Posted by Todd Zywicki:
The Credit Crisis and the Mafia:
http://volokh.com/archives/archive_2009_03_01-2009_03_07.shtml#1235954256
I've noted on a couple of occasions that the credit crisis in the
United States has made credit card and other similar credit less
available to consumers and small businesses, leading them to
substitute to lenders like layaway, pawn shops, and payday lenders.
In Italy, the impact of the credit crisis has been somewhat more
alarming--the inability to get bank credit [1]has generated a rapid
growth in the market share of the mafia:
At a time when businesses most need loans as they struggle with
falling sales, rising debt and impending bankruptcy, banks have
tightened their lending to them.
Italian banks, which for years had been widely criticized for
lending sparingly to small and medium-size businesses, now have
"absolutely closed the purse strings," said Gian Maria Fara, the
president of Eurispes, a private research institute.
That is great news for loan sharks. Confesercenti, the national
shopkeepers association, estimates that 180,000 businesses recently
have turned to them in desperation. Although some shady lenders are
freelancers turning profits on others' hard luck, very often the
neighborhood tough offering fat rolls of cash is connected to the
Mafia, the group said.
"Office workers, middle-class people, owners of fruit stands,
flower stalls are all becoming their victims. . . . We have never
seen this happen," said Lino Busa, a top Confesercenti official.
"It is as common as it is hidden."
Many experts say organized crime is already the biggest business in
Italy. Now, Fara said, the untaxed underground economy is growing
even larger. "Certainly I am worried," he said. "The banking system
doesn't work, and the private one that is operating is often
managed by organized crime."
In the United States we have a buffer of lending institutions in
between formal bank loans and illegal loan-sharks, such as payday
lenders and others. I don't know for certain, but my impression is
that these fringe lending institutions are less-available in Italy (or
Europe generally), where there are much stricter paternalistic limits
on consumer lending, than here. Although the history of loan-sharking
in America is sketchy (or at least I've never found a good source on
it--please recommend it if you know of one), my sense is that
mafia-controlled loan-sharking was much more prominent in the United
States in the early 20th Century than it is today. Over time in the
United States the light regulation of consumer credit enabled a range
of lending institutions to develop, thereby reducing consumer demand
for illegal loan-sharks.
References
1.
http://www.washingtonpost.com/wp-dyn/content/article/2009/02/28/AR2009022801972.html
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