Is New Jersey a failed state?

From The Economist:

Mayors, a council president, two state assemblymen, numerous public officials and political operatives, and five rabbis are among 44 people that were just arrested in New Jersey, part of a ten-year federal investigation of public corruption and international money-laundering and, some organ selling!

This will make a good movie, but maybe people will find it too cliche: Clandestine meetings were held in parking lots and diners. Money, to the tune of $97,000, was stuffed in an Apple Jacks cereal box...a "broker" was even targeting vulnerable people, persuading them to give up their kidneys for $10,000 and then selling the organs for $160,000!

This is a not bad joke or something happening in Michoacan or Nairobi...Religious leaders in New York and New Jersey were heading money-laundering crews, acting as crime bosses!

So the question is why is the rule-of-law still significant in growth regresssions!