9 Underground Economies - And Greece

By Justin Rohrlich  DEC 22, 2011 10:10 AM

From Somalia's "pirate stock exchange" to the flourishing illegal organ trade in Egypt, there are some making money hand-over-fist, under the table.

 


The fortunes of the world's legitimate economies may rise and fall, but the global black market is currently booming.

From Somalia's "pirate stock exchange" to the flourishing illegal organ trade in Egypt, there are some making money hand-over-fist, under the table.

We took a look at nine "alternative economies" -- and Greece -- to find out how people make do on the margins.

Hackers
According to Wired magazine, the Romanian city of Râmnicu Vâlcea is known “among law enforcement officials around the world” as Hackerville.

Reporter Yudhijit Bhattacharjee maintains that the term is “something of a misnomer; the town is indeed full of online crooks, but only a small percentage of them are actual hackers.”

Explains Bhattacharjee in a feature published last January:

Most specialize in ecommerce scams and malware attacks on businesses. According to authorities, these schemes have brought tens of millions of dollars into the area over the past decade, fueling the development of new apartment buildings, nightclubs, and shopping centers. Râmnicu Vâlcea is a town whose business is cybercrime, and business is booming.


When Bhattacharjee asked a cab driver what all the gold-chained twenty- and thirty-something men he saw around town driving BMWs and Mercedes did for a living, the response was, with a laugh, “They steal money on the Internet.”

But it’s not the “gleaming storefronts” or the new construction which “grinds ahead on nearly every block” that mark Râmnicu Vâlcea as the epicenter of Internet crime. No, it’s the more than two dozen Western Union locations within a four-block area that give Râmnicu Vâlcea’s “secret” away.

Prison
In 2004, smoking was banned in all federal institutions, and cigarettes, which were the de facto currency until then, were replaced by…are you ready for this?

Mackerel.

In a 2008 interview with the Wall Street Journal, Ed Bales, a prison consultant, said that mackerel had become the currency of choice in smoke-free institutions.

These days a haircut goes for two “macks”, which are small pouches of the fish, at about $1 each.

A “Fiend Book”, or a pornographic magazine, goes for as few as 40 macks (if it’s out-of-date and stained …use your imagination) and as many as 100 (if it’s reasonably up-to-date and bodily fluid-free).

Craving a bit of heroin? Be prepared to fork over 50 macks.

And, if it’s a cellphone you’re after, that’ll be 400 macks, please.

Mark Muntz, president of supplier Global Source, told the Journal that his company unloaded about $1 million worth of mackerel to commissaries in federal penitentiaries in 2007, though it’s not particularly popular elsewhere.

“We've even tried 99-cent stores," Muntz said. "It never has done very well at all, regardless of the retailer, but it's very popular in the prisons."

Somali Pirates
Somali pirate hijackings are financed by what may well be the world’s most unusual “stock market.”

A pirate interviewed by Reuters in 2009 says that, in Haradheere, 250 miles northeast of Mogadishu, brigands set up an exchange of sorts to fund their activities.

“Four months ago, during the monsoon rains, we decided to set up this stock exchange," he said. "We started with 15 ‘maritime companies’ and now we are hosting 72. Ten of them have so far been successful at hijacking.” 

He explained that, “The shares are open to all and everybody can take part, whether personally at sea or on land by providing cash, weapons or useful materials.”

After a ransom payout for releasing a Spanish vessel, “investor” Sahra Ibrahim, was lined up outside the exchange waiting for her cut.

“I am waiting for my share after I contributed a rocket-propelled grenade for the operation,” she said. “I am really happy and lucky. I have made $75,000 in only 38 days since I joined the company.”

Between June and September every year, the number of hijackings drops, as monsoon season makes it difficult for pirates to operate the small skiffs used in attacks. Come autumn, the attacks begin once again, which are so frequent that Frontline Ltd. (FRO), the world’s largest operator of oil supertankers, which transports cargo for companies including ExxonMobil (XOM), BP (BP), and Chevron (CVX), has in the past considered avoiding the Gulf of Aden altogether.

Pirates know that the value of the ship and its cargo are usually worth far more than however much they are demanding, and a few million dollars is a drop in the bucket in relative terms for the ship operator. Whatever risks there are in attacking -- like the chance of being caught by the international task force of naval vessels patrolling the area, for one -- the risk of not collecting a ransom is lowered still, as corporate “Kidnap & Ransom” insurance today seems to be the rule, not the exception. 

North Korea
The North Korean government has reportedly earned itself hard currency over the years by engaging in drug dealing, weapons manufacturing, and top-drawer counterfeiting. But the proletariat makes ends meet in decidedly more pedestrian ways.

"A North Korean family needs 90,000-100,000 North Korean won for living costs per month, but workers at state-run factories or enterprises earn a mere 2,000-8,000 won," one South Korean official told the Chosun Ilbo newspaper this fall. "So North Koreans have no choice but to become market traders, cottage industrialists or transport entrepreneurs to make up for shortages."

With the ration system in tatters, North Korean citizens survive by moonlighting from their state duties as private tutors, carpenters, and taxi drivers.

"Ordinary North Koreans have become so dependent on the private economy that they get 80-90% of daily necessities and 60-70% of food from the markets," the official said.

Public School Cafeterias
Though the Los Angeles Unified School District has received accolades for its new, healthful lunches, the appearance of quinoa and whole wheat bread has created “an underground market for chips, candy, fast-food burgers and other taboo fare.”

Last week, Van Nuys High School juniors Iraides Renteria and Mayra Gutierrez told the LA Times they considered the new school fare "nasty, rotty stuff," as they pulled three bags of Flamin' Hot Cheetos and soda from their backpacks -- which they very well may have purchased from one of the junk food “dealers” on campus.

At Van Nuys High, a Junior ROTC officer and an art teacher have been caught selling candy, chips, and instant noodles to students. And, as Hank Cardello, the author of Stuffed: An Insider's Look at Who's (Really) Making America Fat, and a former food executive with Coca-Cola (KO), General Mills (GIS), and Cadbury-Schweppes (KFT), pointed out in the Atlantic, candy dealers have sprouted up wherever fresh food is sold:
 

• Following the passage of the Texas Public School Nutrition Policy, which banned candy, enterprising students at Austin High began selling bags full of candy at premium prices, with some reportedly making up to $200 per week.

• Similarly, young entrepreneurs at one Boca Raton (Florida) middle school make runs to the local Costco (COST) and buy candy bars, doughnuts, and other high-calorie snacks in bulk. They then offer these goodies for sale in an environment that has supposedly eradicated such goodies.

• An eighth-grade student body vice president in Connecticut was forced to resign after buying Skittles from an underground "dealer."

• The U.K. has also seen its share of black market trade in banned foods, snacks, and beverages, with schools in Oxford, Dorset, and Essex reporting healthy underground markets trading in food contraband. The plots ranged from kids selling McDonald's (MCD) hamburgers in playgrounds to bicycle-riding entrepreneurs hauling bags of soft drinks and milk chocolate for sale.

Bushmeat
Meat from roughly a dozen animal species -- including porcupine and pangolin, a scaly relative of the anteater -- is “commonly smuggled into France to cater to the country’s African community,” according to Genevieve Oger of Public Radio International’s “The World.”

One Congolese immigrant in Paris told her back in March, “You can’t make the difference between fish or chicken or beef. But in Africa, you can make the difference between porcupine, snake, crocodile. All animals have got a unique taste.”

That’s why he eats bushmeat -- which can land a seller in jail for up to four years -- twice a week.

There’s a thriving market for illegal bushmeat in the U.S. as well, which Dale Peterson, author of Eating Apes (University of California Press, 2003), recently noted is more common than one might think.

"If you go into a big city [anywhere in the world], you can buy ape meat,” he said. “It's more expensive than domestic meat, but people will pay for it because they want to be reminded of life in the village where their grandparents are.”

Peterson says the bushmeat trade is “not just a conservation problem but a serious public-health problem,” as the “hunting and consumption of ape meat is the origin of HIV1,” the virus that causes AIDS.

Scrap Metal
As commodity prices rise, so do commodity thefts.

Church roofs have gone missing as the price of lead hit all-time highs. Used fryer grease has disappeared from behind fast food restaurants and resold for biofuel. And thieves in New Castle, Pennsylvania stole an entire bridge for scrap.

The latest trend in metal theft?

Tubas.

“It’s exclusive to the tubas every time; they are the most valued instrument for any band,” band director Ruben Gonzalez Jr. of Southern California's South Gate High School told ABC News earlier this month. “We currently have more players than we do instruments.”

South Gate has lost five of its eight tubas, valued at $30,000. However, South Gate is still in better shape than nearby Huntington Park High School, where thieves made off with the school’s last tuba. Fremont High School saw 13 tubas go missing, and Centennial High School lost eight.

Reporter Jenna Harrison explains that some of the stolen tubas are likely being “melted down for the high priced brass, but it’s more likely that the high priced instruments are being sold  -- there’s been a recent resurgence of tuba-based banda music in  Hispanic communities.”

While no one has put a hard number on the economic impact of tuba theft, Sam Hoober of NewsyType.com shows just how expensive theft -- no matter how pedestrian the item -- can be. According to Hoober, the Center for Problem Oriented Policing, part of the Department of Justice, claims that “stolen beer kegs alone cost the beverage industry an estimated $50 million in 2007, and the city of Philadelphia spent $300,000 between 2007 and 2008 to replace stolen manhole covers.”

Organ Trafficking
The Arab Spring and the fall of Egypt’s Hosni Mubarak have “left a shortfall” in the country’s law enforcement ranks. This, says the Wall Street Journal’s Joel Millman and Matt Bradley, “has been a boon for criminal organizations that traffic in human organs.”

Earlier this month, the Coalition for Organ-Failure Solutions, an international health and human-rights organization, released a report titled "Sudanese Victims of Organ Trafficking in Egypt," which told of traffickers “removing kidneys either by inducing consent, coercion or outright theft.… In some cases, sex trafficking was associated with incidents of organ removal. The victims include men, women, and children."

Far from being limited to Sudanese, victims are believed to include citizens of Eritrea, Ethiopia, Somalia, Iraq, Syria, and Jordan. Neither is the illegal organ trade limited to one country -- or region -- of the world.

While selling one’s organs was once legal in India, legislation outlawed the practice in 1994. The Philippines finally banned organ sales until 2004. Iran, however, has no restrictions on kidney sales. And China harvests organs from executed prisoners, which is fully legal as long as the condemned signs a release before he or she is put to death.

In 2007, 26-year-old Daniel Tuck, an Englishman who found himself facing a £25,000 slot machine debt, discovered the hard way that the UK frowns upon the sale of human organs.

After offering one of his kidneys for sale in an Internet chatroom, Tuck wound up in Wolverhampton Crown Court, where he pleaded guilty to “offering to supply human material for transplantation.”

He was ordered to pay £250 in court costs.
 
Cocaine
The flaccid economy is proving to be a drag on banks, retail sales (yes, parents are even cutting back on diaper purchases), and New York City cocaine dealers.

This fall, Chuck Bennett of the New York Post pointed out "another sign of the stalled economy -- New Yorkers are ditching their coke habits."

“It is sort of on a slight but steady downward trend,” Dr. Stephen Ross, director of NYU’s Langone Center of Excellence on Addiction, told Bennett. “I treat patients in private practice. Many cocaine addicts tell me stories they don’t have enough money to buy it anymore.”

Drug dealers have been lamenting the sad state of the local economy for some time now.

In 2009, a coke dealer named "Eddie" told New York magazine's Adina Wise that, before the recession, he was "making deliveries every night of the week."

"Back then, I could afford to pick and choose," he said. "If I didn't know the address -- forget it. If I didn't like their accent -- forget it. On most nights, there were more people wanting than I could get to."

But, as one former customer said, "None of my friends mess with that anymore. It's like they grew up when the banks died."

And, just like that, the business changed.

"I see high-end guys hawking in parks now," a dealer named "Sammy" told Wise. "And these are guys that used to sell to Paris Hilton's crowd."

Greece
“Greece is really skating on the edge,” Thomas Costerg, an economist at Standard Chartered Bank Plc in London, tells Bloomberg Businessweek's Maria Petrakis.

Writes Petrakis:

Unemployment is close to a record, with more than 40 percent of those aged under 24 out of work. The economy is set to shrink for a fifth year, the worst slump since World War II, and Greeks are sending bank deposits abroad at the fastest rate in at least a decade.

Seven general strikes have shut down the country this year, leaving garbage piling up in the streets and stranding travelers. Angry protesters have attacked politicians at public gatherings and outside the Greek Parliament, pelting them with yogurt and eggs, and calling them traitors. In Athens, homeless people sleep overnight in central Syntagma Square, the venue for the protests in front of parliament, amid the trees festooned with Christmas lights. Illegal immigrants with shopping trolleys roam the streets of central Athens salvaging disused water heaters, DVD players and other items left on the sidewalks of the city.

Murders have doubled since 2006. Home break-ins are "on track to set new records."

Sakis Tsaoussis is the president and CEO of Athens-based Pyrsos Security. Like an investor who shorted the euro six or so months ago, Tsaoussis isn't complaining. He tells Der Spiegel that the company's "services for private clients have increased by up to 50 percent in recent months and he has responded to demand by adding 100 new employees to his 1,000-person firm in the past year."

The populace is pointing its collective finger at their elected officials.

“We hate all politicians,” one boutique owner told Landon Thomas Jr. of the New York Times. “We think they are responsible for all this.” And one truck driver says, “I am impressed that the people have not yet stormed into Parliament and burned the politicians alive -- like a souvlaki.”

That's why Greek politicians "rarely venture out in public." And when they do make an appearance, writes Thomas, "even the most obscure member of Parliament is accompanied by at least one bodyguard."
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