draining development.pdf - Khazar University

Governance and Illicit Flows 55benefits can begin (perhaps Afghanistan in 2010). The analysis of whatis socially damaging needs to be fundamentally reevaluated and redefinedin these contexts, and this has implications for our assessment ofillicit flows.The historical examples tell us that apparently predatory resourceextraction has been the precursor of the emergence of viable politicalsettlements that have generated longer-term social order and viable states(Tilly 1985, 1990). Yet, in contemporary fragile societies, new circumstancesmake it less likely that conflicts will result in the evolution of relationshipsbetween organizers of violence and their constituents thatresemble state building. First, natural resources can give organizers ofviolence in some societies access to previously unimaginable amounts ofpurchasing power, destroying incentives for internal coalition buildingwith economic constituents in the sense described by Tilly. Second, thepresence of advanced countries that manufacture sophisticated weaponsand can pump in vast quantities of resources in the form of military assistanceor aid also changes the incentives of domestic organizers of violence.Instead of having to recognize internal distributions of power andpromote productive capabilities, these people recognize that the chancesof winning now depend at least partly on international alliances and theability to play along with donor discourses. Domestic organizers who tryto fight wars by taxing their constituents in sustainable ways are likely tobe annihilated by opponents who focus on acquiring foreign friends.These considerations should give us serious cause for concern in talkingabout IFFs in these contexts in which the indirect effects of financialflows through the promotion or destruction of political stability arelikely to far outweigh the direct effects on growth. By its nature the constructionof politically stable settlement involves winners and losers:strategies of state or polity formation are not neutral in any sense.The terminology of illicit flows in these contexts should preferably beavoided, or its use should be restricted to financial flows that are illicitexplicitly from the perspective of the observer. For instance, the flow ofnarcotics incomes, grey or black market transactions in the global armsmarket, or sales of natural resources by warlords may go against the legitimateinterests of outsiders, and they are entitled to declare the associatedfinancial flows as illicit from the perspective of their interests. This is justifiableif these flows are causing damage to the interests of other countries.