by Noah Raford
Having escaped the backwater slums of Colombia’s Cauca River Valley, they came to rule Cali, a city starved for investment and security. While the cartels in Medellin, two hundred miles to the north, kept the media’s attention, Cali quietly produced more cocaine than any other city on the planet, up to 70 percent of the substance in the United States, and, according to the U.S. Drug Enforcement Agency, as much as 90 percent of the drug in Europe.3 With bank accounts as far afield as Hungary and Israel, the Cali families managed a global distribution network with hubs in Antwerp, New York, Los Angeles, and Tokyo.
While perhaps surprising, the story of the Cali cartel is by no means unique. In the sphere of international development and security, such vignettes represent a pattern of growth and opportunism found again and again around the world. From the oligarchs of Russia to the yakuza in Japan, ambitious non-state actors operating under weakened regulatory or flexible security environments follow similar paths.
Beginning as small-time operators, they can grow to become significant forces in the economy, both preying upon and playing a part in the mechanics of the state and traditional markets. As their influence grows, especially in economically depressed locales, they can become market makers and market shapers, rivaling and often exceeding traditional economic development enterprises. Having captured existing markets and made new ones, they can diversify into established legal trades, financing these efforts with cash from a network of globalized criminal syndicates. Then, armed with wealth and power, these deviant economic agents eventually become political actors themselves, often assuming leadership roles in the same state organizations and institutions upon which they originally preyed.
We trace the evolution of this phenomenon by following the footsteps of an identity designed for an allegorical purpose, finding it manifest across the world from the streets of Bangalore to the White Mountains: the warlord entrepreneur.
Warlord entrepreneurs are the impresarios of black markets, managing an array of illicit activity that generates untold trillions of dollars in the global economy each year. They exist in a world that is both divergent from and linked to legitimate state and private administrative apparatuses, a world dependent on the infrastructures of a globalized society, such as shipping lanes and IT networks, but cut off from the intent such systems were designed with. Warlord entrepreneurs both depend upon and persistently weaken the world’s legal and market frameworks.
With the unique position outside of and between the worlds of conventional market and government actors, warlord entrepreneurs are able to outmaneuver and outrun the orthodox administrative capacities of the state and private economies. As a result, they usurp and even define power structures inside the conventional political-economic machine itself, by bribing, threatening, killing, provoking, blackmailing, and otherwise subverting traditional political-economic actors. Warlord entrepreneurs are therefore powerfully positioned to both work with and exploit their legal economic counterparts, particularly in emerging markets and developing countries, where the scaling of traditional businesses can largely depend on a degree of cooperation between illicit economic parties, who frequently control territorial resources through use of coercion or force, wagging the tail of the conventional economic dogs looking to sustain, develop, or penetrate new markets around the world.
Our book focuses not only on the individual behavior of these actors but also on what happens as an effect of their organization, adaptation, and growth in political economies globally, as they rise to become a preponderant force, the warlord enterprise.
The term warlord enterprise—an intimation of our book’s title—describes the broader organizational dimension of the business of warlord entrepreneurialism, the dimension at which an element of scale is required to succeed. Through this lens, we examine transnational criminal activity as more than just independent, stand-alone operations serving small market segments or demographics, like the neighborhood meth house or basement cannabis grower—although those may be nodes inside a much larger illicit network. Instead, we look at the warlord enterprise as a large, interconnected, and highly adaptive organization that plays a deeper, more foundational role in the development of political-economic systems, while simultaneously serving the interests of black markets. These shadowy actors, as we will show, fill in the gaps and round out the edges of the global political economy, frequently—though not exclusively—in places where the rule of law is up for grabs and the faculties of the state are loosely held, creating an incorporated set of warlords—Warlords, Inc.
The key observation of this book is that, over time, the line between black, gray, and white markets blurs, and warlord enterprises become indistinguishable from other forms of legal enterprise or, indeed, even the state itself. In the sphere of international affairs, this creates additional friction between nation-states seeking to enhance diplomatic efforts and strengthen foreign policy, and in turn, it becomes a means through which diplomatic efforts and foreign policies are pursued.
For those caught in the crossfire of such economic deviance, the allure of participation in the illicit economy, at least on the production and labor side, is more complicated than simply a matter of immoral decision making. Rather, it is a survival strategy for those without easy access to legitimate, sustainable market opportunities—the poor and undereducated, as well as those in locations with ineffective or corrupt institutional support for mainstream business.
In this respect, the world of transnational crime and the corollary mechanics of warlord entrepreneurialism is, in many cases, a story of the stark realities of life in developing countries—and one that benefits those already in the developed world. Whether the transport of drugs, harvesting of organs, extralegal extraction of commodities, deployment of weapons to insurgencies and rebel groups, or movement of laundered money into anonymous bank accounts in Switzerland, the consequences of such behavior continue to position those already well positioned in the economic value chain against those perpetually struggling to make it.
The consequences of the rise of such insidious forces are at once both staggering and, unfortunately, remarkably foreseeable. As the tensions of globalization mount, the world’s complex but fragile political systems are becoming increasingly vulnerable to breakdown and deliberate disruption. Modern states are at elevated risk of partial failure or even collapse as the infrastructure—networks, supply chains, trade routes—grows more tenuous, resources become more contested, and normative authority becomes difficult to maintain.
Crisis, when it occurs, will open new arenas of competition for political and economic control and new opportunities for innovation and reorganization. It will also test the resilience of a citizenry that has grown used to unusually high levels of security and prosperity.
Successful pioneers and opportunists in this new world will prosper by competing to establish new directions and approaches in a rapidly changing environment. Examples of current organizations that succeed include transnational gangs, ideological insurgencies, and organized criminal groups. Most established organizations—whether in government, business, or civil society—are poorly positioned to adapt. Their legitimacy and competitive advantage will erode as the world becomes less stable and shocks become more common. Increasingly, deviant actors will compete for legitimacy and influence by playing a role in markets and services currently provided by the state or mainstream business.
How will civil society and underfunded governments compete against ideologically driven groups intent on working outside the law? How will government and commerce function in a world where contracts cannot be enforced and regulations are selectively applied? What state services and economic functions might such deviant actors compete to provide? And finally, how might existing organizations prepare for the tensions that will ensue?
Warlords, Inc. brings together a team of writers to explore challenges like these that societies—both developing and developed—will face in such environments. In particular, it looks at
the competitive dynamics of deviant and violent actors in post-state and weakened state politics and public administrations, as well as the forces that constrain or compete with them for influence.
We developed Warlords, Inc. as an anthology in an attempt to holistically capture the breadth and complexities of a subject of interminable nuance. Our goal, modestly, is to elevate the dialogue on issues concerning international security, human rights, cross-border conflicts, urban warfare, child immigration, terrorism, the mafia, state failure, and transitional crime. We want both to shed light on traditionally opaque subjects, illustrating the real and growing threats of transitional crime, and to give readers the information they need to effectively analyze potentially grave scenarios, should they arise. We also aim to provide clarity on what actions citizens and policymakers alike may take to combat and peacefully ameliorate legitimate threats to sovereignty and human security.
To accomplish this, we amassed a team of international experts whose background and specialties range from advisory roles to heads of state and consultants for the intelligence community to award-winning academics and career law-enforcement professionals. These contributors provide varied and thought-provoking perspectives on the structure, dynamics, and implications of warlord entrepreneurs as a global force to be reckoned with. We hope to illustrate the unique ways that such actors are shaping our world of tomorrow and provide inspiration for further discussion of our collective role in it.
The focus of this book is not just to highlight the immediate effects that such actors have on economic development, politics, state building, and the evolution of international relations. We also seek to draw attention to the long-term threats and opportunities that such trends will bring to global citizenry in decades to come. To accomplish this goal, we have divided the book into three parts, using the metaphor of “black market, black governance” and “light markets, light governance” to explore the spectrum of “gray markets, gray governance” between them.
In our first part, we uncover the dark side of warlord entrepreneurialism, asking, “What happens when nothing works?” Egypt, Libya, Syria, Mali, Tunisia, Mexico, Honduras, Brazil, Tibet, India, Pakistan, Iraq, Afghanistan, Myanmar, Somalia, Nigeria, Sudan, Ukraine, Lebanon … Russia, China, Britain, Japan, the United States. Are the difficulties faced by the West and its developed-world counterparts to effectually maintain their power in the first fifteen years of the twenty-first century a pattern or an outlier?
As we demonstrate, those actors managing the subtleties of the world’s underground economy are better positioned than governments to take advantage of a planet driven by disarray. Whether by manipulating the flow of drugs (or humans) or by placing a hit on a political leader, black-market economic actors have a capacity that very few are able to use—and even fewer have had to master.
In the second part, we explore the middle ground: the world of semi-legal trade and state building. This part, drawing on case studies from around the world, identifies the many ways that warlord entrepreneurs add value—and even provide social services—to the communities they are nestled in. In doing so, we hope to demonstrate that the dynamics of deviant economics are anything but simple and that frequently such actors maintain—and even scale—their capacity by providing services that the state and legal enterprises cannot support.
Finally, in our last part, we provide stories and case studies that illustrate the positive steps that we can take to mitigate the worst impact that warlord entrepreneurs might have and to learn from the best that they have to offer. As we will show, in the face of such looming crises as resource shortages and climate change, there are still paths we can choose that will avoid some of the most negative effects that the world of black-market entrepreneurship brings to the table.
Twenty years after the bust of the Cali cartel’s high-tech computer center, Cali, like much of Central and South America, still struggles to lift itself out of continuous threat of violence and widespread poverty.4 Boasting a homicide rate of more than 85 per 100,000 residents—roughly four times that of Chicago—the city is torn apart by warring neo-paramilitary groups and other warlord entrepreneurial forces, even as it makes improvements. While the country receives praise in international media for recent booms in its mining and oil industries, little attention is paid to the persistent inequalities levied upon many of the country’s citizens, those still left out of much of the nation’s economic progress and still vulnerable to survival-driven participation in the country’s never-ending dance with illicit trade.
Such examples serve as stark images of the world we may inherit. As the long journey of civilization continues, we find it important to look toward the periphery of human endeavors to identify the possibilities that may lie ahead. Our intent is not only to present alternative points of view as to what that future could be but also to offer narratives of hope, ways that society can adapt to the impacts warlord entrepreneurs will have on our global political economy.
Part 1
THE DARK SIDE
1 Of Warlords and Rodeos
Why Nothing Works
Vinay Gupta
When a stream of revenue large enough to finance an armed group cannot be extracted by any legitimate nonviolent enterprise, the businessmen who rise are by their very nature violent and illicit: they are warlord entrepreneurs.
It would be easy to dismiss these actors as phenomena of the edges, like cracks in neglected sidewalks, but they are really phenomena of failure, and failure is everywhere, once you let yourself see it. The cracked sidewalks are not only far away in countries with UN missions, they are in wealthy countries too, in those pockets where old industries died, leaving deskilled wastelands. In a stable, competitive environment, business eats the lunch of prospective warlord entrepreneurs. Vast capital assets, high trust networks, and deep human resources will always win against the comparatively small and disorganized warlord entrepreneur’s tenacious little businesses. But things fall apart, the center cannot hold, and a certain somebody and friends do business where the state, IBM, and Walmart have all failed. Just as scrub comes in shortly after great oaks are felled, so our warlords are first through any available gap.
What is it that fails, giving the warlord entrepreneurs room for maneuver? Some say rule of law. Others, property rights or the state itself. I say it is accountability that fails: when nobody is willing to go to the wall for what is right, the failure that counts has started. The gap between no profit for business and loss of state legitimacy is filled with corrupt authorities. A warlord entrepreneur’s customers were first turned away by regular service providers, then alienated from the state. A customer should be able to get a legitimate visa, but the office is closed—except for bribes. A container ship is leaving on Thursday, but the available space is unavailable because there is nobody to inspect the shipment for arms until Monday. This area is meant to have regular police patrols, but after nine in the evening they are hardly seen.… The warlord entrepreneur is always last. It is the place you go when there is nobody else—the loan shark, the protection racket, the forged travel papers.
America’s past warlord entrepreneurs are lionized. The Mafia and Vegas, baby, their town. During Vegas’s heyday, the Rat Pack fluidly bridged acting, music, politics, activism on race issues, and organized crime. Nobody doubted that Frank Sinatra was tight with the mob; it was part of his charm, all part of the glamour. To this day, Vegas provides a service: vice. Once, that vice included alcohol, but now it is just drugs and prostitution. For Vegas to exist, the state had to turn a blind eye to warlord entrepreneur operations there—not just for a few years, but for decades. In this crisis—a failure of values—comes the inevitable transfer of legitimacy from the state to warlord entrepreneurs. In your mind’s eye, meet Big Joe, who could be from anywhere. He genuinely cares about your problem, as he is personally responsible for your money and for the merchandise. He will take personal responsibility for outcomes, unlike all other actors involved in the situation,
who hide behind job titles, policies, and badges. Everybody else has a policy. Warlord entrepreneurs have obligations. Everybody else has a hierarchy. Warlord entrepreneurs are accountable to the situation. Our bureaucracies create an enormous gap between the laudable goals and the public-relations front and the actual dysfunction and callousness of front-line operations. Dragons grow in this gap.
Every place a promise is made and then broken, the state loses legitimacy. Everywhere legitimate business will not do business, black-market business thrives. Cannot get a wire transfer from Guyana to Ghana to pay for your website, because the banks charge a fortune or simply will not send the money? That is just fine—use bitcoin like normal people. Cannot get a MasterCard in Liberia? Use a prepaid debit card from a foreign bank through your cousin in New York—and refill it by acting as a smurf for structured payments when they are laundering money. Every barrier to normalized business, to the smooth and effective functioning of business as usual, creates a shadow. In the deep shade, those dragons mature.
The little man who fixes visas sprouts teeth and becomes the criminal logistics magnate of a war-torn city. His protection racket works, because this is not Iowa and his men are accountable. Five AK-47s and an old Toyota become civilization’s darning needle, holding together enough to let life go on just one more day. Everybody knows it’s wrong, but in these times, what else to do? The budding warlord entrepreneur delivers when nobody else can. Pretty soon there’s a vehicle fleet and a pool of capital and an operations base with a small training and recruitment program. If the guy’s smart, he’ll clean up a little and sign on with the State Department after the army leaves, providing logistics and security for programs with lax oversight. How often has this happened in Iraq and Afghanistan already? The answer is: always. Once the social fabric is torn, the warlord entrepreneur is like the clotting blood, the scab forming over the wound. It is a messy healing process, and infections can be terminal to the rule of law. But without the clean, smooth function of the legitimate system—without unbroken skin—these problems are inevitable. And once a situation has mostly scabbed over? The smart, logical thing to do is to mainstream the previously warlord entrepreneurs as businessmen who did rather well during the crisis period. That’s the right thing to do, isn’t it? I mean … sure, we all know this guy had a past, but we can leave him out there in the cold, running a criminal syndicate, or we can get him to focus on his legitimate businesses … the least bad of the bunch … and pretty soon this kind of thinking puts the Taliban back in charge, because, you know, they’re tough on opium production.
