When Crime Becomes the Economy: Inside the Fragility Forum Panel on Organized Violence and Development
Updated: Jun 18
The Civitas One team recently attended the World Bank's Fragility Forum, where one of the standout sessions tackled a topic too often overlooked in development circles: the outsized role organized crime plays in driving fragility and undermining jobs and economic opportunity.
The session was moderated by Chris Blattman, a professor of global conflict studies at the University of Chicago, who coordinates a worldwide research network on organized crime. He was joined by Tuesday Reitano of the Global Initiative Against Transnational Organized Crime (speaking remotely from Tokyo), Maria Paz Jervis of the Ecuadorian Chamber of Industry and Production, Ismail Momoniat, formerly of South Africa's National Treasury, and Eric Kwa, Secretary for Justice and Attorney General of Papua New Guinea. Eduardo Vergara of the Inter-American Development Bank's citizen security division was also on the panel.
A problem bigger than war, with a fraction of the attention
Blattman framed the stakes starkly: homicides linked to organized crime and gangs, concentrated mostly in cities, now outnumber deaths from all the world's civil and international wars combined by a wide margin. Despite that scale, the issue receives little of the development funding, research, or policy focus that conflict and war typically command.
He pointed to his own city as an example. Chicago's gang wars in the 1980s and 90s left lasting scars, and the costs are not abstract: last year three University of Chicago students were killed, and major employers including Citadel and Boeing have cited Chicago's violence and instability among their reasons for relocating. In much of Latin America, the effects are far more severe. Survey data suggests roughly one in ten Latin Americans look to a gang, rather than the state, for security or dispute resolution. Blattman argued this corrosion of legitimacy is also a quiet driver of the populist and authoritarian turn in politics across the region.
Three faces of criminal violence
Reitano, whose organization tracks illicit economies across 17 regional observatories worldwide, broke criminal violence down into three overlapping functions: violent competition between groups for territory, "violent signaling" used by dominant groups to reinforce control once competition subsides, and violence sold as a service to outside actors such as businesses or corrupt politicians.
She noted a broader shift in how organized crime operates. Her organization's Global Organized Crime Index, now in its third edition, shows criminal markets becoming less reliant on raw territorial violence and more oriented toward decentralized economic crime: cyber-enabled fraud, money laundering, and scam operations that increasingly rely on forced or coerced labor. At the same time, narcotics markets are shifting from physically rooted production and trafficking routes toward fragmented synthetic drug supply chains sold online, which has reduced violence visible to consumers without reducing the coercion faced by people working inside these industries.
Reitano also highlighted a troubling state resilience gap: across every edition of the Index, criminal markets have strengthened while state and societal capacity to respond, particularly in prevention, victim support, and transparency, has stagnated or weakened. Her closing argument was that governments tend to over-invest in security and policing responses while under-investing in the economic and social conditions that make communities vulnerable in the first place. She also pointed to gaps in financial regulation, free trade zones, and election integrity as areas where development actors could have outsized impact.
Ecuador: when a transit country becomes a battleground
Maria Paz Jervis described how rapidly Ecuador's security situation deteriorated after long being seen as merely a cocaine transit corridor between Colombia and Peru. The numbers are jarring: identified criminal organizations grew from around 22 in 2022 to at least 48 today, while violent deaths rose more than sixfold in five years, from roughly 1,300 to over 9,200 annually.
For businesses, she said, this has left only three options: investing in costly private security (insurance, surveillance equipment, specialized protection), paying extortion fees, known locally as "la vacuna," borrowed from the Colombian term, or scaling back and abandoning operations in affected areas. She was candid that her own thinking on extortion payments shifted after moving from academia into representing industry: "if you just do not pay, you have to close in the good scenario, because on the other hand you may be killed or some of your workers."
South Africa: when crime captures the state itself
Ismail Momoniat traced a different trajectory, one in which organized crime worked its way directly into government procurement and law enforcement rather than primarily through street-level violence. He described how state capture under a previous administration, tied to a politically connected family, hollowed out public procurement systems over roughly 15 years, eroding growth and deepening inequality after a strong early post-apartheid period. South Africa's recent graylisting by the Financial Action Task Force and an ongoing commission examining police ties to organized crime were cited as evidence of how entrenched the problem has become, alongside the assassination of public officials who have tried to confront it.
The development cost: 3.4% of GDP
Eduardo Vergara reframed the conversation in terms that development institutions should find hard to ignore. The cost of organized crime for Latin America and the Caribbean stands at 3.4% of GDP, roughly 80% of what those countries spend on education. In Jamaica it reaches 5%; even in more stable Barbados it sits at 2.4%. Of that total, 41% is borne by the private sector (including households buying cameras and hiring private security), about 31% by the public sector, and the remainder by the loss of human capital, a category that encompasses not only lost lives but the cascading decisions people make under fear: whether to use public transportation, whether to send a child to school, whether to pursue formal employment at all.
"It goes all the way from shaping an economy to shaping the decision of a woman deciding whether she's going to use public transportation at a certain time of day, to shaping the way a grandmother feels unsafe knowing her grandchild is walking home from school," he said. Vergara argued that viewing organized crime primarily as a security problem leads to solutions confined to police departments and justice systems. Viewing it as a development problem opens up coordination across education, health, urban development, and infrastructure, which is precisely why the IDB created its citizen security division and recently launched both a 23-country Alliance for Security, Justice and Development and a rapid response task force. He noted that the Bank's research almost certainly underestimates the true costs: "I could guarantee those costs are much higher."
Papua New Guinea: a transit point caught between bigger markets
Papua New Guinea does not typically appear in conversations about organized crime, but Eric Kwa made clear why it should. Sitting between Asia and the South Pacific, with Australia and New Zealand as the two largest destination markets for illicit drugs in the region, PNG has become a natural transit corridor, and its large, poor, and predominantly young population makes it acutely vulnerable to criminal recruitment.
The scale of what passes through became viscerally clear in one incident Kwa described: a drug shipment bound for Australia, organized by criminal networks there and routed through PNG, was so heavy that the plane carrying it could not take off from Port Moresby. It crashed. Authorities did not even know the plane had landed, because those responsible had jammed the radar. It was only after the crash that Australian police contacted PNG to say a plane had gone down at a specific location and asked them to investigate. Officers arrived to find a large quantity of drugs and cash. The country, Kwa said, was not used to that. It was a moment of realization: criminal networks operating thousands of miles away had been using PNG's territory, ports, and airspace as working infrastructure, and PNG had barely known. A subsequent meeting of Pacific Police Commissioners in Fiji made clear the problem was not PNG's alone, with counterparts from across the region describing the same dynamic and law enforcement from Mexico and Colombia traveling to the Pacific specifically to help them understand how drug flows originating in Latin America were moving through their waters.
The throughline
Blattman closed with two themes. First, a warning to capitals that do not yet see themselves as having a serious organized crime problem, Ecuador, Chile, and Papua New Guinea all demonstrated how quickly and quietly the problem can metastasize. Second, a direct challenge to the World Bank. Twenty-five years ago, the Bank was slow to recognize fragility and conflict as a development issue, but then led, intellectually and operationally, to the point that the Fragility Forum itself is now almost a victim of its own success, with some feeling the topic has been exhausted. The same transition has not happened with organized crime. Outside of anti-money-laundering work, Blattman argued, the World Bank is currently "the least relevant development actor on the planet when it comes to this issue." He expressed genuine hope that would change, because, he added, criminal organizations are smarter, better-funded, faster-moving, and harder adversaries than the conflict actors development institutions have spent decades learning to address.
Sources:
World Bank Fragility Forum 2026, panel session 'Criminal Violence, Illicit Markets, and the Challenge of Jobs and Livelihoods,' held June 9, 2026.
