TAI Publisher Charles Davidson recently sat down with Louise Shelley, University Professor at the Schar School of Policy and Government at George Mason University and a leading expert on transnational crime and corruption, to discuss her new book Dark Commerce: How A New Illicit Economy is Threatening Our Future. (Full disclosure: Charles and Louise are colleagues and have collaborated in the past.) The following interview has been edited for clarity.
Charles Davidson: You’re known as an expert in international crime and illicit commerce, and now you’ve pulled all of the pieces together in a book that’s targeted at a broad public. How did you get interested in “dark commerce” in the first place?
Louise Shelley: Well, it goes back to my childhood in Manhattan, where my father basically had two occupations: He was in the real estate business, and he was a large-scale stamp collector. At that time, the Mafia was one of the larger real estate owners in New York. His discussions at the dinner table helped me understand how organized crime was involved in real estate. As for the stamp collecting, that also gave me insights into money laundering. In the days before there were wire transfers of money, people needed to find ways to move money with high-value items.
In the 1950s and 1960s, my father would say at dinner: “Guess what emissary of what Latin American dictator came to me today to move stamps to Switzerland? I would never do this, because I don’t want to facilitate the draining of resources out of these poor countries.” My father was also a legal advisor to the American Philatelic Society, which was then smaller, as the trade in stamps was often a cover for many different forms of illicit activity.
Therefore, these discussions we had in the evening were important moral lessons from my childhood that foreshadowed what I’m writing about—the facilitation of illicit trade and money laundering into real estate on a large scale from organized crime and corruption. These problems were deeply disturbing to my father and had an important impact on my intellectual and activist agenda in my life.
CD: Then in terms of your education and schooling, how did that lead to your current specialization?
LS: I went to college to study physics, and I was told I should do two languages. I already had enough French, and they said choose Russian or German. I chose Russian. Then I wasn’t doing that well in Russian, so I went to the Soviet Union to improve my language skills and I got totally fascinated by the country. I was not doing well in the large physics classes where there were almost no women, therefore I decided to major in Russian. It was also the activist 1970s and I was fascinated by issues of crime in the United States and crackdowns on dissidents in the Soviet Union. I decided to combine my interests and did my honors thesis at Cornell on Russian prison literature.
But I was not a literary type. That was not me. So when I thought about what I would do in graduate school, my advisor suggested that I go study criminology. I went to graduate school in criminology, and the first day I was in grad school, the person who would be my thesis advisor said, “I have a whole bunch of books in Russian, it’s too bad I’ve never had a student who can read Russian.” That’s how I got started, and there was a lot of graduate funding to go into underfunded areas in Russian studies, including sociology.
So I focused on Russian crime. But already in my early days of graduate school, I was working on issues of transnational crime and migration, laying out an intellectual agenda. I had one class with a very famous professor, Sir Leon Radzinowicz, then at Cambridge University, who was knighted for his work on criminology. I did an outline for a term paper, and he said to me, “This isn’t an outline for a class paper. This is an outline for a life’s work.” Most of the issues that I wrote about in my outline—urbanization, migration, organized crime, transnational crime and the illicit economy—have been my intellectual agenda for the last 40 years. For my dissertation, I went to study in the Soviet Union between 1974 and 1976. At that time, I couldn’t be working overtly on issues of contemporary crime. Instead, I worked on what sounded like a nice safe topic, “The theoretical development of Soviet criminology.”
But that didn’t turn out to be such a safe topic, because as I got into it, I was looking at how criminologists became the justifiers of purges in the Stalinist era. Academics justified Stalin’s repression and this became the intellectual justification for an increasingly authoritarian regime. That’s what my dissertation was on.
CD: I look forward to seeing the dissertation, if there’s still a copy floating around somewhere.
LS: You do not need to read the whole thesis. You can get the whole idea in a 20-page article. But when I gave my final report at the Moscow Law School, I was told that they should have burned the sources I found. That, together with my association with “anti-Soviet elements” (dissidents), got me kicked out of the Soviet Union. I found ways to keep writing on justice and crime from afar, but only got back to the Soviet Union in the late 1980s when the late dissident Lyudmila Alexeyeva— she just died recently—got me off the black list at the time the Soviet Union was opening up. When I came back, what struck me in this period of glasnost was the enormous rise of organized crime.
In this new freedom, I was seeing organized crime stepping in just as the economy was opening up. Just as you had prohibition in the United States leading to the rise of organized crime in the 1930s, this was happening on a massive scale as the Soviet Union was beginning to privatize its economy. Who got a foothold in this new privatizing economy but organized crime groups and their handmaidens—corrupt government officials.
I’d never seen this before, because this wasn’t what I’d studied in the United States on crime. Therefore, in the early 1990s I studied in Mexico and in Italy, places where organized crime was really prominent, to understand how organized crime was different in the post-Soviet space. That’s when I started writing on post-Soviet organized crime and came to the conclusion that the rise of this form of criminality was going to undermine democracy and the transition to a free market.
I also wrote that this organized crime was not only going to stem democracy in Russia and elsewhere in the Soviet successor states, but was going to lead to the rise of authoritarianism elsewhere in the world. This insight has been quoted in Seth Hettena’s book Trump/Russia: A Definitive History.
CD: Can you tell us more about that? How does organized crime undermine democracy, and what were these impacts on authoritarianism that you were thinking of? It sounds like you were pretty prescient on this.
LS: I was vilified, literally vilified when I started writing this. I wrote that with organized crime there would be a decline of social protections, organized crime would reduce labor rights, undermine the democratic process and freedom of the press. In one article, on organized crime as a new form of authoritarianism, I was discussing how oligarchs, who worked with organized crime, were buying newspapers. Therefore they were contributing to a decline in freedom of the press. There was much more freedom of the press during the final years of the Soviet period, and that was beginning to be curtailed. The people who were buying up these factories, and the workers not being paid, were leading to authoritarian labor policies.
CD: Who vilified you?
LS: At one time, I spoke at a meeting of U.S. government officials and told them that the methods of privatization that they were promoting would have a dramatic negative impact on Russia and would lead to a backlash against us. I said that if they continued to promote privatization without any safeguards, and citizens did not get access to property, then they were going to lead a transfer from the Communist leadership to the rise of what you would call an oligarchic corrupt elite. And that people were being screwed because they were not having an opportunity to participate in the privatization process. Their reaction was so hostile that I had the only migraine I’ve ever had in my life.
This privatization process had effects that also shaped my thinking and led to Dark Commerce. People in Russia were privatizing and controlling resources in the environment, their cutting of trees and illicit trade in fish were leading to drastic and damaging impacts on the environment. Seeing these elements of privatization marked the first time I became alert to these issues. If people don’t have property—and this is what happened in authoritarian states—they have no security blanket and no way of resisting authoritarianism because the social welfare system was collapsing at the time that they were getting no property to support themselves in their new lives.
So they can’t be participating in democratic party structures, and you end up going from one type of authoritarianism to another. Those were the first things I was writing. Then Soviet organized crime started going global, and they were moving across borders and moving their money. They went global and so did I.
CD: And how did you go global, Louise?
LS: One of the things that I noticed is that in most parts of the world, like in Mexico or Colombia, organized crime was based on the drug trade. Organized crime in the former Soviet Union was not based on the drug trade. It was based in part on human trafficking, but mostly on the privatization of state resources and the looting of natural resources. Not only were the resources shipped overseas but the profits of their sale were deposited outside the country, leading to the draining of both natural and financial resources.
Human trafficking was the visible sign of the transnational crime coming from the former USSR. You couldn’t go anywhere in the world and not see trafficked Slavic women. They were in South Africa, Latin America, Japan and elsewhere in Asia.
Russian organized crime has also globalized on a large scale through its criminals’ extensive involvement in the cyber world. Russians, with their superb educations in math and science and technology, should be at the forefront of the technological revolution we’ve had in the last three decades. But because there’s been so much corruption, so much exodus of capital, and so much corporate raiding that deprives people who have legitimate businesses of their enterprises, there is a lack of legitimate tech entrepreneurs in the Soviet successor states. Therefore, talented techies go to the dark side.
CD: Why don’t we take a little detour into Russia as a security threat, because you’ve alluded to all of these issues. And certainly Russia is very much on our minds these days. How would you answer someone who says, “Oh well, Russia is an economy the size of Italy. What is there to worry about?” Why are they having so much influence? How are they able to do so much damage?
LS: One thing to remember when you think about transnational crime is that it’s an asymmetric threat. That’s something we increasingly talk about in security studies today. We’re not dealing with the days of armies, or navies, where you’re counting ships and you’re counting people. Russia’s been really good at using new technology and leveraging the poor economic hand it has with its comparative advantage in technology.
CD: All those darn chess players and rocket scientists, I guess.
LS: And also computer scientists. Oleg Deripaska studied physics at Moscow State University. He and other highly trained scientific minds are now oligarchs who have been placed under sanctions.
CD: The best minds are going into crime?
LS: Yes. Our paramount concern should not be the thugs of organized crime, which is what the U.S. government was focusing on a lot in the 1990s as it pursued gangsters and thieves-in-law, the elite of the organized crime world similar in stature to the made men of the mafia. It’s the people with highly technical educations and skills who should be the central concern of Western governments. What has been so disruptive in the United States and in Europe has been the dissemination of fake news, the hacking, the stealing of data, the stealing of individuals’ personal information, the freezing of computer systems through ransomware. These are things that you do not need a large economy for. These are criminal acts that can cause great harm, but a country does not need a large economy to succeed at this activity. It only needs a select and highly educated group of people to carry out such disruptive behavior.
That’s how I understand the critical importance and transformation of technology through my Russia lens. One of the things that we find here is that, because we have an active law enforcement in the United States, a lot of our illicit activity is going into the dark web. But in Russia, a lot of illicit trade has been operating on the surface web because law enforcement has not been bringing it down. One of the stories that I tell in my book is the case of PharmaLeaks. That’s a popular name for a group of criminals with very sophisticated technology skills who began to be studied by a group of top-level American computer scientists.
The computer scientists decided to study this online pharmaceutical network selling Viagra because they were interested in understanding spam and this network was the largest propagator of spam in the world. The study revealed the network, its operations, its financial operations but also its use of spam. As they did this research, they found that the criminals were using a credit card system that was tied to Western financial institutions, and they managed to get those financial institutions to cut the criminals off from their ability to use credit card payments.
What’s interesting is that when these criminals were forced to move on as they were cut off from their payment system, they began to curse online the people who were attacking them. They had to find a new criminal arena as they were serial criminal entrepreneurs in cyber space. They’d been in child pornography before, and then they went into criminal antiviruses subsequently. But one of them got into trouble later because he used his skills and offended some powerful oligarch who got him arrested. Then when he got arrested, like many other criminals in Russia who had been identified by Western law enforcement, the Russians then knew that they had a super cybercriminal in confinement.
So they gave a choice to this cybercriminal of what I would call the Monopoly “Get Out of Jail Free” card. The prison officials advised him that he would be freed if he agreed to work for the Russian state. Now, one of the people who ran this major spam operation selling Viagra has a new job now. He is head of the national payment system of Russia. This is convenient for the Russian state, because the state needs to pay its hackers.
But this guy has a dual utility, because what else do you need to be running a spam operation? You need a bank of botnets. Spam is driven by botnets. That’s the same way that you also drive fake news. So now Russia has an identified criminal in the critical payment position but who also has links to the whole underbelly of the criminal world and the people who operate botnets.
CD: Fascinating. We tend to think of social capital as always referring to something positive in a society. It sounds from the way you’re describing Russia, that social capital there is in fact negative and has been effectively criminalized, and has created a criminal organization out of the whole country.
LS: I can’t say the whole country, but it has limited honest entrepreneurship in the mold of Silicon Valley, where many Russians have gone with their skillset to be successful entrepreneurs. But the problems of illicit entrepreneurship is not just a problem of Russia. One of the cases that I discuss in the book took place in the Czech Republic and illustrates how one form of illicit activity can provide the venture capital for larger-scale illicit activity. One example I give is in my chapter on the rhino trade that analyzes the extermination of the rhino through the transnational illicit trade in its horns.
In the Czech Republic, Vietnamese criminals used the trade in counterfeits and cigarettes as venture capital for a more lucrative trade—that in rhino horn. Moreover, they exploited their traditional routes. Counterfeits came one way from Asia and then the illicit rhino horn went back in the other direction to Vietnam. All this illicit trade is working in market terms that we understand. One type of illicit entrepreneurship can help support another. And as you were saying, social capital is not always a positive phenomenon.
CD: You were talking earlier about organized crime and how you saw very early on in your career how this was a threat to democracy, and could encourage authoritarianism. But when we look at the complete story you lay out in Dark Commerce, some of what you talk about is just normal crime and things that are perhaps marginal to a society. How do we parse out the elements in this that are governance-threatening, as opposed to illicit activities and the sort of crime that’s just part of the human condition?
LS: We’ve always had crime. It’s part of the human condition.
CD: So what are the specific things we need to attack in terms of the democracy threat you referred to?
LS: What we need to particularly understand is how this illicit trade is funding and prolonging conflicts, and how destabilizing it is. How the corruption that is linked to this illicit trade, which has gotten so enormous, is undermining governance. Just last week, we’ve been hearing of the evidence presented at the trial of the Mexican drug kingpin, El Chapo, who reportedly paid $100 million to the former President of Mexico. Whether this is true or not, large payments to politicians have been paid for decades in countries like Mexico and Italy, where I’ve spent a lot of time.
The corruption that has come with the drug trade in Mexico has been so incredibly corrosive and undermined the successful transition away from the one-party rule of the PRI. Instead of having democracy and free markets, we’re observing enormous corruption in Mexico related to the drug trade that threatens human security. There’s enormous violence, it helps encourage migration as people are fleeing this violence. The domestic situation in Mexico and the politicization of the migration debate is threatening our democracy.
The same problem is going on in Italy, in which the large numbers of migrants that are arriving from North Africa are facilitated by organized crime with payoffs to government officials. Look at the impact this has had on Italian politics and on the politics of other societies in Europe that are becoming more populist. These forces of organized crime are very, very destabilizing. As I wrote in my book, Human Trafficking, which came out a decade ago, the growth of human smuggling and trafficking was going to be a defining issue in the 21st century.
CD: Right. What about the weaponization of this? You talk about the Opium Wars and that the Chinese may be in a sense extracting some kind of metaphorical revenge on us, in terms of shipping us fentanyl now. If one thinks of this in very basic human terms, some might even say it is a just revenge, because what was done to the Chinese in those wars. It’s inexcusable if we look at the sort of morals that we try to champion in the world, what was done there was the exact opposite, and the sort of thing that we in the West now fight.
LS: When we think about the Opium Wars, we generally think about them as being a tool of the British. But that was true in Opium War number one. Opium War number two, the British were joined by the Americans and the French, who were all participants. This is the state sponsoring transnational crime. Yet what is interesting is that when we keep talking about organized crime being responsible for transnational crime. Yet there are many places in the world where it’s the national leader that’s involved in the drug trade, where the corruption is absolutely essential for the drug organizations to operate. So it’s not just criminals that are engaging in transnational crime today.
It takes high-status individuals to propagate this drug trade. You know who was one of the largest American drug traffickers in China? It was Warren Delano, a name you should recognize if you think of Franklin Delano Roosevelt. It’s his maternal grandfather who was one of the large opium traders that was illicitly moving drugs into China. There are precedents as we go back into the history of the drug trade of the participation of high-status individuals. Mr. Delano’s participation in the drug trade did not diminish his daughter’s opportunity to become a debutante and enter into high society.
As long as we’ve had the highly destructive drug trade, it has not been just a criminal activity. It has supported states and state interests. I think that’s really important to understand. So when you think about fentanyl and why the Chinese are not cracking down on it, it also serves state interests if you’re thinking about our conflict over trade now with China. This fentanyl trade is not affecting China, because the drugs are all being sold through English-language websites that reach foreign and not domestic consumers.
CD: If we jump back to Russia, then, we have seen certainly the weaponization of a lot of these things. Now that we’re the target—I don’t want to get into sort of leftist revisionist history à la Howard Zinn—but we’re on the defensive now. We’ve been talking the good talk, and trying to promote democracy and freedom around the world, but we now find ourselves under attack using a lot of the same methods and tools that we’ve been talking about.
In the case of Russia we see organized crime has been weaponized at the state level. There’s been a sort of state capture. So how do we defend ourselves from all of this? What do we need to do as a society, and what does our government need to do to defend ourselves?
LS: I don’t like the term state capture, because it suggests that when you had a king and he was captured, or the state, you could pay a ransom and get him back. This is now a much more complicated process than getting your king or your pawn released. Part of this is a question of how we use and deploy technology. Part of it is doing an analysis of who is behind this technology, which we’re not doing enough of. We’re going after the physical presence of fentanyl, rather than understanding the corporate producers who are behind the production of the fentanyl. We’re not doing enough analysis of how this operates as a business.
When you weaponize dark commerce, you’re dealing with a very negative business competitor that is having an impact on your commerce and on your society. When corporations face a pernicious competitor, they do incredible market analysis of how they need to address this. We are not doing enough of that. What are the kinds of tools that we need? How do we counter this? We’re not thinking enough about this as a business. Fake news is one thing. Selling pharma is another. We stovepipe these negative phenomena without understanding that it’s often the same people behind it, the same operators. We’re not thinking in an integrated fashion about how all of this operates.
CD: And if we did?
LS: We could be much more effective, because the criminals, whether they are criminal states or criminal groups, don’t think in this fashion. They switch from activity A to activity B. They combine A and C. They use the same actors. And we’re sitting around looking at one problem without understanding their flexibility and innovation.
CD: And if we did understand that, and we had a complete picture, how would that affect policy? What would we do?
LS: For example, we would be doing an investigation of how fake news is disseminated. We’d be integrating fake news with our understanding that the person who is involved with PharmaLeaks is part of the payment system of Russia, who has access to botnets. We would be looking at something that combines a criminal activity with a political activity. But we have two sets of things, and we close down one and we don’t look at the actors and how they are integrated.
CD: They’re integrated. And if we did look at it that way, and we had all that knowledge, what would that enable us to do?
LS: We could be thinking much more flexibly about how we cut people off from the financial system of the world. We could be using tools that target technology in different ways. We could be developing more ways to go after illicit activity on the web, the deep web and the dark net. We could be deploying the resources that we have to focus on earlier links in the supply chain, and the key facilitators, rather than just the end results. To do some of this, we need to be working much more with the corporate world. Our commercial code has been giving an enormous free pass to the online platforms and to social media, which are not being responsible.
So we go after one problem, and we say, “Okay, you’ve got to do something about hate speech. You’ve got to be responsible that you’re not propagating hate speech.” Or this summer legislation was passed requiring that, “Online platforms cannot be propagating human trafficking.” But we’re not saying, “Online platforms have to take a collective conceptual approach to be seeing and addressing the ways that our society is vulnerable and undermining our security.” We need to be looking at businesses and making demands on them to be responsible corporate citizens. We’re not making this requirement. In its absence, corporations are not doing enough to address their facilitating role in dark commerce.
CD: What would this look like at the government level? Do we need a new structure for this, or some new sort of Department of Homeland Security devoted just to this?
LS: No. First of all, we need to change some of our commercial code. I’m not saying that regulation is the answer, but if you’re totally exempted from regulation, then things can go amok. We regulate many aspects of our society, for example, mining and utilities. We regulate who can register to vote in elections and what kind of identifications they must have. We regulate lots of things to make sure that we do not have abuses of our economy and abuses of our democratic process. We’ve taken this new technology and acted as if it’s some brave new world that doesn’t need the regulation that we have applied to the old world.
But our criminals have taken enormous and disproportionate advantage of this, and have gone into this cyber world, and have enormous competitive advantage because the rules don’t operate there. I give examples in the book about illicit trade in the online world: Silk Road, which was the first large online dark web marketplace. It was not a hygienic world. You have corruption and violence that also went into the online marketplace. Online marketplaces are unregulated. And you say, “Well how do you regulate the dark web, because it’s dark?”
As I point out in the book, since there’s no indexes that help you search the dark web, you have to get pointers to what you’re going to find in the dark web, often from social media. There are links between the two of them, but we’re making no requirements that social media has to be responsible for policing drug sales, weapon sales, or anything else. They continue to post messages that help steer customers to dark web sites. They do not focus on cleaning up online marketplaces or social media posts sufficiently.
It would cut down on corporate profits, but a lot could be done by constructing algorithms and making sure that these new forms of technology are being much more careful in what they are making available and knowable to a public audience.
CD: Well, I think there’s broad public outrage at some of these issues you just raised. And certainly ripe terrain for further discussion. Louise, thank you.