the actual capacity of those states to deliver anything like what they had been saying to their people they were supposed to be delivering, whether they were delivering a not is another story. The actual capacity to deliver those things really went away in a way that was a real signal difference from the way things were being run from the 1950s into the 1980s in most of these states. And the post Cold War hollowing out of these states had two really critical results both of which are -- you can't understand why people in globalization have without understanding these two results. The first one is the deviant globalization signal unmistakably, to the individuals in this country that you are on your own. The end of the promise of the state building and building states to provide public goods or rather perhaps more accurately the revolution that those promises had always been empty, meant that people had to strike out on their own. The result was a global unleashing of what we might call survival entrepreneurship. Throughout the global south and above the all the formal communism states which previously lacked any legal outlets for that kind of behavior. Here it is again, I mentioned David Remnick cutting his teeth on the history of the way the Soviet Union and the economic system is going on there. There is a reason why Eastern Europe emerged as a real hot bed of epicenter of deviant globalization in the 1990s, and that is because the only people who had entrepreneurial skills in the late 1980s who were able to develop them in the Communism regime were people who were illicitly doing things that were illegal. You had to already be a A-moral person in order to develop the kind of entrepreneurial skills that would be absolutely required in the post-shock therapy, post-neoliberal, post-Washington consensus, versions of the states that were going to operate in. So it was absolutely inevitable, read rim nicks book from 1991, he spells it out. It is absolutely inevitable that the people who are going to take over the economies in these places are people who are criminals. That's at the elite level. At the grassroots level people had the same kind of choices to make the economies were collapsing, people did what they had to do to survive. If that meant becoming sex workers, or organ sellers or narcotic dealers or wildlife smugglers, they did that. This is what they had to do to survive, so they did. The second and equally important impact of the hollowing out of states at the end of a Cold War, was that it largely dismantled the regulatory capacity of states in the global south. In other words, tossed out, with the (inaudible) was much of the practical capacity to enforce any kind of border control or other kinds of legal regimes, this too librated the force of globalization obviously. It basically turned the global south into a smugglers paradise. This borderless world of the global south was in many ways is a return to the premodern order of fragmented sovereignties, judicial ambiguities, jurisdiction ambiguities, localized governance. There's still a state that is sitting there, but those guys, in many cases are not people who are running anything that actually matters on the ground in most places in the global south. So what does all this add up to? From one perspective deviant globalization, can be seen as the failure of modernization and development. From another perspective, it can be seen not as a failure of development but rather as actually existing development. I use that phrase carefully, some of you may remember is meant to be an ironic echo of the old soviet phrase that Soviet Union represented actually existing socialism. This was meant as a putdown to all those western socialists who said no that is the perverted version of socialism, that is not real socialism. We have a different vision of it. The soviets said no, no, no. We have actual existing socialism, don't listen to what all those soft-head liberals in the west who think their socialists, actually know what socialism mean. So likewise, equating deviant globalization with actual existing development is meant as an invitation to judge development not by the vision statements but forth by the world bank or the IMF or the Gates Foundation, but rather by its actual results. Just actually existing socialism represents a perverse realization of socialisms promise of equality so deviant globalization represents the kind of perverse realization of capitalism of personal liberty. To the same extent that Soviet oppression represented, and told us something very fundamental and very disturbing about the dream of socialism, deviant globalization tells us something very fundamental and very disturbing about the dream of capitalism. Simply put deviant globalization is what you get when you combine massive socioeconomic inequality, moral lumpiness across global landscape and the technologies of globalization that bring all that together. What that enables of the rapid of movement of people in goods. None of these elements are likely to be reversed over time barring some really unexpected exhaustion of shock. So I would summarize by saying deviant globalization is not a correctable operation. It is not some perception to the rule of globalization. It is not a marginal feature of the system. It is the system. Second major proposition I'd like to make about why deviant globalization matters, is deviant globalization is creating a new class of political actors Whose geopolitical importance is only likely to grow with the underline resource streams that they are in control of. Just like the classic high modern state that I was talking about earlier, was supposed to create a certain class of actors namely a welfare public goods providing state, deviant globalization is creating a different class of geopolitical actors. What my friend John Rob refers to in his blog as "global gorillas." In what sense would people like the people in this picture by the way these are gorillas, men movement from the emancipation of the Nigerian Delta, they steal oil basically -- they take the oil that is being pumped out of their swamp by western oil companies and hold it for ransom, or up those pipelines if those companies won't pay them more money and so on. In what sense are these guys political actors? Well, as we have seen, deviant entrepreneurs are controlling large and growing swats of the global economy. And they have this control basically outside of the purview of the state. States have estimates how big they are, but have no control over it, no ability, they can sort of shape the flows but they can't really dictate the size, or dictate exactly who are going to be running these things. There's no sort of very efficient regulatory for deviant globalization. These actors also because they work in extra legal market places, will the non-insignificant quota of violence and force. That is sort of an occupational hazard if you are going to run extra legal business. You have to be able to adjudicate contracts and courts aren't going to help you there. And finally these deviant entrepreneurs, and this is what is really interesting, many of these deviant entrepreneurs are beginning to provide privatized versions of the same kinds of political goods that states used to say they were in the business of providing. Let me explain what that means. These private actors are beginning to provide things like health clinics, infrastructure, personal security justice of a rough sort, to the local communities in which they operate. They build parks. They build medical clinics. They sometimes even build schools. Now these are not things that are open to the public. They are open to their particular constituents, the children of the people who run their businesses. These are all company towns if you will. No such thing as public goods for these guys. But, they are providing the kinds of goods that create political loyalties in the consumers of these goods so if you are getting your clinic and your road, and your job from guys like this, are you going to be more loyal to these guys, or to the robber barons. It is pretty clear, where your loyalties are going to lie. The thing I want to emphasize these guys are not nice people, generally speaking. It is important to recognize, that these guys, these political entrepreneurs, are both the cause and an effect of state hollowing out. And they are a threat to the state as classily understood. But they are resolutely not revolutionary actors. Revolutionary actors sought to capture the state, they wanted to control the state because they wanted to deliver those kinds of goods and services to their constituents. They had a very different kind of agenda. These guys, people like these two, this big drug dealer in Columbia, the arm and the arms dealer I referred to earlier, the guy on the right, these are much more typical of the sort of counter actors that deviant globalization produces. What they don't want to do, they don't want to state over the state. It doesn't have very good functions. You have to attend boring meetings in Washington and New York. And then you also have to provide services to people you don't care about. They would much rather provide services to the people who are a part of their communities as they define them. Here I'm thinking of groups like the Modi army in Baghdad or the first command of the capital which is a prison gang in Brazil or the drug cartels in Mexico. These guys are all challenging the state de facto but except when they all directly challenged by the state, they don't go over the state. They do sometimes get in direct conflicts with the state, but usual only when the state initiates the conflicts. A couple of years ago, the first command of the capital shut down South Palo for three days, cartel shut it down by staging attacks on the police stations. The reason they did that because the government decided they were going to try to break up the communications network that the drug kingpins were all in the jail were putting together. These guys ordered a hit taking out on the state for three days. South Palo State was shut down. South Palo State, should be noted has a quarter of all the industrial production of South America. So they basically shut down a quarter of South America for three days. This was because the state initiated the conflict. Likewise the bloodbath that is eternally taking place in the northerner Mexico is a direct result of the new president coming in late 2006 and saying stop. There was a lot of violence going on between the drug gangs competing over turf, but there wasn't a lot of violence directed citizens. The reason why things like what happened in (inaudible) where a party full of teenagers were just machined gunned for no reason is that these gangsters were trying to tell the government, if you keep messing with us, we are going to start taking it out on your constituents. It is only in these contexts that these guys usually directly confront the state. They prefer to sort of undermined the state, make the state be weak to carve out zones of autonomy for themselves so they can run their businesses, make their money. And they are not generally interested in directly under minding the state but de facto they end up functionally zapping the capacity, the legitimacy of the state because they are replacing the state de facto and functionally. This is a picture from South Palo by the way. You'll notice by the way, that big pool with swimming lanes, these guys each need to have their own pool on their balconies. These guys are All right though. What I'd like to conclude with is some thoughts about what all this tells us about the future of the world's economic system, the world political system. I think deviant globalization has basically two really interesting things to tell us about that. It contradicts the two most dominate narratives about the global south that have predominated in American foreign policy thinking, in public discourse over the last 15-20 years the first one of those discourses are the kind of liberal view put forth by people like Tom Freedmen, back in the 1990s for instance, Francis Fukuyama said that we were headed for that modest's vision of liberal states. He said we are going to have economic growth, the world is going to become flat, everybody is going to get rich, it is going to be great. We are going to end up with this world, this vision of perpetual peace. Sort of liberal dream of what international relations can become is one dominant narrative. It is pretty obvious, the ways in which deviant globalization challenges that particular narrative. Rather than creating a flat world of what we have seen as entrepreneurs are actually interested in creating a lumpy world that they can then turn into huge profits for themselves. Deviant globalization is not creating -- globalization in generally therefore deviant globalization is not creating a flat world but rather creating a world with huge disparities where there are actors that are perfectly happy with that state of affairs and are perfectly happy to challenge the states in (inaudible) ways rather than directly. States are withering away, hollowing out in the global south. But the notion that these guys are going to be coequal partners in some international comedy of high capacity liberal states all of which are equally functional is something like a bad joke. So that is probably pretty obvious way in which any knowledge contradicts one kind of conventional wisdom about the global south. But what I think is more interesting actually is the way that deviant globalization contradicts a different narrative about the global south. That is a much more dystopian narrative that has been put forth by a number of people. This usually goes-- the person that really kicked off this rhetoric back in the 1990s was the journalist Robert Kaplan in an essay that appeared in the Atlantic called the Coming Anarchy. He basically depicted a world, a future where there were two world. The zone of order, the global north where things were going to be great. Cold War was over, we weren't going to have to worry about the bomb coming down on our head, and we were all going to get rich and have lots of trade. But then the other world. The zone of anarchy, which of course, most of the world. Here was a situation of failed and collapsing states, of horrible new diseases of terrorists, of new wars of genocides; and much of the 1990s, Kaplan looked like a visionary. People saw what happened in the Balkings, people saw what happened in Rwanda, and the culmination Kaplan's vision seemed to take place on September 11, 2001 when terrorists sitting in one of these zoned of anarchy type places in Afghanistan managed to address plan and launch an attack which killed 3,000 people in Washington and New York city. But I think deviant globalization has something important to challenge in this vision. This might seem surprising. The point about deviant globalization, that this is not about disorder. It is actually very much an orderly process that deviant globalization creates. It is just not a liberal order that it is creating. It is a creating a illiberal order. These are places from the point of view from Washington or London look like ungoverned zones, are in fact, usually very governed, just not governed by states or the kinds of people that we like. They are governed by people who have narrow minded interests, they don't have the notion of the public, they have traditional values, but are really backward, horrible prejudices of one sort or another. These are people who are providing order for their communities. And I was having conversation with Stewart before this talk about Somalia, northern Somalia, is in many ways one of the better off places in Africa. They have the thriving business, piracy. They have a very good infrastructure system, a very dense cell phone network, probably better than the coverage we get one on one. We get people who provide order and justice. It is not very pleasant if you are a woman, and not very pleasant if you are adulter, not very pleasant if you don't want to worship Mohammed, but those things aside there's a certain order there for sure. And it is wrong to think as these places as a zone of anarchy or a failed state. These are not failed states. Failed states, the concept of a failed state falsely implies the normative order that everybody in the world wants to aspire to is a liberal state like something like the dominant model that most western states have striven after for the last 350 years. That is not what these guys want, and they are providing a very different kind of order. And they are learning to live in a world outside liberal states. So finally, what can we do about all this? I think, again, there might be a couple of choices that we often hear. One option that we sometimes hear is that we simply need to shut globalization down. This stuff is horrible. What we need to do, we need to end globalization. Go back to autonomists nation states. They call for capitalism to be restrained. And in essence for the plan to return to the long lost ideal of unitarian homogamous nation states. Several things to be said about this. First of all, I actually give globalization. I like traveling, I like the things it brings me cultural, economically, and so on; but aside from my personal preferences, this is not going to work. Why isn't it going to work? What did we just learn about deviant globalization? Deviant globalization, deviant entrepreneurs love it when people put up trade barriers. That is how they make a profit. The more people try to pull back from globalization, the more this is going to create -- for exactly the deviant entrepreneurs to be the only people who are benefiting from globalization. I think a very telling example is North Korea. We think of North Korea as the ultimate hermit kingdom, the closed society. And it is those things. Does that mean globalization has no impact on north Korea? Well people don't have cell phones. They have famines every 10 years or so. They have don't get quality T.V. like we do. But they do have some aspects of globalization. For example, they are the number one producer globally of counterfeit dollar bills. Also, currently supposed to be the number one source of black market nuclear technology. They are also major producer and exporter of opium and heroin. So in other words, when you try to close yourself off the only kind of globalization that you get is the deviant kind. I don't think this is going to work. I don't think it is a realistic option. I actually think that trying to pull back is going to make the problem worse rather than better. So the other sort of extreme, people sometimes propose when they hear this kind of lecture. Is well, we should just legalize it. Get rid of all these barriers. These are just silly moralisms, we should just give up the ghost, and let everything be permissible and get rid of this. I have to say, I have somewhat more sympathy with this kind of view because at least realistic about the economic incentives that under pit the system. But I also think is unrealistic, just as unrealistic as the first one is about economics, this is unrealistic about the nature of people's social systems. As I quoted him earlier, societies are defined in large measure by the set of things they prohibit. I think most of us, maybe we say, okay, we think marijuana should be legalized, more may be even cocaine and heroin, and do you really most of us think that parents should be allowed to sell their children to sex slaves? Or that northerners should be allowed to dump their toxic waste all over the global south? Or that countries should be allowed to completely rape their natural environments just because they happened to have some U.N. border drawn around this particular plot of land? I think most of us think there has to be limits. And there always will be in any event, even if you as an individual completely given up all moral limits. So I don't think that is a particularly realistic option. I think, the only thing we can do, is two things. We can make judicious choices. The first thing we have to do actually, is we have to recognize the structural nature of this phenomenon. And not try to run away from it. Not try to think it is going to away. We have to embrace the fact that this is the realty of the system. Once we do that, this forces us into a series of not very pleasant, but at least clear choices. We have to decide what do we worry about more? A million people in jail for nonviolent drug offenses? Or our moral the inhibitions about drug use? A blood northern Mexico or moral inhibition about drug use? Our desire to see countries in the global south be able to develop any way they want and dumping of toxic chemicals by northern countries and allowing them to do anyway they want. These are not easy choices, actually. I don't want -- I think most of us fall one way or the other, on these things. These are not easy choices. The main point I would leave us with, at the end of this, what deviant globalization tells is that these not easy choices are not going away. We are going to have to confront them and stick with the inpropretuity (sp). Thank you very much.