Business Page – May 12th, 2002


Crime Does Not Pay, It Costs! 

Introduction

Not a single day goes by without people in Guyana wondering with almost morbidly ghoulish fascination what the next daring crime to be committed is going to be. From daylight gun battles to murder, armed robbery, kidnappings and carjackings there appears to be nothing too outrageous for the criminals to attempt. We are being told that these incidents are the handiwork of escapees from prison who appear to be so elusive that they are able to perpetrate their acts and then vanish until the next time. Our undermanned law enforcement officials seem impotent in the face of this crime wave and one cannot help but feel, yes helpless, and exposed while the entire nation is held to ransom.    

Concept of Development

The current wave is neither accidental nor separable from the deterioration in our law and order capability and will over several years, and from our willingness to accept lower standards across society. Ever since the mysterious death of Monica Reece, the organisation Guyanese Against Crime (GAC) had called for a complete review and re-organisation of the Guyana Police Force with such external assistance as might be necessary. As is the case with so many initiatives by civil society, those calls were rudely ignored and the Force continues to have the same structure and culture that led to its establishment in the colonial days – to keep the natives in check!

Even as we seek economic growth and social development we begin to realise that law and order and the discipline out of which the concept derives, are prerequisites for the development of any society. Not only does law and order bring significant benefits to a country, but it is equally clear that there is a substantial cost arising from the level of lawlessness which the Mashramani Day prison escape has brought into stark reality but not created.

Putting a precise price tag on the cost of crime and lawlessness is impossible since these are concepts that are often clouded by contemporary political and social views. Robbing the state by way of tax evasion is as pervasive as it is criminal but is hardly treated as such even by those who carry the responsibility for dealing with it. Money laundering, corruption in the public sector often with the full participation of those in the private sector, insider dealings by company directors profiting at the expense of shareholders and the state through another level of tax evasion are as criminal as the employee who steals from the company or the act of cattle rustling.

After that hurdle comes the question whether we consider only the direct cost of crime, or the indirect costs as well. Those who smuggle goods into the country paying no duties or underpaying in collusion with the Customs soon put their law-abiding counterparts out of business and discourage others from the sector. And as Dr. Ashni Singh, Budget Director said recently, money laundering can “have significant influence on currencies, market prices and financial stability”

Whatever the gravity and significance of certain crimes such as tax evasion, corruption and money-laundering, the fact that the state agencies seem powerless or unwilling to deal with them and the tolerance by society allow them to pass unnoticed and to be relegated on or indeed from the scale of crimes. On the other hand, those crimes which involve guns, kidnapping and injuries to the persons make news and are seen by citizens and foreign investors alike as the real threats to their staying here or coming into Guyana.

The Cost

By their very nature, criminal activities regardless of whether they are white collar or any colour, are not susceptible of measurement and in Guyana where there is no culture of statistics and record-keeping, the situation is really worse. In the United States studies have been carried out on the cost of crime to society and an amount of US$1.7 trillion per year was identified prior to the terrorist attack in the US on September 11, 2001. Supporting this estimate, David Anderson in the Journal of Law and Economics, gave the components as:  Crime induced production $398Bn, opportunity (time) costs $130Bn., risks to life and health $574Bn. and transfers $603Bn.                   

The study covered defined as “crime induced production” such things as the money spent on locks, safes, surveillance equipment, jails, computer security, airport security, guard dogs and drug trafficking and medical care for crime victims and children born with drug addictions.

The study then goes on to quantify time spent by people securing their possessions, time spent by criminals committing crimes and sitting idle in jails and work time lost by victims and by neighborhood watches. Then it identifies direct related costs of injuries and deaths resulting from crime. Next come transfers which includes items such as fraud, tax evasion, theft, and other cases where criminals benefit from illegal property transfers. Some of these same costs are not unique to the US and can easily be associated with crime in Guyana although obviously on a much smaller scale. 

Drain

It is true that the whole security industry which has been spawned largely to respond to the fear of crime and the real or perceived deficiencies in the Police Force, and the relative comfort of security allows one to operate at a more productive level. The fact is however that those resources can only be considered productive in the widest economic sense since the country would surely have benefited more if these resources were deployed in creative/productive activities. The study of the economic impact of crime on the society is significant because it identifies the drain on resources directly and indirectly associated with the prevention of criminal activity.

Societal Loss

Much of the so-called crime induced production is for items that are not made in Guyana whose only value, (important though that is) is as a deterrent or detective tool. Each dollar spent on this is a dollar less spent by the individual on food or by the businessman on upgrading his business assets which could in turn provide employment and tax revenues. Therefore there are substantial benefits that are not created or are foregone by resources being absorbed by crime-related products which though providing some employment and profits are in effect a loss to society.

Insurance

There is also the high cost of crimes against property in instances of arson and crimes against persons, which it is argued results in the unnecessary production, creates a demand for already scarce resources and drives up prices overall. For instance insured items which are destroyed can result in increases in insurance premiums on two counts. On one hand because of the deteriorating claims experience insurance companies’ expenses are driven up and they pass those onto the consumer. They also wish to be compensated for their increased risk of an eventuality, which is an issue of underwriting cost rather than actual cost, and therefore increase the rates that the public is asked to pay for coverage.

Migration

In Guyana the impact of crime is much more far-reaching than in the United States because of the stage of development or underdevelopment at which we find ourselves at this time. Migration accelerated in the seventies when our political and social experiments created much hardship for most people. A large percentage of the remaining population is therefore awaiting that coveted visa to the US or Canada and the increase in crime will drive even those who were contemplating staying in Guyana into leaving. Occasionally a few stories of the achievements of some of our best and brightest native sons and daughters sometimes filter back to Guyana but many others do not. The brain-drain is for real and continues to be so and that cost is unquantifiable but undoubtedly astronomical.

Double Impact

This problem trickles down because the shortage of human resource skills creates a vicious cycle which hinders development and further creates a situation that does not attract those other resources needed to promote development. Our politicians all say that we need to attract investment but which rational person is going to invest in a country that seems powerless to control its criminals? So crime has a doubly debilitating impact by driving away the talent that persons seek when thinking of making investments and by scaring off investors worried about their personal safety as well as the security of their investment.

Investments

For years now we have heard the cry that we are not attracting sufficient investments in the economy despite having one of the most liberalised economies in the region. Given our mindset, we think “foreign” whenever we think of investments but the fact is that even Guyanese entrepreneurs are now de-investing in response to the whole range of what seem to be insoluble, perennial problems now compounded by an uncontrollable wave of crime.

While there are many reasons which deter the investor including the cost of doing business here, the state of our courts and an uneven playing field, the daily menu of crimes splashed across our newspapers has a salutary, negative effect.

Conclusion

The crime situation has passed the crisis point and we still do not seem to have any idea how to address it. We appoint a person to the post of Commissioner of Police and then do everything to demoralise him. As a society we treat poverty as a crime when he real crime is poverty. Political parties accuse each other of  being terrorists, each claiming to stand for law and order while simultaneously engaging in political point-scoring. Despite escalating criminal activities we ignore calls to modernise the Guyana Police Force.

We treat some crimes such as tax evasion as perfectly acceptable while disproportionately dealing with other crimes. The drug mule is jailed while the master is flaunting wealth. Public and private sector governance create a crisis of confidence against all in authority and yet we expect respect for institutions including the Police Force.

When will we wake up to the reality that a viable future for this country is now at stake and that crime costs, not pays?