V1-2.07| WHO RULES
QQ: When the government is not the only one making rules, who else makes them, and what do they charge?
AA: Armed gangs. And not because the police vanished — the police are right there. The gang is the missing regulation, privatised and armed. It sells the one thing the barrio cannot produce for itself: that a deal will hold.
01| Everyone tells the same story about bad neighbourhoods. The government gave up, walked away, left a hole, and the gangs moved into it. It is short, it is memorable, and it is wrong at the centre.
02| First, the size of the thing. A survey across eighteen Latin American countries found that 14% of people said local criminal groups provide order or reduce crime — somewhere between 77 and 101 million people living under rules made by men with guns and no legal right to make them. Then the finding that destroys the vacuum story:
"Criminal governance is positively correlated with both respondents' perceptions of state governance quality and objective measures of local state presence. These descriptive results are consistent with multiple causal pathways, including case-specific findings that state presence—rather than absence—drives criminal governance."— Uribe, Lessing, Schouela & Stecher, Criminal Governance in Latin America: Prevalence and Correlates, Perspectives on Politics 24(1), 2025, p. 124
Armed rule is found where the state is more present, not less. That cannot happen if the state simply left.
03| It makes sense once you see what the state actually does here. Smuggling is buying cheap and selling dear, and the gap being harvested is usually made by a government. A tax makes one. A ban makes the biggest one there is. Cocaine costs almost nothing to grow and sells for a fortune, and that difference is not transport — it is the price of the risk of arrest. The state does not merely stand nearby. It manufactures the profit.
04| But the deeper reason the gang exists is the one from the last chapter. Modern states claim the sole right to use force, which makes it illegal for a community to punish its own. Neighbours who deal with a thief themselves are committing a crime. Where the police work, that trade is fine — the suburb gave up its own enforcement and got a working replacement. In the barrio the same trade was imposed and the replacement does not come, or comes as a threat. So the only enforcement left standing is the one that was already ignoring the prohibition. The gang is not competing with the community's authority. That authority was disarmed by law. The gang was not, because it never accepted the law in the first place.
05| And enforcement is exactly what it sells. Not fear, not belonging — the guarantee that agreements hold. Two economists who got hold of a Chicago gang's own accounts put the underlying problem plainly:
"Gang wars are also an extremely costly means of dispute resolution, but given the absence of legally enforceable property rights and contracts, other means of resolving conflicts may be circumscribed."— Levitt & Venkatesh, An Economic Analysis of a Drug-Selling Gang's Finances, Quarterly Journal of Economics 115(3), 2000, p. 757
David Skarbek found the same in American prisons: people who cannot use courts build their own institutions, with rules, enforcement and dispute settlement.
06| Be careful with the word, though. What a gang runs is order, not justice. The rules are theirs, they favour whoever is closest to them, there is no appeal, and the organisation that settles your dispute can rob you next month. If someone pays them to hurt an innocent man, some will. What limits it is not conscience but business: a group that punishes at random has nothing left to sell. Order here means only that things are predictable.
07| So why does a nineteen-year-old take the job? In those accounts the street sellers earned roughly the minimum wage while the man at the top took ten to twenty times as much. What the boy is buying is the chance of promotion — economists call this a tournament, the same structure as professional football or acting, where almost everyone earns nothing and a handful at the top earn enormously. He is not being paid for the work. He is buying a lottery ticket. Here is the price:
"Gang members who were active for the entire four-year period had roughly a one in four chance of dying. Furthermore, there was an average of over two nonfatal injuries (mostly gunshot, but some due to knives or fists) per member, and almost six arrests. The risks associated with selling drugs in this sample are astonishing."— same paper, p. 783
Minimum wage, a one in four chance of dying, six arrests. No calculation makes that a good trade, and the boys taking it are not misinformed. They go to the funerals.
08| And how does a foot soldier get promoted? This is the sharpest line in the paper:
"Although willingness to engage in limited violence increases the likelihood of promotion to the rank of officer, those who engage in wanton violence do not advance."— same paper, p. 781
The organisation does not simply reward violence. It meters it, the way any employer meters overtime. Which means the violence on that street is a job requirement produced by a pay system — not a flaw in the young men doing it. That does more damage to the idea that poor boys are simply violent than any political argument, and it does it with a set of monthly accounts.
09| One warning about where this gets worse. The United Nations finds that the danger rises with the number of competing armed groups, not with their existence. One organisation running a barrio can be quiet; four fighting over it is a war. That is why breaking up a large group has sometimes produced more killing rather than less.
10| The limits, flatly. Those accounts come from one gang, in one American city, in the 1990s, with records the researchers could not fully verify. It is extraordinary data and it is narrow. What travels is the shape — street-level illegal work pays badly and kills often, and promotion runs through violence. The numbers do not travel, and anyone who says otherwise is going past the evidence.
