A global bad can be human smuggling, piracy, illicit trade, or illicit financial flows (including terrorist financing). In the work of the OECD, we call global bads illicit economic activities that exploit globalisation to generate private profit and create public harm. These activities involve transnational organised crime or result from international criminal activities. Recognition of the damage caused by global bads has made these issues not only relevant to development actors, but increasingly unavoidable for those involved in development programming. Global bads are no longer simply an issue for governance and rule of law actors – their impacts are felt across basic services, economic growth and the environment.
It does, however, remain true that global bads go hand in hand with wider governance failures, weak rule of law systems, and violence. Illicit criminal activity and organised crime directly enable and finance violence. Global bads erode legitimate governance systems, state institutions and the rule of law, diverting resources from development. It has been argued that in some parts of the world, organised crime has become a substitute for legitimate governance.
As a result Global bads impose huge costs on communities around the world. Data on this issue is by nature unreliable but still provides an idea. In 2011, UNODC estimated that 3.6 percent of the global GDP are proceeds of crime. In 2013, this percentage corresponded to more than USD 2.7 trillion. Proceeds of crime account for a larger share of GDP in developing countries. A 2008 analysis found that in Central America, crime was responsible for costs as high as 10.8 percent of GDP. In 2014, the EU specified guidelines to track some illicit parts of GDP (prostitution, the production and trafficking of drugs, and alcohol and tobacco smuggling.) This was done mainly in an effort to encourage member states to account for the shadow economy.
Estimates by sector include:
- In 2009, gross profits from cocaine sales were USD 84 billion.
- Between 2010 and 2012, EU member countries counted more than 30,000 victims of human trafficking and prosecuted 8,805 persons for trafficking.
- In 2013, counterfeit pharmaceuticals worth more than USD 19.3 million were seized.
- Cutting the homicide rate by ten percent would result in 1 percent higher GDP growth in El Salvador.
These issues are not the business of policemen and investigators alone. Development programmes impact on the diffusion of organised crime; in turn, organised crime jeopardizes development outcomes. The recognition of these problems within the SDG process is encouraging. The problem is not only profiled in Goal 16, but also in the July 2015 Addis Ababa Action Agenda. The latter states that:
“We will strengthen regional, national and subnational institutions to […] combat terrorism and crime […]. We will effectively strengthen national institutions to combat money-laundering, corruption and the financing of terrorism, which have serious implications for economic development and social cohesion.” (Para. 112)
Traditionally, global bads have been tackled by nation states through law enforcement, or livelihoods. While some progress has been made on whole of government approaches and integrated programmes, there has been little comprehensive lesson learning.
Efforts to curb the narcotics trade illustrate an evolution in thinking. Originally, governments focused on fighting dealers within their own borders, primarily through increased law enforcement capacities (more police officers, more investigators, more arrests, etc.) In a second phase, governments broadened the scope of their action to the original jurisdiction, such as drug production sites in Latin America. On a parallel track, development professionals tried to design programmes to support businesses and the economy in the same region. These activities often had only limited success.
The challenge for development practitioners is to identify those cross-sector programmes that can address these problems more effectively – integrated interventions, based on robust evidence. We should strive for integration on two levels: First, development programmes should be designed with a cross-sector view and address the fundamental working mechanism behind illicit economic activity, rule of law and violence. Second, development actors themselves should integrate with their allies and cooperate effectively with their diplomatic colleagues and the security bodies.
While rule of law is now centre-stage in international development debates, concrete actions tell a different story: Even in states affected by fragility, less than 4.5% of ODA is spent on security and justice initiatives. We lack clarity on what opportunities our development portfolio provides to tackle organised crime, and what type of intervention is most efficient. Existing guidance tends to be dated and partial, predating important contributions to the evidence and understanding (including the 2011 World Development Report on conflict, security, and development.)