Crime is often considered a major impediment to economic growth and development because it tends to increase economic uncertainty, discourage long-term investment and new employment opportunities, and erode the rule of law. At the same time, a lack of economic growth in connection with high economic and social inequality tend to increase levels of crime and violence. Socio-economic conditions and social inequality play an important role in influencing whether or not certain individuals engage in criminal behaviour.
From an economic point of view, crime has two important expenses: total and average. The total expense of crime and the average expense is the most analysed. The total expense of crime is significant in the estimation of the degree of the consequences of crime. It can also be fragmented to obtain the closest perception of the magnitude of the different types of expenses or the contribution of certain types of crime in its total influence over society. The average expenses are essential in the estimation of the analysis of expenses. The average expense of crime is estimated on the grounds of the individual incidents and enables us to obtain the idea of the relative influences on the average
The economic analysis of crime points out the link between criminology and economics. Crime on its part causes large expenses in the economy from many different aspects. According to world statistics, the expenses caused by crime are somewhere between £35-60billion a year. On the other hand, expenses aimed at protection from crime on the part of the public sector economy, as well as individual protection also cause large expenses on the budget. In this part, we can also include the expenses spent to combat crime on the part of the state, which is also on a high level.
Crime is an act or an instance of negligence that is against the law and punishable upon conviction. A crime against an individual includes any threat of force or the actual use of force against somebody, as well as accidents, which result in death due to an individual’s intent or negligence. A crime against property, which can also involve or not violence against a person while committing the crime, includes any attempt or the actual deprivation of somebody’s belongings as well as wilfully damaging them.
Drug offenses, impaired driving which resulted in someone’s death, arson, betting and possession of weapons as well as the abuse of public office for private or political gain are also crimes which might have an effect on people or property but do not make part of the above two categories.
The damage caused by crime has a significant negative impact on society’s welfare, which can lead to serious impediments to the creation and maintenance of a developed and well-functioning economy. It imposes large costs on private and public sectors which hurt the personal state of being of an individual, as well as on the welfare of the society as a whole. The impact of crime on the economy is substantial, because it generates great costs to society at different levels, from individual to the national.
The economic impact of violence in Ghana from 2010 through to 2020 stood at US$9.4billion compared to the global economic impact of violence at US$14.4trillion PPP from 2007 through to 2019, equivalent to 10.5 percent of global GDP or US$1,895 per person. These economic losses present an opportunity cost because the money lost could yield some tangible and intangible returns if invested with care, therefore it seems reasonable to think that crime hurts the economic growth of a country. This negative impact on the economy calls for inclusive policies for crime prevention toward social and economic development.
Crime not only leads to financial or physical damage and prevention costs; it also indirectly influences the local/regional and national economy of the country. Accordingly, crime acts as a tax on the entire economy – it discourages domestic and foreign direct investments. On a macroeconomic level crime influence:
- economic growth;
- income;
- labour force participation;
- income spent on security measures; and
- reallocation of resources, creating uncertainty and inefficiency.
On a local and regional level, economists define the following types of impact of crime:
- business impact (crime reduces the competitiveness of companies and investments)
- tourism impact
- impact on quality of life / social capital
- impact on the value of property
Crime serves as an important catalyst for changes in the socio-economic composition of countries. The effect of crime on the local property value is one of those catalyst effects. The availability and quality of crime statistics, dealing with changes over time, and the displacement effect, are the most important reasons for this lack of consensus.
Another effect of crime is that residents become less committed to their communities, causing the ‘social fibre’ of the community to be weakened. An example of the loss of social capital is that residents of neighbourhoods with a criminal reputation are judged to be associated with criminal activities, leading to stigmas that could prevent those people from finding jobs, among others.
Crime has a raging effect on the sustainability and profitability of small businesses. This emphasises the direct and indirect expenses of crime even more, and here the small businesses are the ones that suffer. Businesses suffer losses due to crime, and have to incur costs to ensure safety and security. These costs are often indirectly discounted by lower salary increases or retrenchments.
Crime impedes economic growth, which also impacts the labour market. Lower investment (foreign as well as local) due to crime has a negative impact on the economy, which is often reflected in the lower availability and creation of jobs. Emigration of economically active persons with scarce skills as a result of crime has had a detrimental effect on the economy, and continues to impede the ability of the government to deliver effective services to, among others, workers. Direct expenses consist of the value of money or goods and/or expenses of damage to life or goods.
The indirect expenses include expenses of failure of businesses, loss of jobs, loss of necessary equipment or temporary closing of businesses, medical expenses, loss of personnel, as well as increased insurance premiums. They must also contend with the opportunity costs of crime – which may see businesses limiting growth or staff numbers, or shortening operating hours, to try to reduce their risk of crime.
Criminal Actors in the Sector
The existence of profitable criminal activities in some countries means that the expected loot from crime is larger in those countries than in others. The most important example of profitable criminal activities is the illicit drug trade; other examples are contraband, gambling and prostitution. Countries where the raw materials for illicit drugs are easily obtained or countries that are located close to high drug consumption centres have frequent and highly profitable opportunities for criminal activities.
These activities not only consist of drug production and trade themselves, but also involve elements of violence and corruption. Although the identification and the estimation of crime costs have received wide attention in economic literature, the detrimental effect of crime on the (legal) economic activity is still neglected.
State-embedded actors in several of Ghana’s security and intelligence services play a key role in the facilitation of organised criminal activities. State-embedded corruption is also believed to significantly affect legislative capacity and processes. While Ghanaian officials have historically turned a blind eye to organised criminal activities, the infiltration of drug money into the public sphere has reportedly triggered a hardening of this approach.
Informal Ghanaian criminal networks are known to be involved in drug, arms, and human trafficking as well as in human smuggling, internet crimes and vehicle theft. Many criminal networks in Ghana are linked to African criminal networks. Informal networks of smugglers, particularly in the Brong Ahafo Region, also have links to criminal groups in Burkina Faso and beyond. Criminal networks in Accra have known links to Nigerian criminal groups.
Overall, criminal networks affect everyday life in Ghana and significantly undermine public institutions. Many of these groups are bound together by ethnic, religious, blood, or other ties. Their criminal activity is not only facilitated by corruption but also exacerbated by Ghana’s low state capacity to counter organised crime. Chinese criminal actors in particular are known to have taken advantage of state-embedded connections to circumvent the requirement for fishing, logging, mining and other certifications in Ghana.
Foreign criminal actors from other parts of Africa are also active in Ghana, especially in the country’s illicit gold mining, drug trafficking and illicit logging markets. Meanwhile, although South American cartels have significant links to Ghanaian criminal networks, they do not physically operate in the country. There is little evidence of mafia-style groups in the country. However, some studies point to both hierarchical and non-hierarchical forms of mafia-style groups existing in Ghana.
Preventing corruption
Corruption is a major obstacle to social and economic development and the keeping of human rights. It reduces the ability of governments to provide justice, health, education and other social services to citizens and undermines the rule of law. This in turn affects community trust and how citizens cooperate with the Police to facilitate their work. Strong anti-corruption strategies are needed to prevent corruption from obstructing social and economic development.
Policing and crime prevention
The strength of the Police and the judicial system increases the probability of apprehension and the punishment for criminal actions, thus, reducing the incentives for an individual to commit a crime.
The Police, security agencies and other law enforcement institutions are often seen as key actors in crime prevention. Effective policing requires a gender-sensitive and human rights-based approach to law enforcement, built on consent rather than force. To strengthen legitimacy, law enforcement functions need to be carried out in a fair, effective and non-discriminatory manner that is responsive to people and communities’ needs, and acting with integrity and accountability.
The latest advances in technology have made a clear impact on policing in many countries and have the potential to increase police efficiency. However, there are some challenges including privacy and data protection. The use of technology should be in line with human rights and international norms and standards.
Provision of skilled training & opportunities
Crime degrades the quality of life and can force skilled workers to go overseas; the costs of victimisation, as well as fear of crime, interfere with the development of those who remain. Crime impedes access to possible employment and educational opportunities, and discourages the accumulation of assets. Investors see crime as a sign of social instability, and crime drives up the cost of doing business. Corruption is even more damaging, perhaps the single greatest obstacle to development. Tourism, a key industry in Central America, is especially sensitive to crime.
Crime and corruption destroy the trusting relationship between the people and the state, undermining democracy. Aside from direct losses of national funds due to corruption, crime can erode the tax base as the rich bribe tax officials and the poor recede into the shadow economy. Corruption diverts resources into graft-rich public works projects, at a cost to education and health services. This series of impacts are key in explaining the troubles experienced in the region in terms of economic growth and confidence in democracy.
Conclusion
The economic analysis of crime points out the link between criminology and the economy. Crime on its part causes large expenses in the economy, from many different aspects. From an economical aspect, the calculation of the expenses has an impact on the finding out of modes for combating crime as well as setting policy and measures for its reduction. Some criminologists claim that economic events lead to an increase in the rate of crime. Economists claim that together with the increase in the rate of growth in the economy, the rate of crime also increases.
Reducing crime and violence is important for achieving sustainable development. Therefore, government should not only aim for economic growth but must ensure that more employment opportunities are created, wage rates are increased and basic sites are provided to every citizen, especially during good times, as well as tighten the enforcement of criminal laws so that crime will be continuously reduced and under control.
Increased government consumption, might discourage people to engage in criminal activities due to different reasons, but the most plausible one is financial stability. Nevertheless, even if the crime is not statistically significant, it still alters some determinants like population growth.
REFERENCES
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- Felson, M. (1987). Routine Activities and Crime Prevention in the Developing Metropolis. Criminology, 25, 911-931
- Gerald Koinis and Douglas L. Yearwood ECONOMIC TRENDS AND CRIME: The Effects of the Declining Economy on Crime and the Criminal Justice System in North Carolina, October 2009
- Klecka, W. R. & Bishop, G. F. (1978). Neighbourhood Profiles of Senior Citizens in Four American Cities. Washington D.C.: National Council of Senior Citizens.
- Peri, G. (2004). Socio-Cultural Variables and Economic. Topics in Macroeconomics Volume 4, Issue 1, 1- 34.
- Ray et al. (2009). Crime, Corruption and Institutions. Monash University Discussion paper Nr.20, 1-52
The writer is a Ph.D. candidate, CEPA, CFIP, ATA MIPA, ChMC, AMACFE, Researcher, and Accountant for Serviceships Ghana Ltd & Cape Logistics Ltd
Contact: 0246390969 – Email: [email protected]
