The cost of protection racket in Sicily

Global Crime

Volumn 9, Issue 3, 2008, Pages 221-240

  Asmundo, Adam ^a   Lisciandra, Maurizio ^b  

^a UNIVERSITY OF PALERMO   (Italy)

^b UNIVERSITY OF BOLOGNA   (Italy)

Author keywords

Cost of crime; Extortion; Organised crime; Racket

Indexed keywords

EID: 48549096657     PISSN: 17440572     EISSN: 17440580     Source Type: Journal    
DOI: 10.1080/17440570802254338     Document Type: Article

References (51)

1. This analysis does not take into account extortion carried out 'in kind', that is with merchandise handed over by shop owners, a rather common practice in the commercial sector. A survey by Confesercenti (2007), conducted on an Italian national level among 60,000 associates, poses at 55% the percentage of firms affected by this form of extortion (22% for a value greater than 10,000 Euros).
2. For a detailed definition and subdivision of costs of crime, see S. Brand and R. Price, 'The Economic and Social Costs of Crime', in Home Office Research Study (Economics and Resource Analysis - Research, Development and Statistics Directorate, Home Office, 2000).
3. It is an obviously perverse and ambiguous kind of protection, based on coercion and violence, and in most cases victims have no choice. See also D. Gambetta, The Sicilian Mafia: The Business of Private Protection (Cambridge, MA: Harvard University Press, 1993)
4. D. Gambetta, 'Mafia: The Price of Distrust', in Trust: Making and Breaking Cooperative Relations, ed. D. Gambetta (Oxford: Department of Sociology, University of Oxford, 2000), http://www.sociology.ox.ac.uk/ papers/gambetta158-175.pdf
5. Gambetta (2000) points out and widely explains the enduring social and economic costs of distrust induced by the mafia, 'where people do not cooperate when it would be mutually beneficial to do so; where they compete in harmful ways; and, finally, where they refrain from competing in those instances when they could all gain considerably from competition. (...) In addition, the mafia is exemplary of those cases where the public interest lies in collapsing rather than building internal trust and cooperation.' Gambetta, 'Mafia: The Price of Distrust'.
6. There are complementary primary benefits, consisting for instance in avoiding the insurance cost of the operational risks related to malicious mischief, thievery and robbery.
7. The supplier of protection would force entrepreneurs to buy 'goods' through retaliation whose need itself is in turn imposed through actions which protection should prevent. Today, free exchange is no longer available, the existence of demand is strictly related to the existence of supply but, in this case, supply is not market-maker but rather need-maker. Differently, the origins of the mafia were related to the exchange of protection for monetary benefits (i.e. during the baronial control of their estates through field guards; see for instance, O. Bandiera, 'Land Reform, the Market for Protection, and the Origins of Sicilian Mafia: Theory and Evidence', Journal of Law, Economic, and Organization 19, no. 1 (2003): 218-44) at the same fashion as described by Varese for the Russian mafia after the transition, where the State was an 'erratic, predatory, and non-impartial supplier of protection',
8. F. Varese, The Russian Mafia: Private Protection in a New Market Economy (Oxford: Oxford University Press, 2001), 7.
9. 'Finds Rackets Cost More Than War Did', New York Times, September 21, 1932.
10. A. Smith and F. Varese, 'Payment, Protection and Punishment: The Role of Information and Reputation in the Mafia', Rationality and Society 13, no. 3 (2001): 349-93.
11. Economist, 'Crime in Russia: The High Price of Freeing Markets', Economist, February 19, 1994, 57.
12. C. Moser and C. McIlwaine, 'Urban Poor Perceptions of Violence and Exclusion in Colombia. Conflict Prevention and Post-Conflict Reconstruction' (Washington, DC: The International Bank for Reconstruction and Development/The World Bank, 2000).
13. Brand and Price, 'The Economic and Social Costs of Crime'
14. P. Mayhew, 'Counting the Costs of Crime in Australia: Technical Report, Technical and Background' (Canberra: Australian Institute of Criminology, 2003)
15. R. Dubourg and S. Prichard, 'The Impact of Organised Crime in the UK: Revenues and Economic and Social Costs' (London: Home Office Online Report 14/07, 2007)
16. Transcrime, 'I Costi Della Criminalità in Trentino Ed in Italia: Presentazione Della Metodologia E Tentativi Di Stima' (2006).
17. In this respect, a word of thanks goes to Attilio Scaglione for the onerous work of reading acts and aggregating data.
18. It is important to point out that, had a victimisation survey been conducted, the only possible conclusion would have been that the issue of racketeering in Sicily is absolutely marginal. In fact, most entrepreneurs, faced with the concrete possibility of heavy retaliation, prefer to deny having been intimidated by the mafia.
19. Yet, we are unable to distinguish the entries coming from victims complaints from those related to mere investigative activity.
20. These requests are usually put forward during the start-up stage, especially concentrated in the construction sector. Though remarkable in their amount, they are not current costs and therefore will not be taken into consideration within this study.
21. Where the amount of protection money periodically paid is known, its monthly value in the last available year has been made current using monetary values of 2006. For example, if it is certain that a firm has paid a certain amount until 1995, then this figure has been made current at 2006 prices.
22. Theoretical support to our approach can be found in C.S. Wallace, Statistical and Inductive Inference by Minimum Message Length (New York: Springer, 2005)
23. T. Mitchell, Machine Learning (McGraw Hill, 1997)
24. U. Fayyad and R. Uthurusamy, 'The Kdd Process for Extracting Useful Knowledge from Volumes of Data', Communications of the ACM 39, no. 11 (1996): 27-34
25. J. Han and M. Kamber, Data Mining: Concepts and Techniques (Morgan Kaufmann Publishers, 2001).
26. On reducing error variability, see P.N. Johnson-Laird, Human and Machine Thinking (Mahwah, NJ, 1994), 71-86 and 108-14.
27. This paper is based on a 2-year analysis of reports and investigations by the nine Sicilian Procure della Repubblica (District Courts); for further details, see A. La Spina, 'I Costi Dell'illegalità - Mafia Ed Estorsioni in Sicilia', in Fondazione Rocco Chinnici, ed. A. La Spina (Bologna: Il Mulino, 2008). Our dataset has been gradually expanding with new acquisitions over the period indicated. As in any inductive inference, we cannot be sure that our conclusions are a logical result of the premises, but we may well be able to assign a remarkable degree of likelihood to each conclusion, as shown below.
28. For example, especially, the strong preference bias related to generalising small evidence with respect to the whole statistical universe; see, for instance, SOS Impresa - Confesercenti, 'Le Mani Della Criminalità Sulle Imprese' (Roma, 2007), where an unbalanced sample of listed small firms has been assumed as a representative of a far more complex business universe.
29. A proper definition will be given in Section 5.
30. Available evidence shows that such percentage is extremely variable through sectors of economic activity, according to firm size and localisation.
31. Investigations and judicial evidence show that extortion is a widespread and multiple phenomenon as it usually hits single local units/plants/ branches rather than 'firms' (those which are made of one or more units).
32. T. Ohlemacher, 'Viewing the Crime Wave from the Inside: Perceived Rates of Extortion among Restaurateurs in Germany', European Journal on Criminal Policy and Research 7 (1999): 43-61.
33. T. Frye and A. Shleifer, 'The Invisible Hand and the Grabbing Hand', American Economic Review 87, no. 2 (1993): 354-58.
34. Interviews carried out in Calabria and in Sicily, for example, indicate that in the former region, an average 80% of interviewees believe racketeering and usury are not very common. Similarly in Sicily, only 10% of entrepreneurs believe protection racket to be widespread, while for 58% it is little present and for the remaining 31.4% it is altogether non-existent. See CENSIS - Fondazione BNC, 'Impresa E Criminalità Nel Mezzogiorno' (Roma, 2003).
35. The Calabrian figure is astounding, in the face of apparent difficulties to set up businesses in a context objectively plagued by a widespread lack of legality; the Sicilian figure instead, being surprisingly lower than the Southern average, supports the endogenisation hypothesis made in the text.
36. This survey was carried out among associates.
37. See Confesercenti, 'Le Mani Della Criminalità Sulle Imprese', and Confcommercio - Gfk Eurisko, 'La Mappa Della Criminalità Regione Per Regione', http://www.confcommercio.it/home/ indagine-per-sito.doc_cvt.htm
38. It is convenient to highlight the prevailingly symbolic value - from a strictly economic viewpoint - of said request (only 1 euro a day) but, at the same time, the strong value that the very symbol takes on in 'cultural' terms, regarding the presence and pervasiveness of racketeering down to the lowest and most precarious levels of economic activity.
39. With respect to both left and right tails of the data distribution.
40. The coefficient of variation is a normalised measure of dispersion of a dataset (a probability distribution). It is defined as the ratio of the standard deviation s(here n-based) to the mean.
41. The distribution is right-skewed (symmetry index 2.63); the right tail is longer and the main part of the distribution (i.e. prevalent evidence) is concentrated on the left-hand side of the curve.
42. The authors are aware that this estimator is biased, but has a smaller mean-squared error than the usual unbiased estimator, which is n/(n - 1) times this estimator.
43. Not accounting for outliers, the average figure goes down to approximately 458 euros; see Table 3.
44. Firms with between one and five employees: 93.1% of total; 6-19 employees: 5.8% in census data ISTAT, 'Censimento Generale Della Popolazione, Dell'industria E Dei Servizi' (Roma, 2001).
45. Manufacturing: 10.7%; construction: 6.4% of regional GDP in 2006; agriculture and fishing still amount to 4.1% of regional GDP (twice the Italian average).
46. Quite evidently, this procedure has excluded firms operating in Sicily but based in other regions. Numerically, their number should not substantially affect the evidence; it should be noted that these are often large firms, virtually immune (according to evidence) to extortion as here analysed. See A. Scaglione, 'Il Racket Delle Estorsioni', in I Costi Dell'illegalità - Mafia Ed Estorsioni in Sicilia, ed. A. La Spina (Fondazione Rocco Chinnici, Bologna: Il Mulino).
47. Agriculture is a particular case: Between 1995 and 1997, registered firms have grown from approximately 4000 to more than 115,000 (from 3977 to 115,252), then stabilising around 110,000 and thus increasing their weight on the regional total number from 1.7 to 28-30%. Such occurrence, mostly to do with a breaking-up process of business ownership (fostered on its turn by national and local regulations on the sector), can be an element of possible distortion in this analysis. In consideration of the little weight of protection money (as opposed to other means of pressure and conditioning) in the agricultural sector, as shown by surveys, a decision has been made not to exclude these data from subsequent elaborations, by adopting a specific correction coefficient so as to estimate the actual number of active firms. In line evidence and conclusions of F. Sotte, 'Imprese E Non'imprese Nell'agricoltura Italiana', Politica agricola internazionale 1 (2006), the national ratio has been applied to Sicily (i.e. to the approximated average of Southern Italy - Islands) between entrepreneurs (owners) and firms with an extension higher than 8 UDE [UDE: Unità di Dimensione Economica (Units of Economic Size); it is a standard measure of firms economic size. Each unit is equal to one RLS (Reddito Lordo Standard = Standard Gross Revenue, equal to about 1000 Euros)] found in the sector, equal to 17.2%.
48. Movimprese Database, CCIAA (Italian Chambers of Commerce).
49. There is a time difference between the two measurements. However, using the 5-year average in the first case, the resulting structural variation can be considered as significantly low.
50. With the notable exceptions of refineries, energy, gas and water utilities, airlines and R&D.
51. Confesercenti, SOS Impresa, 'Le Mani Della Criminalità Sulle Imprese', Eurisko, 'La Mappa Della Criminalità Regione Per Regione'.