The Colombian cocaine dealer, the New York banker helping rich clients steer money to offshore tax havens, the shady Ukrainian selling landmines to the highest bidder, the Albanian bully forcing women into prostitution and the Chinese market stall holder selling counterfeit DVDs and software were all part of the same phenomenon, Naim argued.

Viewed separately, there was nothing much new in what they did. There has long been trade in illegal drugs, in weapons prostitution and shady money and fakes in everything from art to designer handbags. But each of these underground trades had swollen grotesquely with the coming of globalization, the Internet and the extraordinary new business of global money. Moreover, there were growing signs these traditionally separate forms of fraudulent or illegal business were starting to blend into one another, and blending also into the new phenomenon of global terrorism.

People had spoken before of "the dark side of globalization," usually in reference to sweatshops and exploitation of third world labor and natural resources. But Naim put the available evidence together in a different way and made new connections and thus new conclusions, in rather the same way his different bits of shady business were making their own connections and establishing their own new conclusions in the global market place.

To give one of Naim's striking examples: "Mexican drug interests are believed to have partnered with Hezbollah associates in the importation of pseudo-ephedrine, a component of meta-amphetamine, from Canada to the United States. In the 1990s, U.S.-based associates of Hezbollah and of Sheikh Omar Abdel Rahman, the patron of the first World Trade center bombing in 1993, used illegal cigarette distribution, store coupon scams, and counterfeit T-shirt sales to fund their operations. And the suspects behind the March 11, 2004, railway station bombings in Madrid also ran a business in counterfeit compact discs."

Naim has now taken his initial essay, and subsequent article in Foreign Policy much further with new research, in a new book, "Illicit; How Smugglers, Traffickers and Copycats and Hijacking the Global Economy" (Doubleday $26). And as Naim was researching his new book, the headlines of the day were reinforcing his argument, and his alarm. The exposure of the A.Q. Khan network, based in Pakistan, to market clandestine nuclear technology -- with sales tracked to Libya and suspected to Iran -- was demonstrating just how dangerous the new underground economy had become.

But it is not just their vulnerability to terrorist exploitation that makes these new illicit networks so dangerous, Naim argues. They are poisoning the process of globalization, the financial networks, the copyright system that is supposed to reward innovation and creativity, and corrupting the law enforcement process. When it comes to counterfeit and fake drugs, they can -- directly -- be killing people, just as they are starting to throttle the real economy on which they feed like parasites.

In Naim's words, they are "eroding the authority of states, corrupting legitimate businesses and governments and hijacking their institutions and even their purpose."

"It is a new threat that, thanks to new technologies, new economics and new politics, has acquired the ability to change the world," Naim writes. "This is no longer about crime rates. It is about global stability."

Naim tries to calculate the scale of the global black economy, but it may simply be too big to define. He cites former head of the International Monetary Fund, Michel Camdessus, saying the global flow of dirty money is between 2 and 5 percent of global gross domestic product, which would value it at between $1 trillion and 2.5 trillion, sums "beyond imagination." Naim claims more recent estimates put the flows of laundered money closer to $5 trillion a year -- bigger than the GDP of Japan.

These figures should be set in the context of the exploding global financial system. In 1990, international portfolio investment totaled some $5 billion a year; today, it has grown tenfold to more than $50 billion a year, $1 billion a week. Over the same period, the total of foreign direct investment overseas soared from $209 billion in 1990 to $560 billion in 2003. The daily global volume in trading on the currency markets has more than tripled from $590 billion in 1989 to $1.8 trillion last year. That is the sum traded -- equivalent to the annual GDP of France -- each and every day. Within that Niagara of money, there is a great deal of room for the illegal, the counterfeit, the tax-dodging, the whitewashed and the stolen.

When combined with rogue states, the illicit networks stake out a new dimension of threat on several different fronts at once. North Korea may be the ultimate offender, in marketing nuclear and missile technology, in trafficking in narcotics and counterfeit drugs produced in state laboratories, in direct financial fraud and counterfeit banknotes and trade in endangered species means, writes Naim, that "international crime is a core activity that defines in fundamental ways the nature of the North Korean state."

Naim cites other states that have becomes vehicles for illicit business; the tiny Pacific island statelet of Nauru, as a haven for laundering Russian money; the former Soviet statelet of TransDniester as a center for arms trafficking; Suriname as a narcotics transshipment haven; China as a center for the international trade in human organs for transplant.

Naim has a chapter on what do, which may prove controversial. He starts by saying priorities must be set, and the minor offences like trafficking in marijuana, may have to be tolerated in order to focus resources on the big threats. Citizens may have to rethink their civil liberties and accept intrusive new technologies, he suggests, in a trade off with the preservation of a trustworthy global trade and financial system.

"Deregulation, decriminalization and legalization have to be policy options," Naim argues. And standing on his credentials as a former Minister of Trade and Industry in Venezuela, and as a former executive director of the World Bank, Naim suggests that, above all, states have top reassert their national sovereignty, the responsibility for what happens on their watch and within their borders, be ready to pool sovereignty with other responsible states to insist on the transparency and collective law enforcement that will be required.

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