"Not in the Public Interest: Understanding State-embedded Criminal Actors"

The size of illegal or illicit business is almost by definition hard to measure, but it can be broadly asserted as likely to have been large historically, and – beyond the specific case of financial fraud – little studied in business history. Contemporary estimates provide evidence of the scale of the sector. The United Nations Office on Drugs and Crime estimated in 2009 that transnational organized crime generated $870 billion, or 1.5 per cent of the then global GDP. Although illicit business is found in both developed and developing countries, it is likely to be higher in countries with more fragile institutions. A 2015 study reported that illicit outflows were 3.9 per cent of developing country GDPs, larger than total inward FDI. The illicit sector contains a diverse range of actors, from clusters of individuals to large organized enterprises whose activities span illicit and licit businesses. This paper will span one particular organization form. The Swiss-based Global Initiative Against Transnational Organized Crime reported in 2021 that “ State actors are the most dominant agents in facilitating illicit economies.” This paper will look historically and comparatively at the circumstances in which state-embedded criminal actors can become significant businesses in developing countries during the twentieth century. It was focus on a number of case studies including the relationship between provincial governors and the drugs trade in Mexico in the first half of the century, Nationalist China in the interwar years, where the criminal Green Gang worked loosely with the government, and the economic activities of the quasi-governmental Revolutionary Guards in Iran after 1980. It shows that state-embedded criminal actors did not proliferate in countries with “weak” institutions, but rather in situations when government both had capabilities and desire for funds to pursue broader political or economic goals.