Wednesday, 11 January 2012

Italy and its largest corporation

This article captured my imagination today and as it's my 200th post I thought I'd write about something I really enjoy discussing, criminals. In essence a report has emerged which suggests that the Mafia is now Italy's largest business:

The country's four Mafia groups have broken out of their traditional strongholds in the dusty 'Mezzogiorno' south of Rome and spread their tentacles across the whole country, taking advantage of the economic crisis to snap up ailing businesses and ramp up their loan-shark operations.

They now boast estimated cash reserves of €65bn, collectively making them "Italy's biggest bank", according to a study released on Tuesday by Confesercenti, a prominent employers' association.

They groups make an estimated annual profit of €100bn – about 7pc of Italy's GDP.

Their sources of income are pretty diverse, but ultimately fall back on the old classics:

With the economic crisis meaning banks are loath to lend, Mafia dons have profited as desperate businesses are forced to turn to loan sharks demanding crippling rates of interest.

Organised crime groups - including Cosa Nostra in Sicily, the Camorra around Naples and the 'Ndrangheta in Calabria, have bought ailing businesses, shops and restaurants.

The exorbitant rates they charge for loaning money have pushed many enterprises to the wall.

Mafia chiefs have also moved into new areas of business such as public health, transport and logistics.

Gambling is particularly lucrative. The average adult Italian spends nearly €1,300 a year on slot machines, bingo and other forms of gambling. This €76bn market is Italy's third biggest industry, according to a report presented in Rome on Monday by Libera, an anti-mafia association.

The grip of the Camorra on toxic waste management has been hugely detrimental to the environment in parts of southern Italy and has caused a rubbish crisis in Naples for years.

Now much of this is nothing new, it is only the scale which has changed, with the Mafia increasingly able to penetrate areas of society which were closed to it previously, or at least were not as porous as they were now.

On its own this topic is just of interest, but it sounded suspiciously like another country which has a rife and diverse group of criminals who are seeking to further their own power at the detriment of the state, Mexico.

Italy has long seen its civil institutions decline in the face of its Executive (Berlusconi), and is now in the throes of a major financial crisis which means that cuts are the only answer the world economy will accept. This will mean still weaker state institutions and a population searching for money through avenues outside of state control, and into the breach steps the Mafia.

The Mafia are subverting traditional state roles in Italy, as well as dominating the commercial space through their control (direct or indirect) of certain sections of the economy. Waste management may not be glamorous, but you notice its absence pretty quickly. I think the idea that the Mafia are crushing businesses out of existence is likely hyperbole to some extent, or at least an activity which will die out over time. In the end, destroying a major revenue stream is not in their long term interests.

The truly interesting part will occur if the Mafia start to replace fundamental social functions, as they have in South America and parts of Africa. Hospitals and schools are the obvious areas which could be replaced in time. Whether this occurs will be up to the Italian state, but of course, with brutal spending cuts to come, it is increasingly likely that people will turn a blind eye to exactly where the money is coming from.

The Italian state, in its current position, is clearly not able, or not willing, to deal with the Mafia on a criminal level, else it would not have allowed such a direct challenger to have emerged in the first place. It will be a long time before we know if this lack of action is the result of simple malaise, or something more insidious. Regardless, the criminal element will seek to subvert political figures, if not now, then soon, because it is in their interest to control those social institutions which could limit their power.

This means that it is only a matter of time before the police are penetrated and subverted. With budgets about to be slashed that means that pay will likely decline, or promotion opportunities will dry up. From there is is a rather more simple matter to find the weak links and ensure that these individuals are given money and other incentives to ensure their co-operation. That becomes self re-enforcing, as corrupted individuals support each other up the ranks, and although it may take years (Mexico suggests not that many years) eventually the police will become a meaningless institution when it comes to projecting state power against the Mafia.

Now that doesnt mean that Italy will be left with the military as its own tool to fight back against the Mafia. It will take many years before the undermining of Italy's institutions by the criminal element are enough of a problem that such strong action needs to be taken. Most likely it will be when the various families start to compete with each other and that competition spills out onto the streets in the form of violence that there will be real moves made to roll back the spread.

Conflict between the main groups is less likely than in Mexico. There are mechanisms in place to deal with conflict, at least initially. But as in Mexico, the larger the organisations grow the more chance there is of elements of their hierarchy splitting off and going their own way. When that happens violence is likely to swiftly follow. Like the Zetas these new organisations will have little institutional memory of "how things used to be" and will be willing to resort to more violent and extreme means to maintain control.

The Mafia is unlikely to remain confined to Italy forever. Although to its North and West Italy is bordered by relatively strong states, to its East and South this is less true. Of course having an area of Europe with significantly weakened institutions and a powerful criminal element will mean that criminal enterprises across Europe will have somewhere to turn.

This is just a thought experiment of course, but if the Mafia is as strong as this report suggests it has the potential to use its current revenue to springboard itself still further as the Italian state retreats in the face of austerity measures. What that will mean a decade or more down the line is impossible to predict, but as states grow weaker, seeing criminal organisations on the rise is a worrying precedent.

And so ends my 200th post. Thanks to everyone who has encouraged me to get this far.
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