Tackling crime is key to growth
Published:Friday | June 15, 2018 | 12:00 AMMcPherse Thompson/Assistant Editor - Business
The International Monetary Fund (IMF) has again sought to persuade the Government that improving security and crime prevention is crucial in Jamaica and other parts of the region where chronically high crime rates are weighing heavily on economic growth.
As it has done before, the IMF, in its April 2018 regional economic outlook for the Western Hemisphere released recently, noted that "crime saps economic growth by imposing large public and private costs, distorting economic incentives, and disproportionately affecting the poor and the young."
Suggesting that the chronically high crime is one of the biggest challenges in the region, the report said homicide rates "are among the highest in the world, with El Salvador and Jamaica having the top two rates worldwide".
High Homicide rates
According to the report, the Caribbean and Northern Triangle countries - El Salvador, Guatemala, and Honduras - account for only half a per cent of the world's population, but for five per cent of non-war homicides.
A report appended to the regional outlook prepared by IMF Mission Chief to Jamaica Uma Ramakrishnan and IMF economist Joyce Wong said that assessing the economic impact of crime on growth is, among other things, difficult to isolate because the vicious cycle between low growth and crime muddles causality.
However, they concluded that if Caribbean and other countries in the region were to reduce their crime rates to the world average, GDP growth could be higher by around 0.4 percentage point a year in Jamaica.
On a cumulative basis, Jamaica lost about seven percentage points of GDP due to the high crime rate during the period 1999-2015, the report said.
It said the channels through which crime generate the impact on growth estimated include the cost of goods lost; public and private costs for prevention, deterrence and imprisonment, and lost productivity from the prison population and victims.
It quoted the Inter-American Development Bank as saying that all those can add up to about four to five per cent of GDP a year for the Caribbean and Central America, Panama and the Dominican Republic.
Other non-monetary costs may also result, the report said, noting for example, that criminal activity and shorter lifespans discourage investment in human and physical capital by directly lowering expected returns and eroding job creation.
Crime also fosters brain drain, which is especially pertinent for the Caribbean where growth has been chronically low, it added.
Since the young are often both victims and perpetrators, crime can also generate a cycle of negative labour market outcomes, further fostering criminality and lowering growth, it said.
According to the report, from an economic perspective, criminals weigh the expected net benefit of committing crimes against the expected net benefit of legal activities.
Tackling Crime
"Thus, given the high levels of poverty and low growth in Central America and the Caribbean, tackling crime will require a combination of implementing policies to spur growth and promote economic opportunities, improving deterrence and crime prevention, and strengthening the criminal justice system," it said.
"Given the region's fiscal constraints, interventions should be targeted and evidence based. Thus, interventions directed towards at-risk youth and investment in data collection and monitoring are critical," they said.
In addition, security budgets should go beyond just deterrence, and include skill development and vocational and social programmes for youth. Strengthening the credibility and efficiency of the criminal justice system will enable swift judgments.
Governments should also provide basic skills training to convicts to bolster their reintegration into the productive sector. Less overcrowding and better-quality prison facilities will also help prevent criminal activity within prisons, the report said.