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A shadow economy of fake merchandise

Knockoff: The Deadly Trade in Counterfeit Goods
by Tim Phillips
Kogan Page
246 pages, $29.95

In the movie ''The Godfather: Part II," which was set in the 1950s, organized-crime boss Hyman Roth tells fellow crime boss Michael Corleone, ''We're bigger than US Steel."

In a movie set in this decade, a trafficker in counterfeit goods could go Roth one better and proclaim, ''We're bigger than Wal-Mart."

Much bigger, says business journalist and broadcaster Tim Phillips in ''Knockoff," his new book about the shadow economy in which fake goods are manufactured, distributed, bought, and sold.

''If the knockoff economy were a business, it would be the world's biggest, twice the size of Wal-Mart, its nearest competitor," Phillips writes.

The World Customs Organization, Phillips says, estimates the trade in fakes at $512 billion, about 7 percent of world trade. But he hastens to point out that some other organizations put the proportion of the trade in counterfeits as high as 10 percent. Those estimates, however, are based upon the stuff that gets discovered and confiscated.

''Much of the best, most sophisticated stuff never gets noticed, because it is much harder for anyone -- customs, police, or purchasers -- to detect, and anyway, customs officers can't open every parcel, van, lorry, and container they see," he writes.

When most people think about knockoffs, they think of such luxury items as purses, watches, perfume, and clothes. But those are only the tip of the iceberg, constituting, according to Phillips and the WCO, about 4 percent of that illegal trade.

''The next fakes you encounter might be the pills you are about to take for your heart condition, the brake pads the mechanic just fitted to your car, or the engine parts on the airplane you will be boarding this afternoon," Phillips writes.

Phillips takes the reader around the world to some of those dark alleys and bustling bazaars where counterfeits are dispensed both surreptitiously and in plain view. The tour includes:

Counterfeit Alley in midtown Manhattan and the Canal Street area, where suburban shoppers and shopkeepers come to load up on fake designer handbags and clothes.

Silk Alley in Beijing, the world's biggest knockoff bazaar, with 375,000 square feet of space where 20,000 tourists a day have their pick.

The Tenth Anniversary Stadium in Warsaw, which abounds with hawkers of fake DVDs, CDs, and Johnnie Walker whiskey.

St. Petersburg and other places in Russia, where 87 percent of the Microsoft software sold is counterfeit.

Nigeria and other parts of Africa, where counterfeit medicine and drugs are contributing to the deaths of thousands of people, and counterfeiters murder and intimidate government officials who interfere with their business.

''Knockoff" makes the case that counterfeits are hurting both large and small businesses while exacerbating unemployment, worker exploitation, child labor, and worldwide poverty and providing funding for terrorist activities.

Phillips emphasizes the need for governments and businesses to devote more resources to combating the problem. But most importantly, he calls for an attitude change among consumers about buying knockoffs.

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