The New Gangsterism

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Within months of the collapse of communism in 1989, hideous hybrid organizations including among their numbers newly unemployed secret policemen — together with the likes of Olympic wrestlers and weightlifters — seized effective control of former Warsaw Pact states like Bulgaria. What began as muscle-bound gangs, running the streets of Sofia and other cities, quickly graduated into networks that, for example, become the major importers of stolen cars from Western Europe.

In the years after the fall of communist power, the Wild East was no place for faint hearts. Artyom Tarasov, one of Russia's first post-communist millionaires, recalled how quickly business disputes could turn into something much nastier when he described an incident from 1992 at the Club Volodya Cemago in Moscow. "A number of gangsters turned up that day with a clear mission: extract several million dollars from me or, failing that, kidnap me," he said. A veritable army then emerged from both sides — 30 to 40 men. "Given that all were armed to the teeth, it was only a matter of minutes before they started shooting," continued Tarasov, "It was just like a gangster movie — totally unreal." Tarasov was lucky; he escaped alive. But at the time, such battles were common in Russia, as protection rackets met to hammer out contractual difficulties between the businesses whose interests they protected.

Violent and frightening they may have been, but these groups were also essential to ensuring that the free-market economy took root. With the police and courts in free fall, it was protection rackets that guaranteed that contracts entered into by the new entrepreneurs of Eastern Europe would be honored. "If it wasn't for the mafia in Russia and elsewhere in the early 1990s, nothing would have moved, nothing would have happened," said Gary Busch, an American businessman who worked in Russia during the turbulent 1990s. "They were essential for the free market." The gangs of Sofia, Moscow and Prague were the midwives of capitalism. In Russia, the new entrepreneurs — or oligarchs, as they were called — could use their guile to seize control of Russia's vast energy and metallurgical sectors, building empires worth billions of dollars, while the living standards of ordinary Russians plummeted.

With the East European protection rackets acting as a replacement criminal-justice system, they defined what was legal and what illegal. And legal was anything that brought in a profit — so along with oil, food, furniture and cars, markets were established in drugs, caviar, trafficked women and counterfeit cigarettes; the networks would bring to market anything that would sell. By the mid-1990s, the U.S. government had recognized that something pretty ugly was underway in the postcommunist world. Jon Winer, the architect of the Clinton Administration's anti-organized-crime strategy, traces its development. "In '93-'94 I started working in law enforcement, knowing that globalization was beginning to have an impact on a whole range of issues," he said. "The paradigm was El Salvador. After the war, people decided to use their arms caches to make money in criminal gangs. And then we saw that the right-wing paramilitaries and left-wing guerrillas began working together! Burglary, car-jacking plus kidnapping, car theft and the like ... But the main sources of revenue in Salvador were not car-jacking or drugs. When you got to the Balkans or the Caucasus, however, the main source of revenue in society was criminal. Now you had a very different model."

It is not only law enforcement that has had to get used to new times. Traditional organized crime groups like the Sicilian mafia, New York's Five Families and even the powerful Yakuza syndicates in Japan have had difficulty adjusting to this rapacious new model of international crime. Old patterns of family and clan ties have given way to networks whose obsessive focus is on making money — lots of it, as quickly as possible. The global integration of capital markets, coupled with the fall of communism, has triggered an enormous explosion of international financial flows, which has both facilitated criminal behavior, as trillions of dollars slosh around the world, and made it much more difficult to combat crime. Winer and his colleagues identified the development of a coherent global anti-money-laundering strategy as key in trying to stem the shadow economy's swelling river. But it proved an uphill struggle. The sums involved in the liberated capital flows were vast. By mid-1990, the foreign-exchange markets alone reached a volume of trading that exceeded $1 trillion every day — more than 40 times the value of daily global trade. Keeping track of such flows and their origin at a time when corporations, banks and private-equity firms were warning against the dangers of over-regulation has proved impossible.

The Magic Powder
It is not only in the former Soviet Union and its satellites that the twin forces of globalization and communism's end have created criminal networks. In Africa, for example, proxy conflicts of the cold-war continent mutated into much more deadly struggles between criminally financed militias over minerals. Nowhere was this more clear than in the awful war in the Democratic Republic of Congo that broke out in 1998. In large measure, the war was driven by complex criminal conspiracies. A map of the main zones of conflict between the various armies and militias coincides with a map of the concentration of the D.R.C.'s natural resources. Militias pillaged anything they could find, be it timber, gorillas, copper, diamonds or a little known metallic ore called coltan. When refined as a heat-resistant powder, coltan has a unique ability to store electrical charges, and has become an essential component in laptops, mobile phones and video-game players.