Business | Schumpeter

Mafia management

The crime families of Naples are remarkably good at business

AN EASY way to revive a flagging dinner party is to ask people to name their choice of the greatest crime show. Is it “The Wire”, with its intricate portrait of Baltimore’s underworld? Or “The Sopranos”? Or perhaps “Breaking Bad”? Now there is a new contender for the prize—“Gomorrah”, a drama about a collection of Italian gangs known as the Camorra that run a criminal empire from their base in Naples.

“Gomorrah” has been Italy’s most talked-about television series since its release two years ago. It has been sold in 50 countries and the first episode premiered on America’s Sundance TV this week. The series is far darker than the other three. The gangsters aren’t lovable monsters like Tony Soprano, just monsters. It is more realistic. The author of the book behind the series, Roberto Saviano, has been in hiding since the Camorra issued a death warrant against him in 2006. Filming of the series in gritty Neapolitan neighbourhoods was interrupted by local violence.

One of the most striking things about the Camorra is how good they are at business. They have taken over from the Sicilian Mafia as Italy’s foremost crime syndicate, partly owing to the Italian state’s move to clamp down on the Cosa Nostra from the mid-1990s. The Camorra’s strategy of focusing on drugs, particularly cocaine, has also paid off. The group runs much of Europe’s drug trade, including the continent’s largest open-air narcotics market in Secondigliano, in the north-east of Naples.

The syndicate appears to be organised like a typical corporation, with descending levels of power. There is a top tier of senior managers who determine strategy and allocate resources; a second tier of middle managers who purchase and process the product; a third level of sales chiefs who co-ordinate distribution; and a fourth grade of street salesmen who deliver the product directly to customers. The group employs all the usual supply-chain-management methods. Its leaders source drugs from around the world (cocaine from Latin America, heroin from Afghanistan and hashish from north Africa) and make sure that alternatives are in place in case of disruption.

They do some things outstandingly well. Operating outside Italy’s growth-killing labour rules, the Camorra can be fleet-footed. A loose alliance of about 115 gangs, with around 500 members each and numerous associates, they can swiftly assemble a workforce of whatever size is needed, or shift from one line of business to another in a flash. They are best-in-class when it comes to renewing talent and ideas. Whenever entrenched managers balk at moving into new markets, as the older Camorra bosses did when drugs came along in the 1980s, they are replaced by a younger generation.

Paolo Di Lauro, the former head of one of the most powerful clans, and the model for Don Pietro in “Gomorrah”, is arguably one of the most innovative businesspeople Italy has produced in recent years (since 2005 he has been held in solitary confinement in a maximum-security prison). As well as co-ordinating the drug trade with Colombia, he designed the group’s successful franchise system, in which it treats distributors like franchisees who are responsible for their own turf rather than as mere employees. That gives them an incentive to recruit more people as well as to shift more product.

The Camorra put their own unique spin on standard management techniques. They are experts in team-building. New recruits are initiated with quasi-religious ceremonies. Rising stars are given endearing nicknames such as Carlucciello ‘o mangiavatt (“little Charles the cat-eater”) or Urpacchiello (a riding crop made from dried donkey’s penis). They take care of the relatives of workers who die on the job. Gang members known in their role as the “submarine” deliver money and groceries to the bereaved families on Fridays. The group’s efforts at corporate social responsibility (CSR) pay off. Local people invariably take the gangsters’ side during police raids, forming human barricades, pelting law enforcers with rubbish and setting fire to their cars.

True, this is CSR that comes soaked in blood rather than the usual syrup. Mr Saviano calculates that the gangs were responsible for 3,600 deaths between 1979 (when he was born) and 2006 (when he published his book). They are also responsible for a widening circle of economic devastation. The trade in drugs that swells their coffers also ruins lives. Naples, one of Italy’s most enjoyable cities, would be a bigger tourist attraction if it weren’t for its reputation for violent crime.

They’re bigger than US Steel

The Camorra themselves pay a high price, too. The street soldiers live miserable lives, typically ending up dead, injured or in prison before they reach middle age. Those at the top are constantly on their guard against being rubbed out by rivals or arrested by the police. Many of them live in permanent hiding, either in attics or underground complexes. Mr Di Lauro’s business produced turnover of €200m ($250m) a year, but he didn’t exactly live large: he was a recluse, protected by steel shutters and bolted gates, and also had to spend years on the run.

Nonetheless, the syndicate thrives, in part because the rewards are so huge and in part because the alternatives are so sparse. Italy’s economy has been stagnant for well over a decade. The country ranks number 45 in the World Bank’s ease-of-doing-business table, with southern Italy being a particularly hostile place for legitimate enterprise. On August 22nd the heads of the euro zone’s three biggest economies—Angela Merkel of Germany, François Hollande of France and Matteo Renzi of Italy—met on an island off the coast of Naples to talk about relaunching the European project. To be successful, any such plan must make it easier to create legal businesses—and thus likelier that the management genius displayed by the likes of the Camorra is directed towards the creative side of creative destruction.

This article appeared in the Business section of the print edition under the headline "Mafia management"

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