The BBC does an expose on a man they call Gaza’s smuggling-tunnel millionaire
For at least five years, this place has been a smugglers’ paradise. The soft desert sand on which the town sits is riddled with tunnels into Egypt. If you could take a slice of the ground under Rafah you would find it riddled with holes – like a Swiss cheese.
Like thousands of teenage boys in Rafah, Abu Nafez started off at 17 as a tunnel labourer. Dangerous, dirty and demanding work.
The number of goods made illegal surely helps these high-risk high-reward traders. It is not a short list.
He had over 100 employees and was smuggling millions of pounds worth of goods into Gaza. Crisps, coffee, cookers, cows, cars – yes, that’s right, whole brand-new cars.
It stands to reason that removing the ban could affect his business.
This lavish home is the fruit of Abu Nafez’s labours. But the tunnels business has almost disappeared in the wake of Israel’s decision to ease its blockade of Gaza.
Opportunity for growth, no? A business must adapt to changing markets. I see at least two risks in the conversion.
- It would require a different skill-set. Illegal import and export probably takes a very different character and expertise than legal trade.
- The move from low volume high price underground routes from Egypt is unlikely to translate directly to connections and routers for higher volume lower price goods from Israel.
This is a strange situation to read about.
On the one hand the BBC suggests Gazans have no money to purchase goods. Yet there is clear evidence of wealth accumulation and regular trade routes. On the other hand the smugglers are said to worry that legalization will crush their business by allowing low cost goods to enter the market as Gazans are eager and ready to purchase.
The flip-flop economics remind me of the current debate about legalization of marijuana in California.
The study said legalizing marijuana in California would drop the price of pot by more than 80 percent and increase consumption.
It also said California could generate annual tax revenues either far higher or much lower than the $1.4 billion tax estimate by the state Board of Equalization last year. It forecasts a possible surge of Amsterdam-style pot tourism or luring out-of-state drug traffickers wanting to buy cheap California weed to resell elsewhere.
Potential tax revenues may be lower if an illicit, secondary market develops from people trafficking cheaper, non-taxed marijuana.
Revenues could either be far higher or far lower. I see now.
Consumption is expected to increase (officially), prices are expected to plummet, advertising is expected to start, and a whole new market of non-compliance will be generated to escape taxation.
Aside from all the predictions, the problem that stands out to me most is the last item. Some groups try to go legitimate when given the opportunity. They thrive in underground and illegal markets because that is their best chance at a comfortable living given limited options (e.g. embargoes, racism). They are businessmen first, criminal only due to circumstances, and welcome a chance to shift their business above ground.
Consider the evolution of Las Vegas and how gambling became legalized and institutionalized. That was the result of a group transitioning away from wealth acquired through illegal methods and towards legal status. Legalization of gambling was achieved in 1931 by a vote in the state legislature, but it was only in the late 1940s that some in the mob used Las Vegas to build legitimacy and respectability.
If marijuana is legalized, will those in the industry today adapt and move into a larger market with greater capitalization potential? Hard to say, but the millionaire profiled by the BBC in Gaza jokes about the “skill” he has developed. It is not seen as importing or trading, only smuggling:
Some tunnellers have joked they could export their skills. Maybe go to the Mexico-US border and set up there, smuggling people or drugs into America. “You get me there, I’ll go,” quips Abu Nafez.
Wrong skills. Perhaps instead build a legitimate and respectable business for import-export to Israel?
