Crime robs growth: prevent it with innovation

Kiran Mathur Mohammed

kmmpub@gmail.com

How much does crime cost? According to an IMF report released in September, “Public and private spending on policing and securities, medical expenses, judicial procedures and forgone income, is about 3.5 per cent of GDP…compared to two per cent in advanced economies.” That is approximately US$770 million.

And that is just the direct cost. Fear of crime drives emigration and capital flight. If your business has just been robbed, the chances that you will make a significant investment fall.

Almost 20 per cent of local firms cited crime as a major or severe obstacle in doing business. To protect themselves, 85 per cent of firms in TT pay for security, at the cost of around two per cent of sales. Instead of going out and boosting the economy, fear keeps people in their homes.

Indeed, the Inter-American Development Bank has demonstrated that a ten per cent reduction in crime can increase firms’ sales by four per cent. Crime constrains growth. We don’t need the IMF or the IDB to tell us this. We already see it in the deserted streets, and the worried calls if loved ones are late. "Get home safely" has replaced "Good night." I’ve met distraught families of brave police and prisons officers; and those left behind by poor young men who lived and died by violence.

We have heard about oil and gas distortions and listened to exhortations to diversify.

But there is some interesting new research. Veridiana Ross at Harvard’s Wilson Centre is sleuthing out a new crime – the prevention of diversification.

The theory is that the crime abets concentration and inhibits the development of complex industries. Resource-based industries tend to be resilient to crime and violence. They are constrained by geography and must therefore invest in crime prevention – which their relatively high profits permit them to do.

However, other industries less constrained by geography simply go elsewhere. Tourism is one example, being highly moveable and more at risk.

Size also matters. Nascent companies have less ability to resist crime or absorb its costs.

According to the working paper, which uses a cross-section of data from Mexico, an increase of 9.8 per cent in the number of criminal organisations is enough to eliminate a whole economic sector. Similar effects can be seen if homicides rates increase by more than 22.5 per cent, or if gang-related violence increases by 5.4 per cent.

So what solutions are cheap, innovative, robust and empathetic? And how can the private sector and society come together to support the government and the police?

There are a growing number of programmes that treat violence as a literal epidemic and aggressively combat it. Cure Violence has recorded a fall in homicides by at least 40 per cent in its programmes worldwide. Its Chicago neighbourhoods saw a 67 per cent drop in homicides. In under a year, shootings fell from 98 to 12, in the first five Cure Violence zones in the Honduran city of San Pedro Sula.

How does it work?

First, programmes map the violence to see where it clusters. Next, they hire local workers – such as ex-convicts, who command respect in the community. These "violence interrupters" patrol the streets and build relationships with the most at-risk.

Workers are trained in cognitive behavioural therapy techniques like “constructive shadowing,” which means echoing people’s words back to them. “Babysitting” means staying with someone until they have cooled down.

Interrupters also stress the potential consequences. In parallel, outreach workers attempt to change attitudes to violence. They also connect people with jobs, counselling or education.

According to Mosaic, the programme’s solution is based on the World Health Organisation’s recommendations for viruses: “interrupt transmission, prevent future spread, and change group norms.”

Programme founder Dr Gary Slutkin has said that behaviour is "formed by modelling and copying.” A victim of violence has a much higher chance of carrying out another act of violence. Cure Violence’s recorded violence patterns found the epidemic curves and clustering typically found in contagious disease. This explains why areas with similar socioeconomic problems often have very different violent crime rates.

The private sector can fund a pilot in partnership with the government, which could be scaled up if it works. If costs are transparent and the economic benefits are made concrete to affect investors, funding becomes easier. Perhaps it could be funded by our first social impact bond?

This is an opportunity for multilaterals like the IDB or for the EU to support – particularly given the implications of crime’s effect on diversification. The chambers of commerce would also benefit and can take the lead.

After all, crime doesn’t pay.

Kiran Mathur Mohammed is a social entrepreneur, economist and businessman. He is a former banker, and a graduate of the University of Edinburgh.

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