THE MONEY MONSTER: ORGANIZED CRIME ECONOMY

The massive marijuana industry underpins an illicit empire that's hard
to measure. Estimates range widely but all are well into the billions.

According to reports published in the last year or so, the number of
marijuana grow ops in B.C. is:

a) 2,000

b) 20,000

c) Some number in between.

The correct answer is, of course, d.) All of the above.

Similar wildly differing estimates are found for the amount of
marijuana produced in a typical grow op. Or for the price it might
fetch per gram, ounce, pound or kilo. Or for how much of it is from
organized criminals vs. mom-and-pop independents. Or for how much is
consumed locally vs. what's exported out of province. Etc. Etc.

And, while most agree that growing marijuana is B.C.'s most common
organized crime, it's not the only one. Yet there's no way to rank the
impact of others -- making and selling chemical drugs, trafficking
heroin or cocaine, smuggling goods or people, prostitution,
loan-sharking, credit card fraud and more.

Indeed, trying to nail down the impact of organized crime on the B.C.
economy is like trying to nail jelly to the wall. All that's certain
is that it's really big.

There are two main ways to try to gauge the magnitude.

One is to make an educated guess at the size of the marijuana
industry, then add on estimates for other crimes.

The other is to try to calculate the overall size of the underground
economy -- the legal activities that are shielded from the taxman, the
haphazard acts of individual criminals and the proceeds of organized
crime -- and work backward.

Both methods produce a wide range of figures, all in the
several-billion-dollar range and all amounting to a sizable percentage
of the province's GDP.

At the low end of estimates, the Vancouver Police Department's Web
site estimates the total economic impact of organized crime in B.C. at
$1.8-$2.7 billion a year. It does not explain how that total was calculated.

By contrast, an estimate by Simon Fraser economics professor Stephen
Easton is spelled out in detail. It concludes the total is $2 billion
a year for marijuana exports alone.

All in all, Easton reckons, marijuana-growing accounts for about 2.8
per cent of B.C.'s GDP. With the GDP figure reaching $142.4 billion
last year, that would be about $4 billion.

Meanwhile, a Forbes magazine article last year pegged the annual value
of the B.C. pot crop as high as $7 billion US.

Yet even that huge number, says Kelly Rainbow, a civilian analyst with
the RCMP in Vancouver, is "conservative, laughably
conservative."

Those numbers are, of course, just for marijuana, which is only a part
of organized crime.

Try looking at the question from the other end of the telescope -- by
estimating the size of the underground economy and working backward --
is sadly no more precise.

Published estimates of the size of the underground economy range from
3.7 per cent of GDP to as high as 28 per cent.

Most hover near or just above 15 per cent, which informed analysts
like Jock Finlayson of the Business Council of B.C. believe is too
low.

That's thanks in no small part to the marijuana industry, as well as
to an unusually high percentage of self-employment and
service-industry jobs. Service businesses in general and those run by
the self-employed find it easier to hide income from the taxman,
though most of that activity would not be considered organized crime.

And there's still a question of how much clearcut crime -- drugs,
prostitution, smuggling, fraud, loan-sharking -- is "organized" and
how much is not?

Police and government tend to define "organized crime" very broadly,
and, as they tell it, the percentage is huge. As are the economic
consequences.

A study done for the federal solicitor general in 1998 by Samuel
Porteous is one of the few in-depth analyses that looks at the impact
of all organized crime, not just one or two activities. It's filled
with estimates that are now hopelessly out of date but are still
useful to understand what kinds of things criminals do and how this
impacts the economy.

Porteous puts environmental crime -- particularly improper storage or
disposal of hazardous waste -- as second to drugs in economic impact.
Next is securities and telemarketing fraud, followed by, in no precise
order, car theft, smuggling of tobacco and other goods as well as
people, counterfeit goods and money laundering, which may be connected
to most or all other criminal activities.

The relative importance of each may have changed considerably in the
last seven years.

But the areas of social and economic impact are likely the same. The
key ones are social/political and economic/commercial costs arising
from virtually every kind of crime; health and safety costs from such
things as illicit drugs, environmental crime and contraband tobacco;
violence; and environmental harm from illicit waste and, to a lesser
degree, drugs.

Some potential costs of crime might not be obvious at first glance.

For example, Rainbow includes in the health costs growing respiratory
troubles in children which, she believes, can be caused by exposure to
chemicals used in grow ops that double as the family home.

And just one item, the theft of electricity to power the lights in
grow ops, is estimated to cost rate-paying British Columbians well
into eight figures a year.

However, nowhere in the literature are there entries on the other side
of the balance sheet -- reasoned assessments of what crime adds to the
economy.

Some activities -- prostitution, for example -- tend to just move
money around.

Others, like heroin or cocaine use, drain money out of B.C., since the
product is imported.

And marijuana, grown for export on the scale it is here, brings in
several billion dollars a year.

Much of this money goes through sophisticated money-laundering
schemes, and there's no doubt that some of it winds up invested
outside the country.

But a lot of it is spent here, on everything from haircuts to Hummers
to homes.

Insp. Paul Nadeau of the RCMP maintains that drug money underpins much
of the market for large, luxurious SUVs.

And Rainbow says it's a major force in rising real estate prices.

Marijuana growers "aren't price sensitive," she says, noting that a
few years ago they used to rent small homes, but the profits are such
that now they often own large ones. She cites an instance in her own
neighbourhood where a house sold for thousands more than the asking
price.

"Six weeks, later the grow op was up and running."

But the consequence, she said, is that more and more honest families
can't compete for a decent place to live.

So, too, money laundering can have dire consequences for honest
business people.

When organized criminals set up sham businesses that don't have to
earn their own way because their main purpose is to legitimize
ill-gotten cash, legitimate competitors are undermined.

On the other hand, she and Nadeau note that there are growing numbers
of people involved in legitimate businesses who owe much of their
earnings to customers spending illegal drug money. They range from the
operators of hydroponic shops to specialized crews that rehabilitate
former grow ops to real estate agents who specialize in homes with all
the features a grower might want.

And there are, by some estimates, as many as 60,000 people who make a
fulltime living from marijuana alone.

Whatever the positive economic contribution of these jobs and
spinoffs, however, it's difficult to believe they match the negatives.