Economic Factors Leading To Increased Crime Rate Economics Essay

1-Introduction

Economic prosperity serves as a backbone for the overall progress of a nation. One thing is common in all developed nations- they are economically sound. When citizens of a country are freed from the worries of earning a livelihood to sustain their lives, they divert their attention to more useful things. They focus on education, improvise healthcare, develop technologies that make life easy and much more. Poor economic condition is the root cause of so many problems that exist in a society.

“The Becker’s paper opened the door to a new field of empirical research whose main purpose was to verify and study the socioeconomic variables that affect crime. The economics of crime interacts with different and heterogeneous fields, i.e. (Sociology, Criminology, Psychology, Geography and Demography) and it is closely related to poverty, social exclusion, wage and income inequality, cultural and family background, level of education and other economic and socio-demographic factors that may affect an individual’s propensity to commit crime such as age, gender and urbanization.” [1] 

Crime is an activity which is against the law and the fact that the linkage between criminal activities and the socio-economic development of the society is undeniable. Crimes are associated with economic downturns and it is believed that crimes generally tend to rise during recessions and when economy is not performing well. As we know unemployment increases dramatically during bad economy which can lead to more cases of depression and increased number of crimes. The most obvious cases are drugs and alcohol. People suffering from depression often turn to drugs for refuge. Increase in drug taking leads to more drug related crimes. Drug dealing will become higher if demand is higher and when people do not have much to buy the drugs they will commit theft for money. It is also more likely that people will commit crimes, such as those involving violence, if they are intoxicated by drugs or alcohol. On the other side economic development are also dependent upon reduction in crimes.” Keeping crime rates low now is the best guarantee that cities across the country will be able to exploit the inevitable economic recovery when it comes.” [2] 

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A recession leads to more debt. If people spiral into debt they are liable to become more desperate. This particularly increases crimes such as theft. People are more likely to steal so they can pay off their debts. They may also turn to other illegal ways to make money if they feel that there are no legitimate ways of earning.

“Violence is another area that can increase during a recession. People are more liable to get angry when times are tough, and therefore are more likely to turn violent. People may be angry with their employer who has made them redundant, or the government because they don’t feel that they are being helped sufficiently, meaning they are generally more disgruntled with the world. People may also become more hostile towards each other. In particular those who are struggling may be angry towards those who are not. There has been a recent example of this in Ireland, where there were instances of violence towards some Romanian immigrants. The reason for this was attributed to some being angry that the immigrants had taken “their” jobs, although they were jobs local people hadn’t applied for at the time of the vacancies.Family break ups are sometimes more likely to occur during a recession. Debt can cause stress within the family and lead to marriages breaking up. The breakup of parents can have an effect on children. They also show these children are 70% more likely to finish school without any qualifications. This is significant as a high percentage of crime is shown to be committed by those with a poor education.” [3] 

There has not been undertaken a systematic comprehensive study for Pakistan on the above mentioned issue. Several explanations have been provided on crime in the literature but none of these provide a sound analysis of linkage between urbanization and crime. Therefore, there is dire need to fill this gap in the literature by conducting an empirical investigation on the relationship between crime and urbanization. This provides the motivation for the underlying study. More specifically, the objective of this study is to find the relationship between crimes and urbanization and some other macroeconomic factors such as unemployment, and inflation. The question is what will be the impact on crimes when large numbers of people settle down in a single city? Using time series data for Pakistan the study covers the period of 2007-2011.

The results indicate that there is a positive association between urbanization and crime in Pakistan. Moreover, unemployment, inflation, and income inequality are also important determinants of crimes. Education, on the other hand, is found to have a negative effect on criminal activities. Rest of the study proceeds as follows; Section II briefly reviews the related literature on crimes and their determinants. Section III discusses the theoretical model and the econometric methodology used in the study. Detail of variables, results and interpretations are presented in Section IV. Section V concludes the study.

3-Economy of Pakistan.

Economic prosperity serves as a backbone for the overall progress of a nation. One thing is common in all developed nations- they are economically sound. When citizens of a country are freed from the worries of earning a livelihood to sustain their lives, they divert their attention to more useful things. They focus on education, improvise healthcare, develop technologies that make life easy and much more. Poor economic condition is the root cause of so many problems that exist in a society.

3.1- GDP Growth.

In the context of Pakistan, owing to the fact that it is a developing nation, there is no wonder that it is surrounding with a number of social and economical problems. The real issue is not the presence of these problems in society because, as stated earlier, there is no concept of an ideal society in the world. Every country in the world has its own set of socio-economic problems. The main issue is the extent and intensity of the socio-economic problems of Pakistan which have soared to alarming levels.

Today, Pakistan’s economy remains somewhat backwards. “The Gross Domestic Product (GDP) in Pakistan expanded 2.39 percent in the second quarter of 2011 over the previous quarter.” [4] 

3.2 Inflation

The inflation rate in Pakistan was last reported at 10.2 percent in November of 2011. From 2003 until 2010, the average inflation rate in Pakistan was 10.15 percent reaching an historical high of 25.33 [5] percent in August of 2008 and a record low of 1.41 percent in July of 2003. Inflation rate refers to a general rise in prices measured against a standard level of purchasing power. The most well known measures of Inflation are the CPI which measures consumer prices, and the GDP deflator, which measures inflation in the whole of the domestic economy.

4 – Crimes in Pakistan

“Crime Statistics of Pakistan shows that there is a rapid increase in the number of crime reported over time like other countries of the world. It may be because of high unemployment, rising poverty, increasing inflation and urbanization.” [6] .Despite the efforts and measures taken by the government and tall claims of law enforcement agencies for busting gangs, the crime rate in the country is increasing day by day and the crime rate is said to be touching 20.1 percent during the last one year in all over the country. the graph of vehicle theft and snatching, mobile phones snatching , fatal incidents and general crimes is on rise while police and other law enforcers are raising pleasant slogans and making non-stop claims for busting criminal gangs and rounding up individuals indulging in vehicle snatching and other crimes.

“If crime was a rational response to income inequality, the thinking went; government can best fight it through social services and wealth redistribution, not through arrests and incarceration.” [7] 

According to data collected by online from National Police Bureau (NPB) shows that there are 59189 proclaimed offenders involved in major crimes while police has succeeded to arrest 70948 POs during year 2008 but still 59000 are operating. Amazingly, the numbers also increased from 58615 in 2008 to 59189 in 2009. According to the data, Punjab is still on top position with record number of 25991 proclaimed offenses while Sind is on second with 18373 offenders, NWFP 9514, Baluchistan 2659, Federal Capital 1777, Northern areas 446 and AJK have 429 proclaimed offenders. [8] 

4.1. Economic Factors leading to increased crime rate in Pakistan.

4.11 Poverty

Lack of basic necessities is called Poverty. The people all over the world are facing serious problems of poverty.

“The results show that poverty also causes crime. The poor have limited income and resources to satisfy their desires and wants. In Pakistan the poverty statistics show dismal picture besides increasing income inequality. The low income means low saving potential which results in low standard of living. The low income in relation to increase prices (inflation) has crime instigating effect by reducing individual’s moral threshold. Therefore, it can be concluded that people in poverty are induced to commit crime. The results of Granger causality through Toda-Yamamoto procedure affirm that poverty causes crime.” [9] 

A great percentage of people in world are below the average line of poverty and such condition leads to begin cultural crime such as Suicide, Murder ETC. Almost 70% population of Pakistan live in villages. Most of them don’t have access to sufficient basic needs of life. They are struggling for bread and butter. A large chunk of population lives below poverty line. They live in miserable conditions. Lack of proper food, clothing and shelter, poor sanitation, unsafe and sometimes dirty drinking water are just some of their many problems. Poverty itself gives rise to various other social problems. It deprives children of poor people to access education and healthcare. We read crime stories in newspapers that are characterized by lower orders of society who adopt illegal channels to get the financial prosperity which they cannot achieve otherwise.

4.12 Illiteracy.

The illiteracy rate all over the world is increasing and the prime reason beside it is the high cost of education and lack of institutions and access. People due to lack of resources are unable to educate their children’s and so chain is developed with ever increasing illiteracy.In Pakistan Illiteracy is yet another problem. The literacy rate lingers on 56%. Over the decades, despite decreasing, illiteracy rate in Pakistan has shown an upward trend. Not only that but enrollment ratio of students at primary level has shown a decreasing trend. The facts that 50 percent of children do not complete their primary education testify this fact. Despite spending millions on it, government has failed to achieve literacy rates comparable to other countries in South Asia.

4.13- Corruption

Corruption is the prime reason behind the economical unstableness. Corruption has spread into the world and has ruined the economy. Just as a weed spread in the field and affect the yield of the crop. Corruption is the mother of other problem such as unemployment which will be discussed later.

According to latest report of Transparency International, “Pakistan’s Corruption Perceptions Index declined to 2.3 in 2010 against 2.4 in 2009, and out of 178 countries, its ranking as most corrupt country jumped from 42 in 2009 to 34 in 2010.” [10]   Corruption in government departments is so much deep-rooted that a common concept prevails that the system doesn’t let honest people to work peacefully. There is a lack of responsibility due to which wealthy people and those in power are sure that they can’t be held responsible for their deeds. So they keep on looting the national treasures and find ways to legalize their black-money. Many corrupt people don’t even bother to do that.

4.14- Unemployment

Unemployment is a major social problem caused by poor economical system. Whole world is facing serious problems of unemployment and the reason behind it is the unstable economy. Lack of funds followed by unorganized system and lack of new projects are causing unemployment worldwide. Therefore the serving of deserving people is not used, causing loss to both country and the person.

“The results of the data analysis reveal that unemployment in Pakistan Granger causes crime. The reason is that unemployment rate in a country is a complementary indicator of income opportunities in the legal labour market. Therefore, when, unemployment rate increases the opportunities for earning income decreases which instigate the individuals to commit crime. The costs of committing crime go down for unemployed workers. The results of causality support this proposition that unemployment causes crime.” [11] 

In Pakistan major portion of population consists of youth and a large number of young people who have the ability and are willing to work are unemployed. Currently rate of unemployment as per official resources is 7.4% but according to some private estimates the rate of unemployment is 12%. [12] There are many reasons of unemployment like influx of machinery that has replaced manpower, lack of new industries and defective education system. But the impacts of unemployment are more serious and dangerous. People who don’t find work here migrate to other countries with better prospects. Also, people tired of making both ends meet due to unemployment indulge in evil activities and ratio of crimes increase.

4.15- Health Problem

Health is another social problem caused by poor economical conditions. The cost of living is ever increasing and shortage of funds is a usual problem worldwide. There are less hospitals and medical centers and if there are any, the people are unable to afford their and their children health expenses so the health problems grow unchecked.

4.16- War on Terrorism

War against terrorism is another very important reason behind the economical problem. War benefits none, someone is hurt badly and someone is destroyed completely. War is affecting the world’s economy and is causing problems like shortage of fuel, lack of funds, increase in health problem etc. When we talk about Pakistan, Due to war on terror, local people of war-ridden areas are migrating to other areas of Pakistan. Country has seen the largest migration since independence in 1947. These people have left their homes, businesses, possessions and property back home. This large influx of people and their rehabilitation is an economic burden for Pakistan. Unemployment is already common and now the question of providing employment to these migrants has also become a serious concern. This portion of population is contributing nothing worthwhile to the national income yet they have to be benefited from it. This unproductive lot of people is a growing economic problem of Pakistan.

4.17 Lack of tourism

Lack of tourism is also a cause of the declining in economy. Northern areas of Pakistan have been a place of great tourist attraction. The beautiful hills, the lush green valleys, shimmering lakes and flowing waterfalls brought many a tourist from all over the world to Pakistan. This contributed to foreign exchange. Tourism Industry was one of the booming industries of Pakistan. Besides attracting foreign exchange, it also provided employment to local people. Also, tourist industry was a source of friendly relations with other countries.

“If the tourists are to come here in large numbers next year and feel comfortable, then streets should be cleared of the crimes now called street crimes. It is one thing to snatch mobile phones by the dozen everyday and quite another to relieve women of their jewelry. And there are bank robberies and snatching of money as the customers come out with that from banks. What is worse is resistance to such crimes which is fatal in too many cases.” [13] 

Nevertheless, war on terrorism has served as a serious blow to the tourism industry of Pakistan. Local as well as foreign media has projected Pakistan as a dangerous and unsafe country. Its poor law and order situation has alarmed the tourist and thus Northern areas no more receive many tourists.

4.18 Loss in Business

The poor economical system affects the business very badly. People all over the world are facing serious losses in business. In Pakistan sugar, cement and shoe industry is on its downfall while textile industry is breathing its last. Foreign investors are not ready to setup their businesses in Pakistan. They have their own set of problems which include painful and lengthy procedure of getting licenses and work permits in Pakistan, power crises, terrorism and declining exports. Multinational Companies are unwilling to open their offices and franchises in Pakistan. More than 70 Multinational Companies have already packed up their business from Pakistan. “Now adding to the cost of doing business in Pakistan is the frequent wheel jam strikes.” [14] 

5- Conclusion

The first and the main conclusion is that there is positive association of depriving economic conditions with crimes in Pakistan. We conclude that bad economy is very important determinant of crimes in case of Pakistan. This robust analysis shows the very strong positive relation of urbanization with crimes in Pakistan. The other outcome is that in Pakistan inflation, unemployment and income inequality also the main determinants of crimes. Education also shows positive relation with crimes but this is not the right sign because we estimate model with urbanization, unemployment and with education then its sign become negative. It means that unemployment captures the sign of education so it’s right sign is negative. If there is more high education in Pakistan then this will reduce the crimes also. This study brings the important policy implications.

In order to reduce the crime rate it is important that economic growth has to be favorable for poor class of the society. It should follow a path that directs resources to those sectors where majority of the poor exist like agriculture sector and the areas where they live (comparatively less developed areas). [15] 

The policy makers should make some planning to improve the economy and should provide more chance of employment and more capacity to absorb the rapid urbanization. After getting good education people don’t have suitable job. Then those persons can adopt illegal ways to earn more money. But the special focus should be on infrastructure development because since 1964 urbanization increases. Second important implication is that government should create job opportunities in rural areas as well. This process will reduce the burden of unemployed persons in urban areas and finally reduce crimes. Moreover, the policy makers should try to keep inflation within acceptable limits so that the real income of consumers does not lose its purchasing power.