Underworld Economics

Raymond Baker & Jennifer Nordin on dirty money:

This enormous disappearance of capital from poor countries—perhaps a cumulative $5 trillion in recent years—should be of keen interest to economists. Billions of dollars in foreign aid have flowed into developing countries over the last several decades—on average $50 to $70 billion a year. These countries, home to 80 percent of the world’s population, often have weak le- gal and administrative structures, large gangs of drug dealers and racketeers, and wealthy elites who want their money elsewhere. The estimated $500 billion in illicit outflows eviscerates foreign aid and contributes to deeper poverty for billions of people. Despite the impact of trillions of dollars of dirty money flowing out of poorer countries, we are still at step one: measuring it.

International flows of dirty money also have implications for the (mis)measurement of trade volumes and balances.