Granted that the argument can be made that the poor are more likely than the wealthy to commit street crime, it is also true that the wealthy are much more likely than the poor to commit white-collar, or better put, organized, crime, which, as easily demonstrable can be much more harmful than street crime.
Economics and Crime
The day I ran into the submission by the U.S. Department of Justice published in the Atlanta Economic Review Volume: 28 Issue: 4 Dated July-August 1978, I became fully convinced that some economists are criminals! Hear the intellectual spokesperson of the Justice Department-in his introduction to the topic, Economics of Crime:
The economic theory of crime essentially argues that criminals rationally maximize their own self-interest (Utility) subject to the constraints (Prices, Incomes) that they face in the marketplace and elsewhere. Thus the decision to become a criminal is in principle no different from the decision to take up another occupation. The theory claims that crime rates will be negatively associated with opportunity costs and with probability and severity of punishment and will be positively associated with gains from criminal behavior. Many empirical statistical tests have been performed on this economic model and have consistently supported the theory.
This rationalization is precisely what makes the authors and their fellow ideological travelers guilty of the charge: criminal economists. It is the same amoral rationalization that encouraged Richard Freeman to declare that:
Most analyses show that “crime pays” in the sense of offering higher wages than legitimate work, presumably in part to offset the risk of apprehension.
David D. Friedman, on the platform of Econlab says all that is needed to implicate the accused economists in the words that:
Economists approach the analysis of crime with one simple assumption—that criminals are rational. A mugger is a mugger for the same reason I am an economist—because it is the most attractive alternative available to him. The decision to commit a crime, like any other economic decision, can be analyzed as a choice among alternative combinations of costs and benefits.
In this framework, criminal groups are viewed as standard business outfits. Hence, as Friedman puts it, “newspapers, prosecutors, and the FBI often make organized crime sound almost like General Motors or IBM—a hierarchical organization with a few kingpins controlling thousands of subordinates”.
It is pertinent to point to the fact that the economic theory of criminal behaviour is an application of the neoclassical theory of demand. Formalized by Nobel Laureate Gary Becker in 1968, it states that potential criminals are economically rational and respond significantly to the deterring incentives by the criminal justice system.
Over time, the interest of economists in crime has grown substantially as reflected in the increasing number of articles churned out by researchers, a development traced to three factors, namely: one- the path breaking theoretical analysis provided by Gary Becker cited above; two- the rising crime rate and the growing public concern about the substantial cost of crime; and third, the success of researchers in using economic models to explain variations in crime over time and across jurisdictions. As a pointer to the growing popularity of our chosen subject, here is a sample of works on the theme:
• Essays on the Economics of Crime by Ignacio Munyo (2012) PhD Thesis at Universidad de San Andrés-Victoria, Provincia de Buenos Aires, Argentina
• The Economics of Crime: A Survey- by Donald E. Lewis. Department of Economics, University of Wollongong- Economic Analysis and Policy Vol. 17 No. 02, September 1987
• A Modern Guide to the Econ0mics of Crime- a 414-page text edited by Paolo Buonanno, Paolo Vanin and Juan Vargas, published in 2022- with contributions from some of the leading scholars in the economics of crime.
• “A theory of organized crime, corruption and economic growth” by Keith Blackburn, Kyriakos C. Neanidis & Maria Paola Rana published in Economic Theory Bulletin volume 5, pages227–245 (2017).
• Essays on the Economics of Crime PhD Dissertation in Economics presented by Eva Marieke Schnabel to University College London
Indeed, between July 18-19, 2022, the Department of Business and Economics of the Parthenope University of Naples and the University of Leicester School Of Business organized the “6th workshop on the Economics of Organized Crime” to serve “as a forum to present current research investigating the origin, impact and functioning of organized crime”. Analyses on the subject of economics of crime have advanced to the level where we now have a contribution that runs as: “The Becker Paradox and Type I vs. Type II Errors in the Economics of Crime” by Mats Persson and Claes-Henric Siven of the Department of Economics, Stockholm University, Sweden. Furthermore, and joined or led by geographers, economists have written many papers attempting to analyse the spatial variation in crime rates, the determinants of these variations and the impact such variations can have on both the quality of life and property values in otherwise similar residential areas. Increasingly and perhaps justifiably so, the economics of crime is considered alongside the legal context and provisions; thus the theme is now more popularly couched as Economics of Law and Crime. The topic has been pursued vigorously across jurisdictions, providing the basis for comparison between developed and underdeveloped economies as well as capitalist and planned economies.
Isolating Organized Crime
To Hemant More, an expert on our subject, organized crime is presented as “those involved, normally working with others, in continuing serious criminal activities for a substantial profit, elsewhere”. In general, organized crime involves extortion, collection of protection money from rich businessmen, contract killing, kidnapping, film financing, human trafficking, human organ trafficking, drug trafficking, narcotics trafficking, smuggling and illicit trade in arms and ammunition.
The cautionary note sounded by Dr. Abboud Al-Sarraj Professor, Faculty of Law, Damascus University, concerning what exactly constitutes economic or financial crime deserves to be taken on board as he notes that:
It is difficult to have one legal definition of the concept of economic and financial crimes all over the world because the criminal policy, especially in the economic area, varies greatly from one country to another. It is also difficult to determine the overall extent of these crimes because their growing perception involves some of the most rapidly growing predicate offences, as well as the fact that many cases are not reported and the investigation to discover these crimes requires high levels of expertise which is not well developed in many countries, especially in developing countries.
While responses differ from country to country, organized crime is nevertheless a global problem. Hemant More has provided a detailed overview of the characteristics of organized crime groups as having:
• Self-perpetuation and continuing conspiracy,
• The goals of profit and power,
• The use of fear and corruption, and virtual immunity from the law
A detailed treatment is given by the author to the listed characteristics as reproduced here. The essence of continuity is that the criminal group operate beyond the lifetime of individual members and is structured to survive changes in leadership while, of course, the gang remains continuously involved in criminal activity. In other words, these groups are not formed on a temporary basis, rather, they are into existence for a long time. Incidentally, an exploratory research shows that children of organized crime offenders appear to be at much greater risk of following in their parents’ footsteps than children of ‘general’ offenders.
The typical structure of organized crime is that the group is a collection of hierarchically arranged interdependent persons devoted to the accomplishment of a particular function. They are distinguishable as the ranks are based on power and authority. Everybody respects the leader of the group as no member of the group defies his orders. Thus, for members, the organization comes before themselves and their family members. Potential members are subjected to immense scrutiny and are required to prove their worth and loyalty to the criminal group. Rules of membership include secrecy, a willingness to commit any act for the group and intent to protect the group. In return for loyalty, the member receives economic benefits, certain prestige and protection from law enforcement agencies.
Team work ethics is strong as organized crime involves association of a group of criminals which is relatively permanent and may even last decades. Members respect each other the most, behave honestly with each other, and never harm each other in any way. The members are obliged to each other and provide reciprocal services to each other.
The criminal group may be in legitimate as well as illegitimate business activity at the same time. The organized crime involves advance arrangements for successfully committing crimes, minimizing risks and ensuring safety and protection. The members of the group work like professionals whose duties and responsibilities are predefined while high secrecy is maintained. Only people holding higher posts know what crime is to be committed, sometimes even a criminal working at the grass-root level does not know who the boss is. The head of the organization issues order to the person and second in command who in turn may instruct others to commit the crime. There is also the possibility that the members are unaware of other members in the group.
The principle of division of labour is typically upheld as the organised crime involves delegation of duties and responsibilities and specialization of functions. Division of labour among members is based on their skills as the organized criminal groups and their protectors rely on skilled individuals or specialist support to assist in the achievement of group‘s goal. The specialist assists the criminal groups on an ad-hoc basis and not permanently; they are non-the-less considered part of the organized crime.
As to be expected, the goal of organized crime groups is to make money; members also gain a sense of pride, power, and protection. Political power is achieved through the corruption of public officials, including legislators and political executive. Sometimes, such group may also penetrate the legitimate economy, through construction, financing business, etc.
Organised crime arranges permanent protection against interference from law-enforcement authorities and other agencies of government. The protective measures include contacts with policemen, lawyers, doctors, politicians, judges, and influential persons in society. There are corrupt public officials, politicians, attorneys and businessmen who individually or collectively protect the criminal group through abuses of status and or privilege and violation of the law. Corruption is the central tool of the criminal protectors. A criminal group relies on a network of corrupt officials to protect the group from the Criminal Justice System. Corruption involves giving money in cash or in gifts, providing help in elections, threatening their competitors, etc.
At this stage, in order to assist the reader see the urgency and relevance of the theme under examination, a specific country case is highlighted.
The Nigerian scene
As documented by the Global Organised Crime Index, Nigeria has criminal practices embracing human trafficking, trafficking of small arms and light weapons (SALW), wildlife trafficking, illegal oil bunkering, and market for illicit drugs. The global body has the following details on Nigeria:
• Nigerian human trafficking networks are infamous, primarily those engaged in sex trafficking and domestic exploitation, operating in West Africa and Europe. Nigerian networks also engage in labour trafficking, particularly of children who are exploited in domestic servitude street vending, mining and farming all across West Africa;
• Nigeria’s location, as well as its particularly porous northern and eastern borders, and access to the ocean in the south, has made it an ideal transit point for the trafficking of small arms and light weapons (SALW).;
• Nigeria has become a major transit hub for wildlife trafficking, particularly for Central African ivory and pangolin scales as well as for donkey hides destined for Vietnam and China, the primary markets for wildlife products. Local fauna has been widely destroyed due to the trade, which affects Nigeria’s populations of endangered species, including West African lions, Cross River gorillas, Cameroon forest shrews;
• Illegal oil bunkering is a problem in Nigeria, with oil stolen directly from pipelines, predominantly in the Niger Delta region, processed through artisanal refineries and then sold locally or smuggled abroad to China, North Korea, Israel and South Africa, among others. Bunkering operators are professionals and have access to arms and ties to foreign criminal actors who have the means to transport crude oil to refineries in Cameroon, Ghana and Cote d’Ivoire, before moving it to destination markets;
• Nigeria is an important transit, source and destination market for illicit drugs. Afghan heroin is moved through Nigeria en route to Europe, with domestic networks collaborating with Afghani and Pakistani drug cartels for trafficking and distribution. Aided by corruption, these networks also facilitate the sea transport of heroin directly to Europe, the United States and the Middle East. The domestic heroin market has not grown, due in part to the high use of synthetic drugs among the youth, typically very cheap codeine-based cough syrups.
Thus we see that when it comes to the world of organized crime, even the relatively poor economies are in the league of those that can rightly boast of rampant practitioners, with imaginable negative consequences. Clearly, this is not a model for a peaceful world.
A more peaceful world is possible
As empirically tested and reported by Adenuga Fabian Adekoya and Nor Azam Abdul Razak-both of the School of Economics, Finance and Banking, Universiti Utara Malaysia, in their article, “The Dynamic Relationship between Crime and Economic Growth in Nigeria”, crime is a major impediment to economic growth and development in Nigeria despite measures taken to reduce it. For instance, the Federal Government of Nigeria in 2014 claimed that theft, fraud, corruption, and violence constituted a major challenge on the economy and financial budget. Large sums of money were lost to criminals through fraud and forgery as revealed by the Central Bank of Nigeria (CBN) way back in 2013. Smuggling, sabotage, kidnapping, theft and violence have negatively affected the revenue of the Government.
In my view, any well-meant attempt at addressing the challenge of organized crime must go beyond the neoclassical economic prism of static analytical framework to the higher, more enduring pedestal of economic justice. Economic justice is the idea that the economy will be more successful if it is fairer; thus, its goal is to create opportunities for all to succeed regardless of sex, age, disability, creed, national origin, religion, or genetic formation. Granted that the argument can be made that the poor are more likely than the wealthy to commit street crime, it is also true that the wealthy are much more likely than the poor to commit white-collar, or better put, organized, crime, which, as easily demonstrable can be much more harmful than street crime. I come in peace, please.
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