Understanding Mobster Economy

Examining the effect organized crime has on the economy

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Hours after the FBI arrested 127 suspected mobsters Thursday, U.S. Attorney General Eric Holder appeared at a presser saying the Mafia posed "a major threat to the economic well-being of this country," and that the arrests "mark an important step forward in disrupting La Cosa Nostra's illegal activities."

Considering that suspected Mafia members were arrested in New York, New Jersey and Rhode Island, their operations must have been pretty far-reaching. So what is the effect of mobsters on the economy? And will this recent round of arrests make a difference?
  • They Had Their Hands In Everything, writes Ron Scherer at The Christian Science Monitor: "The scope of the mob's continuing crime activities, as detailed in a two-inch-thick stack of legal documents, included murder, loan-sharking, arson, narcotics trafficking, extortion, robbery, illegal gambling, and labor racketeering." The indictment also has them controlling the Cement and Concrete Works Union and extorting members of the International Longshoremen's Association.
  • What's the Toll It Takes on the Economy?  "It's difficult to quantify because these guys don't really file 10-Q statements with the FTC," says New York Daily News reporter Greg Smith speaking with Marketplace. "However, there are certain aspects of the mafia that are extremely predictable. One of them is their infiltration of unions. That's always been their big money maker because when they can control a union, they can extort a lot of money out of big business and that is the thing that goes up and down with the economy for them. They always have their other scams as well, but that's the big money maker for them."
  • It's All About Extortion, says former U.S. attorney Randy Mastro speaking with CSM: "The La Cosa Nostra is entrenched in certain industries, especially time-sensitive industries where they can control the timing and flow of goods and the labor force has an ability to impose extortionate demands." One example includes a racketeering scheme where longshoremen were forced to pay $500 and $5,000 each year to criminal syndicates.
  • How Does the Mafia React to a Weak Economy?  "They react the way everybody reacts to the economy. If the money isn't coming in from one place, they go try to find it somewhere else," says Smith.
One of the things that I saw recently was they showed in these mortgage frauds schemes that are kind of a reaction to the collapse of the housing market. So while they made some good money during the housing run-up by controlling, for example, construction unions, also controlling certain corrupt contractors that were making a lot of money when the housing market was on the way up. When the thing collapsed, they then switched over and got into mortgage fraud, which is also apparently quite a lucrative way of making money.
  • The Mobs Will Remain Resilient, says Edward McDonald, a former federal prosecutor involved in organized crime cases: it won't cripple organized crime, but is "more of a dent. A big dent. There are a lot of people out there who can replace them...They are an institution, part of the fabric of life in the New York metropolitan area. Young people are still attracted to the power and glamour of organized crime. They still aspire to get into it."
This article is from the archive of our partner The Wire.