Part III: From the Entrepreneurial to the Financial Mafia 
     The mafia of the 1980s presents a quite different face from 
the traditional agrarian mafia of the 1950s or even the urban 
mafia of the 1960s.  The most drastic difference lies in the 
level and the targets of mafia violence.  Until the late 1970s 
mafia violence was directed primarily against other mafiosi (in 
periodic struggles for dominance), against individuals who 
refused to submit to mafia ultimatums, or, when such violence 
became political, against the leaders of opposition parties or 
popular movements which challenged mafia power.  Members of the 
dominant elite or official representatives of the state were 
rarely threatened by the mafia.  On the contrary, as we have 
seen, they tended, either directly or indirectly, to be the 
allies rather than the enemies of the mafia.  In the 1980's, 
however, the mafia seems to have launched an all-out attack on 
the Italian state.  From 1979 through 1988, 3 magistrates, 5 
high-ranking police officials, l journalist, 4 politicians (the 
regional secretary of the Communist Party, the provincial 
secretary of the Christian Democratic Party, a former Christian 
Democratic mayor of Palermo, and the Christian Democratic 
President of the Sicilian Region), and most shocking of all, 
General Carlo Alberto Dalla Chiesa, the so-called "super-prefect" 
sent to Palermo to head the struggle against the mafia, 
were assassinated in Palermo.  How can this radical 
transformation in the relationship between the mafia and the 
Italian state be explained? 
     In the only comprehensive study yet to appear on the changes 
which have taken place in the mafia in the 1970s and 1980s, Pino 
Arlacchi points to the emergence of a new entrepreneurial mafia 
which not only has assumed an important and growing role in the 
economy (both legal and illegal) of large areas of southern 
Italy, but also has extended its hold into geographic areas and 
economic sectors outside its traditional spheres of influence 
(Arlacchi, 1986).  The mafia of the 1980s is no longer a regional 
phenomenon, confined to Sicily or southern Italy, but instead an 
economic and financial power of national and international 
dimensions.   In using the term "entrepreneurial mafia," Arlacchi argues 
that a profound transformation has taken place from a "pre-modern" 
mafia whose  economic base consisted primarily of 
"parasitical" activities (extortion, tribute money, and the like) 
to a dynamic "capitalist" mafia  investing its illicit gains in 
productive activities forming an integral part of a modern 
economy.  As social and economic conditions have evolved, the 
mafia has transformed its role from one of mediation ("rent 
capitalism" or "broker capitalism") to a more directly 
entrepreneurial role, not abandoning illicit activities but using 
them to finance processes of capital accumulation and 
reinvestment in the legal sector.   However, the distinction 
between a traditional and a modern mafia is perhaps less 
clearcut.  Although Arlacchi dates this transformation from the 
1970s, the evidence presented in the earlier sections of this 
monograph suggests that, in the Sicilian case at least, the mafia 
has from the outset operated in both illegal and legal markets 
and combined "parasitical" with "entrepreneurial" activities 
(e.g., its role in the construction industry in a city like 
Palermo from the mid-1950s on). 
      Arlacchi provides a fascinating description of the 
advantages which the mafioso as entrepreneur enjoys over his 
competitors (Arlacchi 1986: 109-125).  These advantages are 
directly linked to Catanzaro's concept of "social hybridization" 
-the fusion of tradition and innovation which is central to 
explaining the persistence of the mafia and its continuing 
economic success in the face of tremendous social, economic and 
political changes.  The mafioso has effectively adapted 
traditional values and methods to the pursuit of profit in a 
modern capitalist economy.  His first competitive advantage lies 
in his ability to discourage competition.  Through the threat or 
exercise of violence, mafiosi have not only discouraged private 
investment in large areas of the South, but have succeeded in 
establishing virtual territorial monopolies of certain economic 
activities--e.g., the cycle of construction-related activities in 
the city of Palermo, tourist-related construction on large tracts 
of the southern Italian coast, and, perhaps most striking, 
control of seventy percent of the sub-contracts for the 
construction of a publicly financed industrial port at Gioia 
Tauro in Calabria in the mid-1970s. 
       An excellent example of the mixture of archaic and modern 
methods can be seen in the kidnapping of Paul Getty, Jr., in 
1973.  The ransom money of a billion lire paid to liberate Getty, 
whose ear was cut off and sent to his family, was utilized by the 
mafiosi of Gioia Tauro to finance the acquisition of the 
equipment necessary to execute the contracts for the industrial 
port.
       A second advantage lies in the mafioso's ability to secure 
his labor force at lower cost and with fewer restrictions than 
can his competitors.  Here the advantages lie in non-payment of 
social security and other benefits, as well as in the recruitment 
of a more docile and flexible labor force than would otherwise be 
the case.  A combination of personal ties and potential 
repression discourages worker organization and conflictuality and 
increases productivity.  In this regard, the mafioso can often 
exploit traditional family, territorial, and subcultural ties 
while conducting business deals with national or even 
international ramifications. 
      Finally, the mafioso has at his disposal financial resources 
far superior to those of the normal firm.  In contrast to the 
businessman who must rely on outside financing through bank 
loans, paying high interest rates and suffering lengthy 
bureaucratic delays, the mafioso has two critical advantages-- 
privileged access to credit through his political and financial 
connections and a substantial reserve of liquidity based on the 
profits from his illegal activities.  Unlike most other firms, 
the mafioso often faces the problem of excess liquidity, leading 
him to seek ever new investment possibilities. 
     The expansion of the scope and scale of the mafia's
entrepreneurial activities is not sufficient, however, to explain 
the emergence of the mafia as a profound challenge to the power 
and legitimacy of the democratic state in the 1980s.  On the one 
hand, the expanding power of the mafia is linked to the 
deterioration of economic, social, and political conditions in 
much of the South throughout the 1980s.  As has been demonstrated 
above, the penetration of the post-war Italian state into the 
South--in terms of both economic development policies and the 
extension of social welfare programs--created a fertile terrain 
for renewed mafia infiltration of public administration and mafia 
access to the substantial flows of public funds which resulted 
from those policies.  By the late 1970s it had become clear that 
these policies had not created a process of self-sustaining 
economic development in the South, but rather an "assisted 
economy," increasingly dependent upon public resources to sustain 
consumption and consensus.  Under the impact of the economic 
crisis, state spending in the South declined, the limited 
industrial initiatives created in the preceding decade faltered, 
and levels of unemployment rose sharply. The social and 
economic fabric of the South became increasingly fragile, 
social deviance increased sharply, and competition for scarce resources 
became more and more intense.  The large cities harbored a 
growing marginal proletariat, excluded from stable employment. 
Competition for increasingly scarce resources from the center 
provoked severe factional struggle within the Christian 
Democratic Party and between the DC and its coalition partners, 
paralyzing many local and regional administrations and thereby 
reducing the capacity of the new class of political brokers to 
manage tensions through the politics of mass patronage, which 
they had so adeptly perfected in the preceding decade.  The 
interlocking system of political, social, and economic power 
constructed by the DC in the 1950s and 1960s began to erode, 
opening new spaces for other forces. 
        Even more importantly, a major transformation in the nature 
and scope of the mafia's economic activities, in both the illegal 
and the legal spheres, occurred as a result of the movement of 
the Sicilian mafia in the mid-1970s into a leading position in 
the international drug trade.  The liquidity which made the 
movement of the mafia into the sector of heroin refinement (as 
opposed to the lesser intermediary role which it had previously 
undertaken) was based upon the surplus profits from the 
activities of the two preceding decades.  In addition to the 
profits from traditional illicit activities (extortion, 
kidnapping, traffic in contraband cigarettes), it is striking 
that a substantial portion of the capital available for 
investment in the drug trade can be traced directly to mafia 
penetration of the public administration.  One such source of 
investment capital was profits from the construction industry, 
made possible, as we have seen, by collusion with local 
administrators.  A second source was the agricultural subsidies 
disbursed by the Sicilian Region, a disproportionate share of 
which ended up in the hands of mafiosi. 
     The Palermo magistrate Rocco Chinnici, subsequently 
assassinated by the mafia, estimated that 60-70% of the funds 
distributed by the regional assessor of agriculture ended up in 
the hands of the mafia (La Repubblica, August 2, 1983). 
     A third source was the enormous profits reaped from tax 
collections which, from 1952 until 1982, were subcontracted by 
the regional government to private collection agencies at rates 
of 10 percent in contrast to a national average of 3.3 percent. 
The dangers inherent in the tremendous liquidity accumulated by 
the private tax collectors (esattori) in Sicily and the suspected 
ties to the mafia of the most powerful of the esattori, the 
Salvos, one of the island's wealthiest families and prominent 
supporters of the DC, were denounced already in the 1976 report 
of the Antimafia Commission (although to no effect) and are 
outlined in still greater detail in the documents prepared by the 
magistrates for the "maxi-trial" against 707 mafiosi held in 
Palermo between February 1986 and December 1987 (Antimafia 
Commission 1976: 601-603; Stajano 313-358). 
          Finally, and most importantly, one must look more closely at 
the relationship of the mafia to the banking system.  Not only, 
as noted above, has privileged access to the banking system 
provided mafiosi with a competitive advantage over legitimate 
entrepreneurs.  It has also been crucial for the recycling of 
illicit gains (especially from the drug trade) into national and 
international financial circuits and into "clean" investments. 
The linkages between the mafia and the banking system take three 
forms.  First, through their political allies mafiosi have had 
privileged access to major credit institutions in Sicily, the 
boards of directors of which are subject to political 
appointment.  Second, the mafia has penetrated and often directly 
controls a vast and growing network of small rural banks in 
Sicily, the numbers of which have multiplied far out of 
proportion to economic growth.  For example, in the period from 
1952 to 1984 the entire network of minor banks in Sicily expanded 
by 270.9 percent as compared to an increase of only 76.9 percent 
in all of Italy; even more telling, the banchi popolari, the 
specific form of local bank which has been most under 
investigation by the magistrates, increased by 681.1 percent in 
contrast to a figure of 108.5 percent for all of Italy. 
financial transactions.  This expansion of the banking system 
in Sicily is in turn directly linked to politics.  As part of the special provisions of Sicilian autonomy granted in 1946, the Sicilian regional 
government exercises powers over financial institutions (in 
particular the authorization for the opening of new banking 
outlets) that in the rest of Italy are reserved to the Minister 
of the Treasury or the Bank of Italy.  Given the evidence 
presented above with regard to mafia penetration of the political 
parties and the institutions of local government in Sicily, 
should not be surprised at the growing evidence of mafia 
influence over the very shape of the banking system as well. 
       While the direct production of heroin in Sicily was rendered 
possible by the excess liquidity accumulated through the sources 
outlined above, it represented in turn a qualitative leap from 
earlier mafia activities--an extension of the "entrepreneurial" 
mafia into what one might term the "financial" mafia.  Given the 
magnitude and complexity of the drug traffic, there was a move 
toward a more centralized organizational structure, a kind of 
informal hierarchy or "Commission" composed of the heads of the 
most important families and reflecting the internal equilibrium 
among the various groups at any given time.  As was stressed at 
the outset, however, this should not be seen as a rigid or 
monolithic chain of command, a kind of corporate bureaucracy, but 
rather as the expression of temporary alliances among powerful 
contenders who still retain important sources of autonomy. 
     Although the vastly increased scope of its economic activities 
has led the mafia and the constellation of economic and financial 
interests which have formed around it to appear increasingly as 
an impersonal market force, a kind of multinational corporation 
of crime, the success of mafia "enterprises" continues to rely in 
the last analysis on the personal "charisma" of the capo-mafia 
and on networks of personal trust rather than legal-contractual 
guarantees.  This personal basis of mafia power impedes its 
transformation in a rational-bureaucratic sense toward more 
stable forms of organization and explains the continuing recourse 
to violence as an instrument of competition. 
      The magnitude of the economic interests at stake in the drug 
trade also required a vaster and more complex set of linkages to 
legal sectors of the economy and the financial system.  In the 
first place, the mafia needed more solid and far-reaching 
financial connections than its local financial base could 
provide.  Thus, it worked to penetrate into national and 
international financial circuits, an entry in which financiers 
like Michele Sindona and Roberto Calvi played a major role, in 
order to acquire both financial capital and the financial 
linkages necessary for recycling the enormous profits (estimated 
at 700-800 billion lire per year--approximately $400-$500 million 
dollars [Arlacchi 1986: 207]) from the drug trade.  Secondly, 
mafiosi created, or further expanded a network of legal 
enterprises--especially in the areas of construction, public 
works, tourism, and agriculture--to serve as channels for the 
reinvestment of illegal gains.   The scope of its economic 
transactions has transformed the mafia into an economic and 
financial power of national and international dimensions, a kind 
of multinational holding company. 
      This tremendous expansion in the economic base of the mafia 
(in both quantitative and territorial terms) has had several 
important consequences.  Both its illegitimate and legitimate 
economic activities have contributed to a renewed social 
consensus in support of the mafia.  To a large extent this 
consensus has been based on the mafia's capacity to provide 
concrete solutions to basic needs not answered by public 
institutions.  For example, the mafia has responded to a serious 
housing shortage in urban areas in the South by constructing 
millions of illegal units (obviously taking advantage of either 
the complicity or the impotence of local administrators).   And 
through its own economic activities and continued access to 
channels of public spending (for example, the mafia and the 
camorra succeeded in appropriating a substantial chunk of the 
funds for reconstruction after the earthquakes of 1968 in Sicily
and 1980 in Campania), the mafia creates jobs and wealth--a kind 
of mafia "welfare state" in juxtaposition to the faltering 
official welfare state undercut by economic crisis and by 
spiralling government deficits.  Given the deterioration of the 
southern economy over the past decade, the increase in 
unemployment, especially among youth, and the deepening social 
and economic crisis of cities like Palermo and Naples, the mafia, 
the Calabrese 'ndrangheta, and the Neapolitan camorra have 
assumed growing importance both as legitimate employers and as 
recruiters of unemployed youth into the ranks of organized crime. 
Increasing sectors of the economy, especially but not only in the 
South, have become directly or indirectly dependent upon 
investment and employment produced by the mafia, both in the 
illicit activities linked to the drug trade or other mafia 
rackets and in the legitimate activities born of the recycling of 
illicit gains.  [Estimates of the total import of the "criminal economy" in 
Italy are by their very nature highly approximative.  Such 
estimates vary from 25,000 billion lire (about 5% of GNP) to 
100,000 billion lire (about 20% of GNP).]  The area of consensus created by such employment extends even into sectors of the middle and 
professional classes, not themselves necessarily mafiosi, but 
performing important technical and managerial functions for mafia 
firms, as well as to legitimate entrepreneurs who, if they do not 
wish to be forced out, have little choice but to come to terms 
with the mafia. 
       The actual economic impact of the mafia in the South is the 
object of an ongoing debate among Italian scholars.  Some, like 
Arlacchi, have argued that there has been a massive influx of 
investment of profits from illegal activities into legitimate 
business ventures, such that the mafia is now in a position to 
shape large sectors of the southern economy (Arlacchi, 1986). 
Others argue instead that most mafia firms in the South remain 
small and traditional, with a high rate of turnover, and that 
they serve less as serious entrepreneurial efforts than as 
"fronts" for the recycling of illicit gains (Catanzaro, 1986a). 
These conflicting views raise broader questions as to the nature 
of the "mafia economy."  (1) To what extent has the mafia 
reinvested in the South rather than channeling its funds into 
investments elsewhere in the country or into national and 
international financial circuits?  (2) To the extent that the 
mafia has invested in the South, how much mafia generation of 
investment and employment has been in the legal rather than in 
the illegal sector?   (3) Is the mafia a stimulus or an obstacle 
to further economic development in the South?  Is the mafia 
taking on the role of the entrepreneurial bourgeoisie in the 
South (the weakness of which has historically constituted a 
serious impediment to autonomous development), or is it precisely 
the mafia which has prevented the emergence of indigenous 
entrepreneurship? 
       Any attempt to answer these questions on the basis of 
available statistical data is undermined by the absence of any 
reliable data on the illegal economy and by the often 
contradictory nature of existing data on the legal economy. 
Despite these caveats, a comparison of the 1971 and 1981 censuses 
for the regions where the presence of organized crime is 
strongest--Sicily, Calabria, and Campania--demonstrates certain 
trends.  First, in each of the three regions, there has been a 
sharp decline in labor force participation, and a rapid increase 
in officially registered unemployment. 
    Second, each of the three regions has seen a decline in its index 
of industrialization between 1970 and 1984.  Third, 
in each region there has been a decline in the percentage of the 
labor force engaged in industry (including construction), while 
substantial increases have occurred in commerce and services. 
At the same time, there has been a sharp decrease in 
the number of industrial firms across the three regions, but huge 
increases in the number of construction firms and more contained 
increases in commerce (because of differences in the way the data 
were collected in 1971 and 1981, it was not possible to draw 
accurate comparisons in the service sector).  However, the number 
of employees per firm remained quite low and actually decreased 
in the construction sector. 
       What conclusions can be drawn from these trends?  There is 
evidence of substantial increases in the numbers of legally 
registered firms in construction and commerce, and the 
probability is that there are still larger numbers of such firms 
unrecorded by the census, since these are sectors which in Italy 
are notorious for containing large numbers of "underground" 
enterprises, which fail to officially register in order to avoid 
regulation and payment of social-security contributions and the 
like.   On the other hand, these sectors remain the reserve of 
tiny, often family-based firms, and appear, especially in 
construction, to have undergone still further fragmentation. 
This impression is reinforced by the data indicating declines in 
overall industrial employment (including construction) and 
increases only in commerce and services.  Given the structure of 
the southern economy, where an already swollen tertiary sector 
has served primarily as a safety valve to absorb unemployment 
from other sectors in the absence of sustained industrial 
development, further expansion in the areas of commerce and 
services can hardly be taken as evidence of a substantial 
contribution of mafia investment to promoting the process of 
economic development in the South. 
     The limitations of available statistical data make the above 
conclusions extremely tentative.  All analyses of the 
contemporary mafia agree that the mafia is playing an 
increasingly important economic role in the South.  It is also 
clear from judicial investigations that substantial flows of 
funds from the illegal to the legal sector have occurred.  What 
remains unclear from available data is the nature of such 
investment.  The evidence presented above seems to suggest either 
that mafia investment may be to a large extent rechanneled back 
into illicit activities in the South (which could indeed provide 
substantial employment, but which would not show up in official 
statistics), with legal firms serving primarily as "fronts," or 
that the mafia is directing a major portion of its gains into 
investment channels outside the South. 
      Regardless of its origins (legal or illegal), the growing 
economic power and concomitant social consensus generated by the 
mafia in turn translate into growing political clout.  Some 
observers have argued that in the 1980s the mafia assumed 
increasing autonomy vis-a-vis its traditional political allies, 
thereby explaining the unprecedented outburst of violence against 
representatives of the state and of the governing parties 
(Arlacchi 1986: 165-180).  Two phenomena have been cited as 
evidence for this increasing political autonomy of the mafia. 
The first is the formation of "political-mafioso lobbies." 
These are joint ventures, based on shared economic interests, 
among mafia bosses, politicians, and representatives of local and 
national entrepreneurial and financial elites for the purpose of 
influencing key centers of public power.   What is new is not 
so much the existence of such linkages, which have always 
characterized the Sicilian mafia and which were amply documented 
in the 1972 and 1976 reports of the Antimafia Commission, but 
rather the level of the political and financial connections in 
question, which now extend far beyond the regional arena to touch 
the highest levels of the national political and financial 
systems and which have come to constitute a major force of 
corruption in Italian public life.  One of the distinctive 
characteristics of the Italian case is precisely this facility of 
linkage both among different sectors of criminal elites and 
between such criminal elites and important sectors of official 
political and economic institutions, such that the line between 
legality and illegality has become increasingly ambiguous. 
Beginning in the early 1980s, a growing body of evidence has 
emerged not only with regard to the ties between mafia/camorra 
and their political/financial allies, but pointing as well to 
connections with the P2 of Licio Gelli, right-wing terrorism, and 
the Italian secret services. 
      The second indicator of the increasing political autonomy of 
the mafia is that mafiosi, or members of their families, have 
directly assumed elective and administrative positions, rather 
than delegating such functions to political intermediaries.  This 
has been especially true at the local and regional levels.  Given 
the paucity of autonomous economic resources in the South, local 
governments--because of their role in land-use regulation and the 
distribution of public funds in the form of contracts, subsidies, 
welfare payments, etc.--are crucial levers of economic power and 
of the organization of consensus, and as such have been key 
targets of mafia penetration.  Here again the line between the 
criminal activities of the mafia and legal clientelism has become 
increasingly blurred.  However, as the Sicilian experience 
demonstrates, the phenomenon itself is not new.  What has gained 
attention is rather the increasing scope of such direct 
mafia/camorra political representation, especially in Campania 
and Calabria, where the distinction between the political and 
criminal spheres seems until recently to have been more clear-cut. 
      The key to understanding the emergence of the mafia as a 
direct political protagonist in the 1980s lies in the 
relationship between economic resources and political power. The 
traditional autonomy of the mafia, based on control of a key 
resource--the land--and on the delegation by the Italian state of 
functions of social and political control in peripheral areas, 
came to an end in the 1950s.  At this point, as shown above, the 
functions of intermediation and social control performed by the 
traditional mafia were assumed instead by a new class of 
political brokers, represented par excellence by the DC, which, 
through its control of the state and of the vast new programs of 
public spending in the South in the postwar period, monopolized 
the channels of access to key economic resources.  As a result, 
the mafia, attracted by the outpouring of public resources in 
various forms, became increasingly enmeshed in the clientela 
networks controlled by DC notables and their political allies. 
 What transformed this relationship in the late 1970s was the 
dramatic change in the economic base of the mafia, engendered by 
the enormous profits from the drug trade.  As its economic power 
grew to unprecedented proportions and spread from peripheral 
regions like Sicily to the national and international levels, the 
balance of power between the mafia and its traditional political 
allies began to shift.  The mafia demanded an expansion in the 
scope of its political power commensurate with the explosion of 
its economic power, and thereby provoked a split in the ranks of 
those whose complicity or silence had traditionally protected it. 
At the same time, competition for control of the enormous 
economic interests at stake shattered the confederal 
organizational structure created to restrain conflict and led to 
a violent struggle for supremacy among rival cosche, leaving 606 
dead in the province of Palermo alone between 1978 and 1984 
(Chinnici and Santino 84).  Despite the impressive network of 
corruption and complicity which the mafia had constructed over 
the years, the government and the political parties could no 
longer look the other way when confronted with a massacre of 
these proportions.  The mafia thus found itself increasingly up 
against magistrates, police officers, and politicians whose 
actions could no longer be controlled or neutralized as in the 
past--and this precisely at a time when, given the dimensions of 
the economic interests at stake, the non-action of the police and 
the magistracy was critical.  It is at this point that the mafia 
began to strike back with its weapons of last resort-intimidation 
and violence--this time directed against representatives of the state 
and the political parties. 
     It is thus the expanding economic power and the increasing 
political demands of the mafia which explain the violent conflict 
between the mafia and the Italian state--or, more accurately, 
certain sectors of the Italian state.  Probably the most striking 
characteristic of the mafia of the 1980s is this shift from the 
"stabilizing" violence of the traditional mafia to the 
"destabilizing" violence of the present--what many observers have 
labelled "mafia terrorism."  It should not be forgotten, however, 
that, in contrast to terrorism, the mafia has from its origins 
been an expression of the dominant classes.  What one sees today 
is less a mafia which has rendered itself autonomous from the 
political system--to which, given the nature of many of its 
economic activities, close linkages and privileged access remain 
critical--than a struggle for hegemony among competing groups 
within the Italian state.  In the words of one observer, "the 
dominant classes are seeing an old subordinate ally transformed 
into a dangerous competitor, armed with violence and great 
amounts of capital" (Santino 18).  The mafia's traditional quest 
for legitimacy and respectability has come into conflict with the 
demands of capital accumulation.  The latter have prevailed. 
Thus the turn to violence directed against representatives of the 
state is not an attempt to subvert or destroy the state, as in 
the case of the Red Brigades.  Instead, it is an attempt to 
assure control of the state for the mafia and its political 
allies, and thereby to insure the continuation or restoration of a political status quo which guarantees the unfettered pursuit of mafia interests.