The Mafia would like to thank health campaigners and social activists for making them even richer!

Those who advocate prohibition, ‘denormalisation’ and the state punishment of selected lifestyle sins continue their campaigns:

• MPs are recommending two “drink free days”, minimum pricing and allowing licences to be removed on “health grounds”
• The BMA are urging the banning of smoking in cars and restrictions on smoking in the home
• Stella Creasy continues with her campaign to cap the APR that lenders can charge on loans
• Other ‘campaigners’ are calling for a ‘fat tax’ such as that introduced in Denmark
• And gambling is in their sights as another ‘lifestyle sin’

Setting aside whether a liberal society should indulge in these bans, controls and zealous regulation, there is a massive downside to such actions. A downside that ‘campaigners’ never mention. And it looks like this:

According to a new report by Italian anti-crime group SOS Impresa, as reported by Reuters, "Organised crime has tightened its grip on the Italian economy during the economic crisis, making the Mafia the country's biggest "bank" and squeezing the life out of thousands of small firms, according to a report on Tuesday."

The Italian Mafia has over 65 billion Euro in liquid assets.

You don’t get the connection with the nannying fussbuckets who want to dictate how you live your life? Let me explain – starting with:

The high tax-induced price of tobacco products in the UK has led to many smokers seeking alternative cheaper sources of cigarettes and handrolling tobacco (HRT), both legal (duty-free and crossborder shopping) and illegal (smuggling and bootlegging). The TMA estimates that in 2009 this non-UK duty paid consumption (NUKDP) accounted for 21% of the cigarettes and 58% of the HRT smoked in the UK.

And:

Seizures of contraband alcohol smuggled from France have surged to around three times their normal levels this summer, say officials. French customs officers in the Channel ports of Calais and Boulogne-sur-Mer confiscated 82,000 litres of illegal spirits in the past month.

Plus:

The use of loan sharks is increasing and going to "get worse", according to experts in the South West. The Bristol-based Illegal Money Lending Team claims it is already a serious problem across the region. Spokesman Alan Evans said they were "really concerned" and that with harder times ahead "this problem will get worse". Since its launch three years ago the team has recorded a 700% increase in referrals which are still growing.

I’m sure the picture is becoming clearer – the Mafia (or for that matter any other organised crime group) gets its money from a willingness to trade in things we’ve banned, to smuggle so as to avoid taxes and to fill gaps in the market created when honest providers are forced out by legal changes.

Organised crime is the biggest beneficiary from high tobacco taxes, from strict controls on drink and from restrictions on gambling or lending. And criminals, unlike legitimate businesses, don’t care if you get hurt – so we’ll get dangerous fake cigarettes, poisonous vodka and loan repayments enforced with a baseball bat rather than a court order.

So next time you think a ban or a new tax is a good thing, consider the Mafia. Ask yourself how much money criminals will make from your proposal.

And then don’t do it.

....

In which I defend the indefensible...

I’ve rather held off from writing this post. Partly because right now lending is a touchy subject and partly because I don’t want people to see me as an advocate of rapacious down-market lenders.

But here it is...

Stella Creasy, Labour MP for Walthamstow has been campaigning loudly and effectively for new regulations around doorstep and payday lending:

A cross-party group of MPs has secured a vote on the principle of introducing caps on the total costs of credit for British consumers, following good practice across the Americas and Europe. We have the backing of a wide range of consumer groups, charities, trade unions and religious groups, who recognise that every day these rates go unchallenged, debt and poverty get worse. We also have the support of many Tory and Liberal Democrat backbenchers.

All good stuff. But there’s a problem – not just the impact that hobbling Provident Financial would have on the economy of Bradford (where it is headquartered and where it will employ approaching 1000 people) but a problem for the very people Ms Creasy wishes to help.

What Ms Creasy proposes is a cap on interest rates and associated fees. Seems straightforward until you consider what the effect of such a cap will be. By capping interest rates you will reduce the supply of credit to riskier groups (which tend to be poorer groups) – the area the doorstep lenders won’t touch will get bigger and the credit checking will get tougher. People who can get a short term loan now would not be able to get a short term loan if Ms Creasy’s bill became law.

Again this is fine. Truth is that many of these people shouldn’t be borrowing money given their financial status. But what we know is that they do want to borrow money, which leaves them with two routes – pawn shops or the bloke in the nice suit who’ll agree to help “just this once”.  You know him – he’s the illegal loan shark who has been forced right to the margins by the liberalised credit regime we enjoy. Right now, these loan sharks aren’t that common (although they’re on every estate) because Wonga and other down market lenders have taken their market.

And the likes of Wonga are licensed, regulated and subject to the law – let me tell you that the bloke in the nice suit isn’t and he will use force to get his money.

The effect of an interest cap will be to increase illegal loan sharking – it really is as simple as that. I know it sounds good to reduce those shocking interest rates we see on ads, to control this “legal loansharking” as the campaigners have dubbed it, but it will have negative consequences for too many people – the very people Stella Creasy wants to help.

...