Chapter 8. Impunity and disorder.

The instrumental features (anonymity, uniformity, mobility) of this sort of historic currency bring about all sorts of crimes with, in or for it; they make a metric and informative system (multicaptor) of all the significant facts of each sale-purchase operation impossible; and therefore, they prevent the experimental verification of any of the economic theories and policies.

«Qui paga, mana» (a Catalan expression meaning 'money makes dependence') and «Laws are made to be broken» are aphorisms born of a fatalistic history, where theses kind of anonymous currencies have left most crimes and offences unpunished (for lack of evidence or through well-paid «pressures») such as: treasons, trafficking of weapons, persons or drugs, wars, attacks, abductions, forgeries, fiscal fraud, double accounting, perjuries, prevarications, briberies, misappropriation of public money, murders, slander, robberies, embezzlements, swindles, speculations... On the other hand, the economic theories and policies are permanently in crisis, lacking an experimental system of verification to prove them according to facts and not to the interests of the power groups or of the «prestige» of the economists defending them.

The best way to explain the three malfunctions of the present monetary system is to resort to facts and evidence. Facts which speak for themselves. Facts which take place as a constant historic fatality with which we must live, while we hope that the morality or good-will of people will prevent them from spreading. We attack on the effects, but we do not discuss the instrumental facilities that help them to spread. Why should we do anything at all if the cause is transcendent, if wickedness is consubstantial to humans?

With the first malfunction, some facts were presented which appeared in the newspapers in these last years, among which we repeatedly fins a significant example of the instrumental inability to put an end to the impunity of the trafficking drugs. We will avoid comments. The italics indicate some of the features that should be taken into account. The information given must be considered simply as an orientation. By definition, nobody can know anything accurately on these matters.

Part one.

Anonymous currency (metal or paper) prevents from anticipating, discovering and condemning most of the criminal and punishable actions.

Some figures for 1985 in Italy are terrifying: the company Crimen S.A. invoiced 15.000 billion pesetas in one year, one fourth of the gross national product. «Under its different forms (Maffia, Camorra, etc.), and in several activities which go from prostitution to the stealing of works of art, going through the traffic of drugs and extortion, organized crime entails a business of about 15.000 billion pesetas per year and gives «work» to almost one million people.» «It is the most important company in Italy.» «People consider less serious and with less responsibility to report them, the «most common» crimes, to which little by little it we get accostumed to.» «The trafficking of narcotics occupies the first place in the economic ranking of the Italian crime industry.» «1. Drugs: three to six thousand billion. 2. Prostitution: one thousand and a half billion. 3. Arms: 400,000 million. 4. Blackmail: two thousand billion. 5. Stealing and holdups: two thousand billion. 6. Smuggling: 300,000 million. 7. Smuggling of works of art: 200,000 million. 8. Games of chance: 700,000 millions. 9. Currency traffic: a balance of 5.000 billion and yearly movement of 500,000 millions. 10. Several illegal activities: one thousand and a half billion.» «However, the difficulty to fight this great economic underground factory is enormous. In the first place the lack of jobs [...] urges many young people to resort to the crime enterprise. In the second place, there are easy profits in this underground job, even if it entails greater risks¹».

«Every day italian politicians, illegally pocket 900 million pesetas whether for personal ends or for their parties. Messrs. Corrupció S.A.'s turnover occupies the twelfth place among the Italian companies, after Olivetti and before Alitalia, If we sum up all the sorts of economic corruption with the political corruption in Italy, we come to the incredible figure of one thousand and a half billion pesetas per year²».

«Spaniards think that law only assists the wealthy. Of the 61 per cent who think that laws benefit some groups more than others, 84 per cent think that it is the «rich», the «powerful» or the «high classes» who are benefited, and only a 10 per cent think that it is the «government people», the «politicians» or the «socialists». 75 per cent think that when the time comes to apply the law, it is done in a different way depending on who is concerned³».

«Hidden economy will move 10.000 billion pesetas in 1989. Prostitution, procuring, resale, trafficking of drugs, capital flight, even the simple work done at home, are today in Spain a suitable ground for the generation and diffusion of hidden operations. Over three million Spaniards, according to the last study carried out by the Ministry of Economy, carry out some of these activities which are generally kept secret with the intention of evading taxes.» «This population, irregularly employed, produces between 15 and 25 per cent of the GNP, foreseen in about 42 billion pesetas in 1989.» «Every month spaniards spend 72,000 million pesetas in prostitution, which means about 900,000 million black money spent every year. With this amount, all the expenses presently accruing to the Instituto Nacional de Empleo (training and enterprises systems) could be metfor government grants⁴».

«The seven great Western States, with USA in the head, show a strong opposition to the setting up of a system for the control of international bank transfers of the black money obtained from the illegal drug trade [...]. They have shown opposition for the negative repercussions that this might have on the international financial system.» (!) «The results are evident: as long as drug dealers have the possibility to move around 300,000 million dollars every year, through the channels of the international bank system, not only will it be impossible for the production to drop and the demand of illegal drugs to decline, but, the risk of this enormous potential of corruption finally, completely rooting banks, police and governments, becomes increasingly greater». «It is possible that the shyness shown by the seven great states in taking actions against the economic Achilles' heel of the drug trade is partially conditioned by the weight of drugs in international trade (9 per cent of the total, that is double than the oil industry operations), but then there is no justification in having the main repression always falling on the small dealers and consumers⁵».

«We are not only worried by the damage to the consumers' health, but also by the participation of gigantic criminal bands which ruin the lifes of individuals and of groups, and, not the least serious, have taken possession of five or six countries in Latin America.» «A small number of criminals handles every year about 100,000 million dollars, more than the GNP of 150 of the 170 countries of the world⁶».

«Just in the USA the drug trade produces a gross income of about 100,000 million dollars. A study by WEFA, concerning the year 1986, reckoned 65,700 million dollars as the gross income of organized crime. These huge figures represent at least 50 per cent of the enormous and destabilizing ball of black money which drifts over the planet looking for a legal image. The simple fiscal fraud gives origin to the other half of this ball, which is achieved with the funds coming from other forms of crime and smuggling, from trafficking of arms, to illegal commissions and briberies. It is apparent that the ball cannot roll without finding a way in the international banking system⁷».

«Complaints lodged in the USA uncovered an operation coordinated by the CIA, with a contribution of 10 million dollars made by the Colombian «Medellín cartel», earmarked for the Nicaraguan «contra». «Drugs are outlawed», discloses a USA anti-drugs agent, «but its money is appreciatively received⁸»».

«The Banca d'Italia asks the European bankers to join together to avoid recirculation of dirty money. Cosa Nostra will try to take advantage of the single European market coming into force for its criminal purposes. The Governor of the Banca d'Italia has said that it is necessary to carry out a study of the tools and methods of action «in order to render more effective the research activity» of those fighting against Cosa Nostra and to protect the banks from «being taken advantage of by organized crime. [...] One of the most frequent actions is to introduce the requirement to record the important financial import operations and those taking part in them, in order to allow the researching authorities to recreate the financial flows of unlawful origin⁹»».

«With the huge amounts coming from the drugs trade, the maffiosi try to get into the board of directors of the great banks and of financial companies «as honourable men».» «To avoid these incomes to be whitewashed and the Maffia getting into the banking system, the governor of the Banca d'Italia has set up, among others, the following rules for the Italian banks: cash deliveries of over 20 million lire must be recorded, and all the documents concerning several operations must be kept¹⁰».

«The Maffia is today in a position to jeopardize the autonomy of the companies, distorts free competition and destabilizes the field of financial intermediation. The financial power of the Maffia is a bomb with delayed fuse for the international financial system. With over 600 companies specialized in the financial leasing, personal loans or real estate credits, Sicily has a density of companies derived from the bank of the highest in Italy, while its industrial or trade activity does not justify it. Oddly enough these societies are concentrated in areas where the influence of Cosa Nostra is higher¹¹».

The Government representative for the Plan on Drugs thinks that «it is relatively easy to conceal the origin of deposits coming from the traffic of drugs by means of a number of financial operations. In face of this, the hardening of the rules on financial movements «has had, as a consequence, a deterioration in the political image of legislators rather than an impairment the movement of black money¹²».

Second part.

Anonymous currency makes impossible the creation of a trustworthy measuring system, exact and thorough, to avoid forgery and manipulation of facts.

Professor Santos M. Ruesga (1988) thinks that the effects of the expansion of hidden economy may be located on three levels:

The results obtained must be handled with caution, and it must be pointed out that the methods of direct evaluation, as much as the indirect ones, show important deficiencies in capturing the complex reality of the unobserved area of economy.«It becomes more and more evident that there is a need to round off and improve the statistic systems which are used as a basis for the national accounting, in order to fill the voids which can be found in them, and therefore cover the fields of activity not entered in the books¹³». After all these precautions, in spite of long lists of varied and contradictory evaluations for every State, it shows a table from where it can be deducted that the average of hidden economy in the OCDE countries in 1978 might have been 9 per cent of the GNP, and that in two years (from 1978 to 1980) it had increased about 5 per cent.

«From my position as a statistics expert I have observed that in our country the lack of rigour is common, and goes from the inadequacy and the poor quality of the basic information, to the treatment and the patterns which are built on them, sometimes as pretentious as ineffective. The low statistical and mathematical training of the economists educated in the Spanish universities leads sometimes to an indiscriminate appreciation for complex and unintelligible applications of these methods. Many of the basic facts (of the input-output tables, of national, regional and even provincial, quarterly... accounting) used for the models are already the result of subjective evaluations; the objective feature of the statistical tests appears then to be trimmed from the beginning, which happens markedly in our country. But to give up the practice of complicated econometric applications because the poorness and low quality of the basic information does not justify it, is a very difficult decision for those who enjoy the delight of such applications. Moreover, there is always the excuse that the models may put in evidence the inconsistency of the basic information and may even correct it¹⁴».

«Also in the social engineering of the economic policy it is useful to have these equation cushions among which the responsibility of action can be concealed. This is the reason why politicians, consultants and engineers sometimes prefer more complex and unintelligible models, without knowing for sure that they will supply better forecasting results than other easier and handier ways. In any case the ambivalence of these techniques must be pointed out, since, on the one hand, they are greatly helpful to study the behaviour and evolution of some given variables which allow to compare and improve the original formulae, by means of completely lawful soundings, but which, on the other hand, offer a wide field of operations to justify, with supposedly scientific arguments and preconceived ideas.

«This is the direction of Harrod's interpretations, who shows is the most realistic manner the possibility that «macroeconomic engineering tries to maximize the electoral possibilities of the political party in the government at any time, but is not as a result of a rational calculation of what is best for the national wellbeing¹⁵».

Third part.

Present day currency hampers the experimental comparison of the economic theories for lack of a complete and consistent measuring system.

«'Whichever its interest, wheter it has a powerful or static logical structure, whether it is expressed in a mathematical way, any theory which cannot be compared with empirical information, or in disagreement with the observed facts, has no scientific value¹⁶». These affirmations may seem commonplace, and to a certain extent they are, but if they were rigourously applied, considerable portions of standard economy would sink¹⁷».

«In the so-called «hard» sciences, the most daring speculations must sooner or later face experiments and observations which carry out a permanent selective pressure; in economy, on the contrary, we have the picturesque situation that there is no commonly accepted standard to reject proposals, except that of formal inaccuracy. The concern to systematically compare theoretical propositions and factual statements, is often absent in «top» research. This is, in my opinion, a regrettable situation which must be overcome. Our work tries to move the opposition of rival approaches to the ground of empirical verifications, in order to improve the objective evaluation of merits and discredits¹⁸».

«Taking integral economies for a model in a meticulous way, needs the setting out and resolution of thousands or millions of simultaneous equations. The result is that these models can never be verified, because there is no way to know all the structural parameters presumed or postulated, and for the time being there are no tools able to process all the potential information with a view to provide a forecast to be compared with the effective information. As long as this situation is not overcome, while connections are not found (whether partial and indirect) with the plane of reality, it should appear evident that the risk that theoretical speculations in economy are no more than theological entelechies, empty of factual contents, is high. It is not a figurative warning; as a matter of fact, most of what is published as a peak research in economic theory shows this feature. Under a formal, some times overpowering, façade, substantial results are conspicuously absent; lemmas and theorems are demonstrated according to rigourous, mathematical procedures and rules, but the factual truth of the propositions remains always in the most absolute darkness, as if it had no importance¹⁹».

«Often the standard economic theory appears in the eyes of literary people as a truly scientific and mature knowledge. This is just an illusion. The profuse utilization of mathematical techniques of intermediate and even higher level, some times disguises and conceals enormous weaknesses of the layouts and the categories commonly used which, often dull restlessness and block other progress lines²⁰».

Conclusion.

All the facts which have been weaved together in the three parts are explosive. So much so, that it is preferred no to accept them. If we did, we would be caught by a terrible panic. The situation is chaotic, in spite of the appearance set «in order» by a society of «image». Of these matters we know very little, and the little we know is frightening. There is no theoretical guide, and the little there is cannot be compared.

Certainly, all this is very complicated. Not everything is, nor will be, accountable or documentable. Evidently, not all is an instrumental problem. But as far as it can be, why shouldn't we try to solve it? Couldn't this help to reduce some of its unembraceable complexity? How can we document crime? How can we obtain reliable information? How can we work out theories to be compared with facts? Here are some of the unsolved questions.

Notes:

¹«Crimen S.A.», El País, 29.9.1985.
²«La corrupció política mou a Itàlia mil milions diaris de pessetes», Diari de Barcelona, 29.11.1987.
³La Vanguardia, 11.5.1988.
⁴La Gaceta, 7.4.1989.
⁵«Drogas y finanzas», El País, 24.9.1989.
⁶«El semanario The Economist pide la legalización del consumo y distribución de las drogas», El País, 4.2.1989.
⁷«La gran bola negra», El País, 18.12.1989.
⁸«Bancos de blanqueo», El País, 22.9.1988.
⁹«El Banco de Italia pide a los banqueros europeos que se unan para impedir el reciclaje del dinero sucio», La Vanguardia, 8.4.1989.
¹⁰«Campaña del Banco de Italia para prevenir el 'blanqueo' de dinero negro de la Mafia», El País, 9.4.1989.
¹¹«El dinero de la Mafia amenaza los circuitos financieros de la CE», Cinco Días, 29.5.1989.
¹²«Diez maneras de 'blanquear' el dinero del narcotráfico», Expansión, 29.11.1989.
¹³Santos M. Ruesga, «Al otro lado de la economía. Cómo funciona la economía sumergida en España», Editorial Pirámide, Madrid, 1988, pp. 57-58.
¹⁴José Manuel Naredo, «La economía en evolución. Historia y perspectivas de las categorías básicas del pensamiento económico», Siglo XXI, Madrid, 1987, p. 392.
¹⁵Ib., p. 349.
¹⁶Ib., p. 349.
¹⁷Alfons Barceló, «Elogi de Maurice Allais», Diari de Barcelona, 19.10.1988.
¹⁸Alfons Barceló, «Teoría Económica de los Bienes Autorreproducibles», Oikos-Tau, Barcelona, 1988, p. 8.
¹⁹Ib., p. 199.
²⁰Ib., p. 199.