Economic Gangsters: Corruption, Violence, and the Poverty of Nations

by Ray Fisman, Edward Miguel

Meet the economic gangster. He's the United Nations diplomat who double-parks his Mercedes on New York City streets at rush hour because the cops can’t touch him--he has diplomatic immunity. He’s the Chinese smuggler who dodges tariffs by magically transforming frozen chickens into frozen turkeys. The dictator, the warlord, the unscrupulous bureaucrat who bilks the developing world of billions in aid. The calculating crook who views stealing and murder as just another part of his business strategy. And, in the wrong set of circumstances, he might just be you.

In Economic Gangsters , Raymond Fisman and Edward Miguel take readers into the secretive, chaotic, and brutal worlds inhabited by these lawless and violent thugs. Join these two sleuthing economists as they follow the foreign aid money trail into the grasping hands of corrupt governments and shady underworld characters. Spend time with ingenious black marketeers as they game the international system. Follow the steep rise and fall of stock prices of companies with unseemly connections to Indonesia’s former dictator. See for yourself what rainfall has to do with witch killings in Tanzania--and more.

Fisman and Miguel use economics to get inside the heads of these "gangsters," and propose solutions that can make a difference to the world’s poor--including cash infusions to defuse violence in times of drought, and steering the World Bank away from aid programs most susceptible to corruption.

Take an entertaining walk on the dark side of global economic development with Economic Gangsters .

Genres: Economics, Nonfiction, Politics, Crime, Political Science, Social Science, International Development

240 pages, Hardcover

First published September 2, 2008

Reviews

[Nils · Rating 3 out of 5]

Written by a protege of Jeff Sachs, this book adopts a quasi-travelogue "you are there" approach to reporting on the economic underpinnings and implications of the various seemingly noneconomic challenges facing the poor in the Global South. It's not really a book about development, so much as it us a book about global poverty, and it's basic thesis is right there in the title: the central source of the miseries of the world's poor (from civil wars to climate change to witchcraft persecutions) is economic thuggery. It's a crypto-Marxist hermeneutic of suspicion — at bottom, the world's evils are caused by base economic motives — repackaged as a set of micro-policy prescriptions rooted in a disconcertingly cheerful and sometimes almost sententious neoliberal nostrums (e.g. no need for serious reordering of global power, authority or institutions!). Not that the ultimate conclusions lack any merit, but the writing and analytic level appears designed for earnest and bright high school juniors.

[Vince · Rating 3 out of 5]

I might be a little unkind in my rating as I went into the book with high expectations, an internation freakonomics, and the book falls short. Some of the data is mis interperted. For example the writers go on how when Indonesia's ruler was sick certain stocks went down. They assumed that this meant that these companies were involved with corruption to a greater level than others. That could be true or it could be that the markets just assume new leadership might make changes that would impact different companies in different ways. For example a John McCain victory in this country would certainlly have been a boon to the military industrial complex. that doesn't mean that McCain or Boeing are corrupt just different allocation of resources.

[Hardik Lohani · Rating 4 out of 5]

What are Economic Gangsters?

They are the maladies that cripple economies and doom people into miseries. This book has very easy approach in explaining the root causes of poverty and destitute in parts of world like East Asia in 80s and Sahel-Sub Saharan Africa (for very long time). Corruption; is it cultural thing ingrained in human minds of certain people or is it ever changing approach which disappears in accordance with overall improvement in human life standards like rising standard of education?
There are many theories which are craftily presented to show how various factors contribute to poverty. Some ideas like dry weather being a catalyst factor to increase likelihood of civil strife in arid deserts of Africa where nothing grows and people turn to violence. Other cultural malpractices like witch hunting in Tanzania and Indian Northern states (Bihar, UP) are really not cultural but more aligned with economic mindset. So, there are other ideas in line with these and are very interesting. Overall book is an easy read, useful to understand why poor remain poor for very long time. Poverty-violence- more poverty-more violence: circle of doom!

[Farzad · Rating 5 out of 5]

Investing on peace is the greatest investment to fight against poverty, hunger and corruption.

[Ra · Rating 4 out of 5]

This book is about ten years old, so most of the research done has been concluded and/or superseded. However I am happy that I read it at this juncture in time after moving to Kenya, because it has many historical references about this country.

The book makes a good case for the thesis that development is possible wherever governance is generally good and free of corruption. It cites many examples about the effect of corruption in Asia and Africa and gives examples of places where development and change worked despite the scourges of poverty and war (Vietnam and Botswana). There are also many examples of failure, like Iraq. The authors also give some evidence that economic hardships may be one of the underlying reasons behind civil wars, witch killings and even genocide.

I found the history, the stories and the economic experiments fascinating. This book, however would be more useful as reading material, as it often cites numbers and statistics that I would like to see and ponder black and white. These are hard to grasp fully when listened to.

[Curt Buchmeier · Rating 3 out of 5]

Pretty good read, found my mind wandering after about 5 pages or thereabouts so it took me awhile to get thru this one. Tough subject; trying to scientifically measure corruption in various parts of the world. I commend the authors for a noble effort. Economists are not known for page-turners. When I heard about the premise on goodreads, I had to give it a shot & glad I did. I would recommend to others interested in social justice. Beyond documenting various forms of corruption & out & out stealing by the well-connected, this book actually gives possible solutions. However, the 'solutions' are as unlikely as taking money out of the election process in the US. While a bit dry for my taste, still, it had it's moments & was actually funny in an outlandish kind of way in several places.

[Jay · Rating 3 out of 5]

"Research has so far been more successful in figureing out how wars start than understanding how to make peace hold."

[Ami Iida · Rating 3 out of 5]

This book is useful to think about the economic incentives.

[Gus Lackner · Rating 3 out of 5]

Instead of explaining how to reconstruct shipwrecks, Fisman and Miguel provide circuitous descriptions of the coolest flotsam and jetsam they found in their careers. They logically observe each clue, but never solve the mystery—it feels like you are reading something by Dupont et Dupond from Hergé’s Tintin. But if you bring your own thinking about the incentives facing Fisman and Miguel, these strange lapses in perspective start to make perfect sense.

We begin with a chapter on the Sachs-Easterly debate. Easterly is paraphrased as asking: “[H]ow can foreign aid central planners, parachuted in from Washington D.C., really know how to make distant economies develop?” (p. 12). Fisman and Miguel try to answer this question in chapter eight: we can use randomised controlled trials of course!

The discussion of dictator Suharto’s failing health on corrupt Indonesian companies’ stock value is the second and strongest chapter in the book. Not only is the analysis strong, the chapter builds further insight by comparing Suharto to United States political figures and the Italian mafia. The US is found to be much less corrupt, and there is even an interesting analysis showing “the level of extortion under a centralized and well-coordinated Mafia system should be lower than would be the case with an uncoordinated free-for-all” (p. 44). The third chapter is almost as good. Tariffs, Miguel and Fisman find, cause goods leaving one port to magically transmute, disappear, and become cheaper on arrival. Unfortunately, Fisman and Miguel look only at the Hong Kong-China border and never regain a comparative perspective.

Chapter four presents a fun investigation of the parking tickets of UN Diplomats in New York. The idea is clever, the analysis is sound, and the data is included. It’s easy to understand why it made for a gangbusters paper—but it’s not a paper about busting gangsters, economic or otherwise, and it doesn’t provide a satisfying explanation of the parking tickets. The diplomats stopped accumulating tickets because “Bloomberg…has somehow succeeded where so many had failed.” (p. 104). “Somehow”? How, specifically? How did Bloomberg do it? How can Fisman and Miguel claim to have isolated the cultural factors of illegal parking if they don’t understand what factors Bloomberg used to reduce illegal parking?

Chapter five is a preamble to chapter six, which discusses an instrumental variables analysis of how rain shocks cause witches in Tanzania. The causal diagram looks like this Flood/Drought -> Search for Black Magic -> Witches Killed. So Fisman and Miguel have only establised a causal connection between rain and witch killings. The Flood/Drought -> Less Food -> Witch Killers Don't Starve -> Witch Killing Becomes More Common pathway is not demonstrated, it merely relies on a priori confidence in the theory of cultural evolution. Thus, Fisman and Miguel reveal a willingness to leave assumptions and reasoning unstated. Still, this is a very interesting idea, and I am convinced. However, I haven’t the slightest idea how it relates to economic gansters. Fisman and Miguel are ready to supply a connection: this proves that increasing aid to African countries during droughts will prevent war. What?

Chapter six closes with a discussion of a large loan to Chad for an oil pipline. Oil companies thought it was too risky, but the World Bank agreed—on one condition. Chad’s leader Idriss Deby had to commit 80% of the oil revenue to development programs. The loan went unpaid, Deby took the revenues, and the oil companies got their oil. Yet Miguel and Fisman have no idea what happened. I’m starting to think they don’t understand economic gangsters at all.

Chapter seven argues Vietnam is proof countries can develop even if they've been pounded with bombs. But Fisman and Miguel provide no insight into why Vietnam succeeded where others did not, except, arguably, this throwaway speculation: “the more heavily bombed provinces recieved twice as much public investment”. In Africa, Fisman and Miguel enlighten us, if you “get rid of the guns” and “crack down on nascent rebel movements” you will prevent war, which will enable economic growth (p. 175-6). This worked, you see, when the UN invaded Sierra Leone. Wait a second, isn’t centralizing coercive power what the Italian mafia were doing in chapter one?

Chapter seven also includes an interesting aside. When Angolan rebel leader Jonas Savimbi died, mercenary-protected foreign diamond mines lost 12% market cap within days. Two years later, with a more stable government in place, mining concessions rose from $37.5 million annually to $110 million and unarmed companies became competitive. In a similar way, explain Fisman and Miguel, an inability to perpetuate wars makes Western oil companies uncompetitive with the China National Petroleum Company (p. 185). Since I assume Fisman and Miguel do not want American companies starting wars, I assume the implied conclusion is that the US government ought to prop up regimes conducive to American enterprise. But is that really any better?

Fisman and Miguel persist in a pollyannic view through the end. We never get a logical breakdown of the incentives economic gangsters face. They close with a discussion of John Githongos, a Kenyan official who was fired for investigating corruption. Githongos, they say, is a cause for hope. Maybe Fisman and Miguel really do believe understanding economic gangsters’ incentives is unnecessary. Or maybe Fisman and Miguel understand that those at USAID and the UN prefer to fund research that justifies larger budgets and makes the US and UN appear to be doing good no matter what.

[Omri Galai · Rating 4 out of 5]

Picked up this book having only been familiar with the authors' UN parking violation paper, and found it to be an underated primer on development economics, less ambitious than (and, as I found out later, preceding) both Why Nations Fail and Poor Economics but alluding to the two styles of research agendas. I especially appreciated its plain English approach to counterfactual thinking. Reading it in 2025, however, it does have the disadvantage of being very rooted in early 2000s to pre-GFC reality, so chapters that focus on specific countries' situation would benefit from a revisit in a future edition

[Arthur Yu · Rating 5 out of 5]

I recently finished listening to the book, “Economic Gangsters: Corruption, Violence, and the Poverty of Nations” by Prof. Fisman and Prof. Miguel, on Audible. Overall, I think this is a great book on re-learning a set of interesting papers written by them.

There are two papers that I like the most. First, they use rainfall to instrument economic shock to identify the effect of economic shocks on conflict. Second, they use the inconsistency in customs data to study smuggling.

[Federico Romero · Rating 4 out of 5]

It's a good attempt of providing information about corruption and poverty. It throws interesting information and data.

[Dylan Groves · Rating 2 out of 5]

negative value relative to reading each of the academic papers the book is about.

[Chunchun · Rating 4 out of 5]

根本还是经济力量带来的权力

[Philip Mitchell · Rating 4 out of 5]

Corruption costs. But it is notoriously difficult to measure how much corruption is happening and how much it might actually cost. Across cultures and circumstances, what appears to be corruption to some may simply be how society works to others.

This book attempts to measure corruption in various ways by finding situations that remove some of the variables (aka natural experiments). For example, diplomats in New York City with diplomatic immunity: some are happy to rack up hundreds of unpaid parking tickets while others have none. Corrupt companies rely on protection from corrupt leaders, so what happens when those leaders are suddenly ill? Smugglers avoid duties by declaring something other than what they are importing, so what happens when thousands of chickens suddenly become turkeys mid-ocean?

To solve corruption, we need to understand how it happens. This book suggests that instability can allow corruption to thrive. So what causes instability? In much of Africa, instability and rainfall are strongly correlated. A drought is very likely to be followed by war. Or “witch” burnings.

Fisman then discusses some possible solutions to these problems and provides evidence that some of them will make a difference. Many of the findings were very surprising to me and I came away with a far better grasp on what might drive corruption. It is the start of an incredibly important conversation.

[Nicole]

"As Raymond Fisman and Edward Miguel explain at the beginning of their book, there are two main currents of thinking among those who opine on the wisdom of foreign aid: the ""poverty trap"" view, which holds that aid must be injected to end a vicious cycle in which inability to save leads to disaster in lean years, and the view that more such aid is simply sending good money after bad, straight into the hands of corrupt officials to be funneled away or otherwise wasted. Fisman and Miguel aim to look at corruption and violence in developing countries to determine how prevalent such evils are, how they are caused, and how they can be prevented--and, therefore, what the best way, non-ideologically-speaking, of raising up poor nations might be.[return][return]The funny thing about corruption is that it tends to exist out of sight--at least, out of sight of official statistics and public measurements. No one reports the bribes he takes on his income tax returns. So Fisman and Miguel have to come up with creative means of measuring corruption of various types, and this is the most fun part of their book. Economic Gangsters is completely accessible to the general reader, with virtually no economic jargon or concepts more difficult than ""incentives matter,"" but it perfectly captures the exciting, puzzle-solving nature of this kind of academic research.[return][return]Fisman and Miguel's biggest, and most important, suggestion is the basic one that foreign aid and other solutions to developing-nation poverty be studied and implemented in an evidence-based manner. Without experimental data it's very difficult to determine whether a particular program is actually effective or not (or cost-effective or not). Randomized trials, like those carried out for developing medicines, are rare in the field of poverty reduction. But sometimes they are carried out. For example, local democratic control of public works projects is often touted as an antidote to corruption and skimming of funds. But in Indonesia a test was conducted to compare road building under local control, the thread of a federal audit, and no corruption prevention. Local control did little better than the control group, while those projects that were audited involved significantly less stolen money.[return][return]The authors adhere to their intention to remain non-ideological, and their interest is clearly in going where the evidence leads them. Unfortunately, large-scale economic experiments are often impossible and unethical, so some things can never be tested. But those interested in solutions that actually work should use what information they can. Economic Gangsters provides some of that information, and an interesting look at how to find it. It also tells some great stories about the incentives economic gangsters respond to, the strange circumstances that sometimes create these incentives, and how governments and other groups can play with them to aim for better outcomes.[return](More at http://lifeinbooks.wordpress.com/2008... )"

[Ed · Rating 3 out of 5]

The most intriguing aspect of this well written book by two academic development economists is their discussion of the methods and materials they and other economists used in studying such issues as all pervasive corruption in Indonesia during the Suharto regime in Indonesia; how large scale smuggling from Hong Kong to Mainland China (entire container loads of goods falsely identified as holding similar but less taxed items) is done and why Botswana is the one of the few countries in sub-Sahara Africa to successfully deal with periodic drought, keeping it from impoverishing the rural population and freeing them from the "povery trap" that characterizes so much of the rest of Africa.

Their conclusions aren't anything new and some of them are wrongheaded. For example the authors have a very different view of the result of corruption in Indonesia than does Ha-Joon Chang the author of "Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism", also on my list. Due most likely to a difference in approach, Fishman and Miguel look at it as an example of crony capitalism, showing how connections to Suharto were the most important factor in how the stock market valued on of the companies tied to him and his family. Chang's view is equally pragmatic but less moralizing. He compares the economic progress of Indonesia, one of the most populous and crowded countries on earth but one with significant natural resouces, especially oil, with Zaire, now the Democratic Republic of the Congo, which has untold mineral wealth.

Suharto and his family controlled important and lucrative contracts for emerging technologies, like wireless phones and cable TV, as well as licenses to drill for oil. But they kept the resulting profits within the country, essentially re-investing their corruption fueled profits back into the local economy. In Zaire, kleptocrat-in-chief Mobuto not only demanded huge payoffs for the right to do business in his country but then sent billions to overseas bank accounts, robbing his nation and his subjects of any return for their work and investment.

The authors are too easy on the activities of the World Bank--on of them was a staff economist there for several years, painting the supranational body as one committed to the best for its client nations in the developing world, a specious agrument at best but it is a worthwhile starting place for those interested in how development economics works, why it often fails and some of the pitfalls that are faced in implementing what should be beneficial programs.

[Elizabeth · Rating 3 out of 5]

Economic Gangsters by Raymond Fisman and Raymond Miguel (pp. 240)

Billed as another thought provoking, popular science offering following the best seller, Freakeconomics, Fisman and Miguel fall far short of the mark. The promo that got me was an interview with the charismatic authors who discussed how mimes were used in Columbia to curb traffic violations. This is by far the most novel detail based on their central premise – and turned out to be like movie previews delivering the (only) funny line of the comedy.

There is a lot of interesting content. But you have to dig more than Gladwell or Levitt. Fisman and Miguel present a lot of tables and data that could be footnoted. The narrative and the ideas should have be concise and memorable, but their writing style makes it too easy to drift before they can fully realize their point. They are clearly academics and not storytellers.

It’s difficult to tackling some of the very macro issues they cover. But other authors have covered gangs, prostitution and crime and succeeded in making it compelling. The economics for many topics isn’t going to be as conclusive, but the authors often present it like it is – and then give the typical economist disclaimer. Their discussion of parking scofflaws in New York-based international diplomats as a measure of political corruption is novel and worth reading. When the authors are actually able to frame complex problems in accessible and manageable chunks, the book works and can be thought provoking.

The big questions that Fisman and Miguel tackle: poverty, wars in Africa, the impact of international aid, both positive and negative are often presented as a history and less real economics. With some more effort and looking beyond the scope of their personal research world, they may have mined better content by taking a similar approach as the book, Super Crunchers. Fisman and Miguel barely ripple the surface of opportunity in the subject matter they explore.

If you had to read this as part of a college econ class, you’d be thankful for it’s readability. If you’re reading it based on its book jacket, marketing tour, or comparison with other successful popular science authors, you’ll be disappointed by its academicky style and lack of storytelling ease.

The issues presented by the authors are very important and deserve a bigger voice in the public consciousness. Unfortunately, Economic Gangsters is a few dry bites in what could have been and needs to be a memorable multi-course meal.

[Michelle · Rating 5 out of 5]

An extremely well-written book with thorough citations and topics that don't need to be sensationalized (and are not) in order to be interesting. I was really impressed with how the authors reworked their papers for a general audience, with explanations that are understandable to non-economists, and good refreshers for the rest.

Misters Raymond Fisman and Edward Miguel tackle the issues of corruption and poverty in ingenious ways. They look for correlations between stock market prices and political shocks (changes of who's in charge) to gauge the likelihood that certain companies are given preferential treatment by the government (in Indonesia). They use UN diplomatic immunity to analyze the roles that nature and nurture play in following the rules, and give several theories to explain their findings. They examine different methods of economic recovery for war-torn nations with the use of some creative proxies. And that's just a flat summary of a few chapters.

Throughout the book, they also include neat (and concise) tid-bits and anecdotes to make sure everyone's on the same page. I strongly recommend this book to anyone remotely interested in the driving forces behind corruption, violence, or poverty.

[Arbraxan · Rating 4 out of 5]

Economic Gangsters, written by Raymond Fisman and Edward Miguel, is a highly readable account of how violence and corruption keep poor countries poor. The book reads like a tour through many hallmarks of state-of-the-art research in development economics and conflict studies. Therein, Fisman and Miguel show how statistical techniques can be used to analyse a variety of criminal behaviors. These behaviors include but are not limited to the corrupt relationships between politicians and businessmen, smuggling, the import of cultural norms and values for the prevalence of corruption, the influence of resource constraints on war, homicide, and the convalescence of countries from war. Although the book lacks a unifying theory of corruption or violent behavior, except maybe "criminals follow economic incentives", I found it to be fine and interesting reading. The book ends with a set of bibliographical footnotes and an index, which is helpful for anybody interested in further following the many stories mentioned in the book.

[Bruno · Rating 4 out of 5]

Corruption, violence, crime plague many developing (and even developed, actually) economies, but some seem better able to deal with those problems and escape the poverty trap.

This book takes a look at some of the more recent theories explaining the issues as well as the effectiveness of the solutions, and does so in a very entertaining, "freakonomics"-way.

It's also rather brief and to the , so I strongly recommended it to whoever is interested in the development of nations, and why some remain poor while others achieve good progress and well-being for their people.

[Max · Rating 3 out of 5]

This book had a couple of interesting enough sections. The theme, I would say, is a bit "Freakonomics for Development." I like the concept a lot, obviously. The execution leaves a bit to be desired. While I like development and statistical analysis, the book never really manages to be that interesting.

Still, it had a few interesting parts; I particularly enjoyed the chapter about how rainfall patterns in Africa may be causing violence and civil war. Also, the prose was clear and easy-to-read.

All in all, this book was enjoyable at parts, but I don't think I would recommend it.

[Douglas · Rating 4 out of 5]

1CTake all you can and give nothing back 1D has been a prevailing motto throughout history. Fisman and Miguel enter the daunting task of explaining and understanding the age old problem of greed and corruption within society. A thought provoking look at the global problem; yet, the problems still remains. How do you treat an illness when the cause is still unknown? Does poverty breed corruption, greed, and violence or vice versa?

[I'm Kian · Rating 4 out of 5]

کتاب پر از بصیرت های اقتصادی و اجتماعی است. به شدت خوش خوان است. مقایسه ی بین فرهنگ ها و جستجوی علت پیشرفت و پسرفت یکی و دیگری بسیار تامل برانگیز بود. اینکه کتاب در سال ها پیش روانشناسی فردی و اجتماعی رو به عنوان یک مولفه ی اصلی در اقتصاد نشون داده و سال ها بعد برندگان نوبل اقتصاد به علت همین رویکرد بر صدر نشستند و ارج بسیار دیدند نشان دهنده عمق فکری نویسندگان است. حتما به همه توصیه میکنم فارغ از هرگونه پیش زمینه اقتصادی این کتاب بسیار روان رو مطالعه کنند.

[Rohan · Rating 3 out of 5]

Although I do commend Authors for making a noble effort in trying to measure corruption, I do not think that this is one of the best books on the subject. For a short book, I particularly did not like the amount of time they spent on pointing out relationship between foreign diplomats number of parking tickets and their countries corruption perceptions index (CPI). A decent one time read.

[Sebastian Uribe Díaz · Rating 4 out of 5]

Un entretenido y revelador libro de economía. Aparentemente inofensivo, sus argumentos e ideas son de una poderosa fuerza capaz de cambiar nuestra perspectiva sobre las causas del desarrollo y crecimiento de gran parte del mundo.Recomendable para aquellos interesados en ahondar en temas de la relación entre la criminalidad, la pobreza y la corrupcion

[Russ · Rating 4 out of 5]

I learned...when it fails to rain civil wars in Africa get worse. Old women in Africa are more likely to be accused of witchcraft when the crops fail. Chinese smugglers call chickens "turkeys" so they can pay less tariff charges. And many other little known useful facts.

[Kimberly White · Rating 3 out of 5]

Very interesting study on the causes of poverty. Not the best written and there were things that should have been included that weren't, but I learned a lot. E.g., did you know African nations are more likely to to have a civil war the year after a drought?

[Tomas · Rating 1 out of 5]

Primena mano rašinius mokykloje. Rašiniai geri, bet knygos iš jų lipdyti nebūtina. Ekonominiai aspektai kai kurie gan įdomus, bet apskritai dėstymas padraikas, prioritetai keisti.. Išsikrovinėja telefonas, tai daugiau nebestumsiu.

[Lianna]

i want to be one