Organized crime emerges out of the power vacuum that is created by the absence of state enforcement, and which can have many sources: geographic, social, and ethnic distance, prohibition, or simply collapse of state institutions. Mafias and gangs are hierarchically organized and can be thought of as providing primitive state functions, with economic costs that are typically much higher than those associated with modern governance. Though organized crime cannot be completely eradicated, its control is necessary, since it can easily corrupt existing institutions of governance. (Economics of Governance, 2001)
Organized crime, criminal activities organized and coordinated on a national scale, often with international connections. The American tradition of daring desperadoes like Jesse James and John Dillinger has been superseded by the corporate criminal organization. Firmly rooted in the social structure, it is protected by corrupt politicians and law enforcement officers, and legal advice; it profits from such activities as gambling, prostitution, and the illicit use of narcotics.
Organized crime is not limited to Western countries. The Japanese have the very public and active Yakuza and Boryokudan. During the Cold War the Russian Mafia used its connections in the Communist party to establish a vast black market network, and in the power vacuum that followed the fall of Communism the brutal group became even wealthier, more influential, and more successful. (Dictionary definition of organized crime, 2004)
Schelling (1971) discusses the features of those markets where the latter typically develops a governmental authority. The first feature of such markets is that victimized firms should be unable to protect themselves. This explains why illegal or irregular markets are privileged areas for the control of organized crime as illegal firms are less likely to call for police protection. Second, victims should find it difficult to hide them. Accordingly, organized crime concentrates most of its extortion on illegal firms that supply goods to final consumers and not on other organizations specialized in appropriate activities............
