The Breaking Time

Law-less zones: when authority and anarchy shake hands

Just another Pirate Utopia. Photo by Laura K. Gibb.

Some interesting news out of Copenhagen, as the squat of Christiania just won long-sought autonomy:

"'It's not a perfect society, but one of the nice things about being here is that it doesn't have to be," says one resident, who calls himself only Vesinger.

Vesinger delivers his assessment of Christiania with obvious affection. He has lived here with his two little boys for six months, a recent convert to the Christianian way of life.

And it is not hard to see why this tiny enclave just south of Copenhagen's city centre is an attractive location for a family.

Trees and plant life thrive free from human interference and pesticides. It is more racially diverse, culturally open and creatively expressive than your average Danish neighbourhood.

Christiania has been a squat for nearly 40 years, ever since a group of enterprising hippies broke down the fences and set up in the disused military barracks.

And after a recent government ruling, this small society is celebrating its independence as a kind of semi-autonomous region. They call it Freetown Christiania.

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Under the new rules, residents are allowed to buy their land at knock-down prices and the remainder will be put up for rent by the state.

Although this effectively turns a hippy haven into a local council for Ms Larson, it means for the first time they can exist in security as well as peace.

"It will be a new way of living," she says.

"We do not have to worry anymore about whether the government will throw us off our land. Hopefully now that we have won our right to own the land, then we will be able to feel more secure and start to deal with some of the problems that exist here."

Ah, "we won, now what?" the question would-be revolutionaries in every field have to grapple, specifically, Christiania's relatively lawless status has drawn increasingly violent drug dealers:

There have been outbreaks of violence including gun battles on the streets as rival gangs fight for control of Christiania's drugs trade.

On the notorious Pusher Street, skinheads with pitbulls glare menacingly from behind their stalls draped in camouflage netting at anyone who looks like they might be there to do anything other than buy drugs.

Society: never a simple issue.

Christiana's problems aren't new ones either. Back in 2008, I did a brief write-up on the history of the Kowloon Walled City for Coilhouse. Instead of hippie idealism, in that case the lawless zone was founded on a far more mercantile culture, but it faced many of the same problems. As I summed it up then:

Yes, the anarchistic types out there are correct when they say that the Walled City is evidence that humans can co-exist, and even thrive, without laws constantly piled on them. But it’s not that simple. After all, without massive police raids (government incarnate), the place would have probably become a mob-run tyranny. Its residents had a degree of freedom that anyone who comes home to piles of bills or endless forms can’t help but envy. They also had darkness, a lower life expectancy, filthy living conditions and huge numbers of drug addicts.

If the problems with the drug gangs keep building, Christiania will probably need police raids, ironically, to keep its ungoverned character. Anarchists, by ideology or default (as in Kowloon) have never been particularly good at handling organized violence. At the same time, while a hell of a lot greener than the urban labyrinth that was Kowloon, many of the other traits seem similar: functionally self-governing, relatively peaceful, ensconced in a niche and free of some of the surrounding society's ills.

This brings up a paradox: in both cases, lawless areas had their lawlessness preserved by, well, the law. So, what does one do with that particular contradiction?

Financial innovation: The world's first black market stock exchange

I would bet on these guys over Wall Street stock traders any day

Fascinating news from the Wall Street Journal:

The world's first pirate stock exchange was established in 2009 in Harardheere, some 250 miles northeast of Mogadishu, Somalia. Open 24 hours a day, the exchange allows investors to profit from ransoms collected on the high seas, which can approach $10 million for successful attacks against Western commercial vessels.

While there are no credible statistics available, reports from various news sources suggest that over 70 entities are listed on the Harardheere exchange. When a pirate operation is successful, it pays investors a share of the profits. According to a former pirate who spoke to Reuters, "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. . . . We've made piracy a community activity."

Prototypes of this have existed since time immemorial — successful organized crime operation usually have a "bank" — this is a new variation. Keep in mind the sheer scale of the international black market and the role drug money played in bailing out the financial system, and it gets even more interesting.

In a suitably anarchic place, it's easy to see a larger-scale version of this taking root and even prospering, especially if it acquired enough tendrils into the "legitimate" financial system.

The column ends by calling for increased embargoes, sanctions and strikes, which will probably work as well as most of those sort of measures do. Historically, piracy ends through a combination of two factors: ordered government and harsher local scrutiny. When Somalia gets an actual government in place, with authority over most of its territory, piracy will rapidly decline.

Until then, keep those sanctions coming. For the people in Haradheere, it's the equivalent of a factory opening up and offering everyone a job: only a fool turns it down.

Big Black Market: The drug money bailout

Imagine this map in a Charlotte banking executive's PowerPoint presentation

An investigation from The Observer reveals that Wachovia, a major bank, laundered billions for Mexican drug cartels:

During a 22-month investigation by agents from the US Drug Enforcement Administration, the Internal Revenue Service and others, it emerged that the cocaine smugglers had bought the plane with money they had laundered through one of the biggest banks in the United States: Wachovia, now part of the giant Wells Fargo.

The authorities uncovered billions of dollars in wire transfers, traveller's cheques and cash shipments through Mexican exchanges into Wachovia accounts. Wachovia was put under immediate investigation for failing to maintain an effective anti-money laundering programme. Of special significance was that the period concerned began in 2004, which coincided with the first escalation of violence along the US-Mexico border that ignited the current drugs war.

Criminal proceedings were brought against Wachovia, though not against any individual, but the case never came to court. In March 2010, Wachovia settled the biggest action brought under the US bank secrecy act, through the US district court in Miami. Now that the year's "deferred prosecution" has expired, the bank is in effect in the clear. It paid federal authorities $110m in forfeiture, for allowing transactions later proved to be connected to drug smuggling, and incurred a $50m fine for failing to monitor cash used to ship 22 tons of cocaine.

More shocking, and more important, the bank was sanctioned for failing to apply the proper anti-laundering strictures to the transfer of $378.4bn – a sum equivalent to one-third of Mexico's gross national product – into dollar accounts from so-called casas de cambio (CDCs) in Mexico, currency exchange houses with which the bank did business.

It gets better, mind you, with Wachovia hanging out the whistleblower who discovered the laundering out to dry. As a case of major financial malfeasance, this is bad enough. But this paragraph in particular struck me:

The conclusion to the case was only the tip of an iceberg, demonstrating the role of the "legal" banking sector in swilling hundreds of billions of dollars – the blood money from the murderous drug trade in Mexico and other places in the world – around their global operations, now bailed out by the taxpayer.

At the height of the 2008 banking crisis, Antonio Maria Costa, then head of the United Nations office on drugs and crime, said he had evidence to suggest the proceeds from drugs and crime were "the only liquid investment capital" available to banks on the brink of collapse. "Inter-bank loans were funded by money that originated from the drugs trade," he said. "There were signs that some banks were rescued that way."

That's big news, revealing the metamorphosis of corporate finance into a creature with enough tentacles in both government and the black market to draw from both in time of crisis. This is not entirely unexpected. Remember how one of the major factors behind the housing bubble was "everyone else is making shit tons of money off it, why don't we?" The black market, after all, is a growth industry that accounts for 15 percent of the world's GDP. For an amoral organization looking for quick profits, it's a natural fit.

The problem of the cartels' drug trade is its own issue, but historically financial entities had to (mostly) stay away from the black market on any massive scale. For all their white collar crimes, banking institutions do rely on legal guarantees to operate, and so are structurally more vulnerable to the law than the "black collar" sector.

Now? The line is fading, and Wachovia escaped with little more than a slap on the wrist. For future joint ventures between the legal and illegal markets, few things could be more auspicious.

P.S. If you happen to have an account at Wachovia, this might be a good time to switch to a credit union. They don't rely on murderous drug gangs and don't treat their customers like shit.