Introduction
Crime from an economic perspective has a wide range of effects on the economy. Most economists have been determining the main causes of the crime such as drug sales, abortion among others. There has been great concern about the effects of crime on the economy. This is because most countries’ GDP is supported by a greater percentage of income from crime and crime-related activities. This is a major concern economically as a country since domestically there would be few people who can afford the cost of goods and services.
Crime has great effects on the prices of the commodities being sold in the country; hence this will affect both the suppliers and the consumers which influences the income directly. This paper analyses the economic advantages of crime in a country. In the past we have observed that when the supply of hard drugs like cocaine drops the economy also drops. This is an indication that these drugs are very strongly linked to the economy and when their demand is high so is the economy (Jessop, 2007).
Economic reasoning
Crime has created a lot of effects on the economy which are both positive and negative. Crime affects the normal forces of supply and demand in the market. With increase in crime, simply implies that the economy will be faced with increased number of unaccounted economic operations. These operations have great influence on the economy. There will be increase in cash in hands of various households hence the money in supply will be increased. This has effects on economy since the product prices will go up. This is because with increase in the money supply in most people, will make them demand more commodities, hence the increase in demand which will affect the price. The scarce resources will be demanded by every individual in the economy who earns income through illegal activities.
Handy Dandy Guide (HDG) can be used to explain that crime is the best alternative to some people since it brings in a lot of benefits and its cost is minimal. A person chooses between many alternatives which relate to cost but ends up in one which is cost-effective. The systems also of economics have been categorized to be the main factor that affects the choices and inducement of people. When there are changes in rules and regulations, inducements changes and behavior changes. These explain the decision that many people results in crime (Whalen, 1996).
The crime and crime-related activities have been established as an independent type of business with rules which govern the operations. There is well-established market structure that regulates all the activities of individuals or groups as an authoritative body so that the interests of the people’s needs are met all the time. Monopoly is the only characteristic that defines the activities of organized crime. This is seen by the kind of protection the illicit business victims get for example the bookmakers. The organized crime can facilitate the distribution of certain goods and services by monopolizing them.
On scarcity and opportunity cost, crime can be reduced and other products and services forwent, or increase crime and have more products and services in the economy. There are decisions also that have to be made about crime budget on how money is to be spent.
Crime and crime-related activities have large influence on the economy of a nation. When money is stolen from institutions and in large quantities, it causes shift in the market. For instance, the price of goods changes when laundering of this money takes place. This is because of the fact that buying and selling goods is the only means to make sure that this money is clean. If this money is taken to the banks it can be easily tracked.
In drug markets, those who benefit from drug trafficking are the drug lords but they do not stash the money away, it is injected into our economy and this is when the government starts implying that the economy is growing but they are not able to give a clear explanation as to why it is growing. In the legitimate aspect of crime, there are a number of beneficiaries who are involved in the provision of services that are related to interdiction, forensic accounting, policing, personal security and many other areas such as national or regional security (Jessop, 2007).
Forensic experts carry out a lot of crime scenes that involve many people. For instance, the common police officers have to be there. This gives them a job to do. The equipment that is used by these experts is also custom made and as a result very expensive. This creates a job for those involved in the manufacturing company and these people influence the economy of the country in form of taxes which they do not pay and revenues that they generate. Consequently, rate of unemployment decreases and would create more jobs and more spending which revives the economy.
Literature review
According to Friedrichs (2009) crime has impact on the investment in a country. The cost of choices that people have to make is mostly based on investing the money received due to crime-related matters. An investment made in any country where crime is high is influenced by crime such as kidnapping. Friedrichs concludes by saying that homicides, general cases of kidnapping, and the attacks based on guerilla mainly affect the investments in the country. According to Freeman and Rodgers (1999), based on the analysis they did, young people have a lot of money in form of earnings and the rate of unemployment is low in areas where crime is rampant.
Youths have high earnings and less unemployment rates in low crime areas. According to Davies (2009), he analyzed data from Uganda and concluded that crime does not affect start-up investments. According to McDonald and McMillen (2010) crime brings about depopulation in a country hence it can be used to induce savings in the economy.
The illegal and the legal activities when combined will have one of the fastest-growing business sectors in the regional economy in size though it might not be in terms of employment. In fact, if the illegal businesses are made legal, the economy of the respective country would improve dramatically. In the past two centuries, it was very easy to ignore criminal activities and what effect they had on the economy, but this has since changed.
For example, it was very possible to ignore crimes in the Caribbean but nowadays it has become a source of income for some tycoons on this Island. They traffic drugs all over the world and this money affects the demand and supply of other commodities. This was due to the nature of the crimes which were very pernicious and life diminishing effects. This has since changed and a lot of people are aware of these crimes thanks to the media but still, people are ignorant about them (Las Vegas Mercury, 2009).
Analysis
It is therefore right to say that crime has become one of the central development challenges which arise from the huge costs that will be incurred in a bid to eliminate it. There is also the risk of deteriorating economy in a bid to eliminate crime. Taking America as an example, the number of people in American prisons are over two million in the previous year. This has resulted from the escalating levels of poverty that have occurred as a result of the economic recession that has hit most countries in the world. Again from such occurrences there is an indication that crime benefits the crime control industry.
The numbers of correction facilities have to be increased with the increase in the number of criminals. Those who take part in the construction and maintenance of these facilities earn a living and as a result they influence the economy’s balance of demand and supply. There is a 400% increase in the number of incarcerated since the 1970s. This has provided jobs for a lot of people who would have otherwise been jobless. In the forensic department, the tools used during the investigations are very expensive and only a few companies manufacture them. This is therefore a source of income for this country’s economy (Jessop, 2007).
Also, the personnel who are involved in the investigation earn their living through the incidences of crime. The security departments in the world would not exist were it not for crime. There is also a large market for documentaries that involve real crime. The Caribbean is also famous among tourists for its drug policies that allow them to use marijuana and other drugs. This is a tourist “attraction technique” that other countries have not yet tried but it is working for them. It is therefore worth noting that as much as crime is wrong it is very viable as a source of income for most countries (Michael, 2009).
Organized crime has also increased. This is due to the number of people who are frustrated in life due to their high levels of skills yet they do not get jobs. As a result, they have to earn a living and they end up doing so on the wrong side of the law though if their activities were thought of as genuine, they would have sufficient positive economic impact.
For example, hacking other people’s computers is wrong but other people have specialized in this and they earn a living from it. When they get employed by the government, they help in locating people involved in wrongdoings. As a result, they earn a living which they use to influence the economy. Another example is that of pirates who roam the East African waters freely attacking ships using their route. They earn a living this way and they impact the economies of neighboring countries like Sudan, Kenya and Ethiopia greatly. For instance in Kenya, the government has issued a decree whereby all people who have an origin or have recently come from Somali are required to declare their wealth and state where they got it from. The reason for this is the increased inflation due to their influence on the demand and supply of goods.
From the various articles that were used, it has been noted that criminal activities influence the economy of various countries from a wider perspective. On a large scale, they end upbringing in an aspect of wealth creation though in the wrong way. This is the reason why various governments are working on stabilizing their economies through other means such as making convicts work to pay those who work in the correction facilities. It can also be concluded that criminal activities affect the demand and supply of goods since it leads to goods being offered at prices lower than those in the market. This gives people what they want at lower prices leading to people in business lowering their prices to continue with the business. Criminal activities have an economic eccentricity that cannot be assumed and it is important to reduce as they cannot be eliminated.
References
Davies, J.B. (2009). Personal Wealth from a Global Perspective Studies in development economics. United Kingdom: Oxford University Press US, 2009
Freeman, R.B. and Rogers, J. (1999). What workers want. New York: Cornell University Press
Friedrichs, D.O. (2009). Trusted Criminals: White Collar Crime in Contemporary Society. New York: Cengage Learning.
Jessop, D. (2007). Who Benefits From Crime? Web.
Las Vegas Mercury, (2003). Crime Benefits, Control. Web.
Las Vegas Mercury, (2009). It’s More Profitable to Treat the Disease than to Prevent it: Why the Prison Industrial Complex Needs Crime. Web.
Michael, R. (2009). Making Economic Sense. Web.
McDonald, J.F. and McMillen, D.P. (2010). Urban Economics and Real Estate: Theory and Policy. New Jersey: John Wiley and Sons
Whalen, C.J. (1996). Political economy for the 21st century contemporary views on the trend of economics. Journal for New York, London and England. New York: M.E. Sharpe Armonk, pp. 126-250.