LATIN AMERICA:
Crossing to Safety

By Gary S. Becker

Crime is bleeding Latin America of talent, jobs, and the self-confidence to join the global economy. By Gary S. Becker.

As an illustration, we were on our way by car to a luncheon meeting in the middle of the city with an important government official and were caught in extremely heavy traffic because of a political demonstration. As the time of the trip increased from an expected 20 minutes to over an hour, I suggested we walk the remaining distance, less than half a mile. The driver and my host, a native of this city now teaching in the United States, both said it was too dangerous—although some people were walking the streets in the neighborhood of small shops selling simple, cheap goods. My companions said we would stick out because we were wearing suits and spoke English, and argued that we had a good chance of being held up or kidnapped.

I am not trying to single out Mexico City, a city of which I am extremely fond. The same experience could be repeated in major cities in all parts of the developing world. It has been unsafe to walk in Bogotá, Colombia, and Brazil’s Rio de Janeiro for decades. Buenos Aires is a graceful, European-style city, but it has experienced such a rapid growth in crime during the past decade of economic instability that it, too, is now considered quite unsafe. To develop solutions to this growing crime problem, a center on crime is being created in Buenos Aires at Di Tella University, which has the top economics program in Argentina.

The rich and middle classes are not the only victims when crime rates are high. Poorer victims lose a few pesos and cheap watches and may get knifed or beaten in the process, while very small shopkeepers see their take for the day stolen as they close up shop or even in the middle of business hours. In fact, the poor are victimized disproportionately, even though they have little money and other possessions, because the rich and middle classes take costly precautions to guard against crime: driving rather than walking or taking public transportation, installing anti-burglary systems, living in gated communities, and hiring security protection.

Crime festers and grows in countries where unemployment is high and economic opportunities low. It becomes worse when criminals are unlikely to be caught and punished. In Mexico and many other countries, conviction rates are low—partly because the police are often criminals themselves and have no time or incentive to go after other criminals.

Good pay would attract more honest men and women to Latin American police forces. It would also raise the cost of being fired for malfeasance, since the best job alternatives would then be far inferior to police earnings.

Statistics reported by the police indicate that robberies and other felonies are much higher per 100,000 people in the United States than in Mexico. Yet anyone who has lived in or visited both countries will recognize that something is fishy about these statistics. For a more realistic view, look not at police reports but at victimization surveys, which ask households whether they have experienced various crimes.

These reports indicate that robberies, for example, are far more common per person in Mexico than in the United States. But a much larger fraction of Mexicans than Americans do not bother to report burglaries, assaults, robberies, and most other crimes to the police (they do report car thefts, out of a desire to collect the insurance) because they do not expect the police to do anything about them. In fact, the police may harass victims, or otherwise take much of their time, and show no results.

The consequences of high crime rates are serious and far-reaching. A general disrespect for laws often follows when felonies are committed with impunity. In addition, about 2–3 percent of employed Mexicans are used to provide private security to protect against crimes, rather than engaging in more productive employment. High crime rates add to the difficulty of getting skilled and unskilled natives who are working abroad to return home. Foreign companies are reluctant to set up businesses because foreign employees do not want to raise families where crime is severe.

Perhaps most costly to public welfare is the pervasive fear of crime. It afflicts children going to and from school, as well as people visiting friends, going to work, shopping with their families. Long ago, the great English utilitarian Jeremy Bentham emphasized the importance of the “alarm” created by crime. I have increasingly come to appreciate the harm to public welfare caused by this dread.

The problems stemming from the high crime rates in Latin America and elsewhere are clear and so, too, are many solutions. Unfortunately, solutions are not easy to carry out in the present political and economic environments. In fact, many people throughout this region are resigned to crime, as if it were inevitable in modern economies and societies. But the U.S. experience shows this not to be true. Crime grew sharply in this country from 1960 to the early 1980s. Many commentators attributed that rise to the growing alienation of the poor from the rest of society or to declines in “social capital” that reduced protection from criminals. Yet for the past 25 years, crimes against property and against people have fallen greatly, despite a sharp growth in the degree of earnings inequality that might be expected to cause greater alienation in those less educated and less skilled.

The explanation for the fall in American crime rates during the past 20 years is in good part that many more criminals began to be caught and sent to prison. Politicians like former New York City mayor Rudolph Giuliani discovered that fighting crime is not only socially useful but also good politics. Another part, according to analysis by my colleague Steven Levitt (Freakonomics), is due to the legalization of abortion in the 1970s.

Crime festers in countries where unemployment is high and economic opportunities low. It becomes worse when criminals are unlikely to be caught and punished.

I believe that the new president of Mexico, Felipe Calderón, and many other new political leaders in Latin America are aware that crime is an important deterrent to economic and social progress. I recommend that they use both the stick and the carrot to fight crime. The stick includes catching more criminals and severely punishing those who commit major crimes (while giving light punishment to those who commit minor crimes). To catch more criminals, it is necessary to reform the police forces, partly through creating internal police-review boards that focus on corruption. Their purpose would be to punish officers who engage in serious crimes and penalize or dismiss those who do not try to catch criminals and prevent crime.

The carrot includes much higher pay for police. Their pay is now abysmally low in Mexico and many other countries, so that the men and women attracted to the job expect to supplement their incomes by bribes and other corrupt acts. Good pay would attract more honest men and women to the police forces and raise the cost of being fired for malfeasance, since former officers’ best job alternatives would be far inferior to police earnings.

Long ago, Jeremy Bentham emphasized the importance of the “alarm” created by crime. I have increasingly come to appreciate the harm to public welfare caused by this dread.

Following Argentina’s example, universities and think tanks in other countries should create centers dedicated to analyzing the causes of their high crime rates. They should pursue solutions that fit their particular political, economic, and social circumstances.

It is also critical to improve earnings from and availability of legal jobs, especially for workers at the low end of the job spectrum. Crime tends to rise sharply when unemployment is high and good jobs are scarce. A good education for young people from poor families would greatly increase their earning prospects and help bring about a long-term solution to crime and pervasive poverty. Large reductions in crime in the next few years, however, must depend on the other changes I have proposed. Those would work much faster.

Available from the Hoover Press is Crony Capitalism and Economic Growth in Latin America: Theory and Evidence, edited by Stephen Haber. To order, call 800.935.2882 or visit www.hooverpress.org.

Gary S. Becker, who won the Nobel Memorial Prize for Economic Science in 1992, is the Rose-Marie and Jack R. Anderson Senior Fellow at the Hoover Institution and University Professor of Economics and Sociology at the University of Chicago. He is an expert in human capital, economics of the family, and economic analysis of crime, discrimination, and population. His current research focuses on habits and addictions, formation of preferences, human capital, and population growth. He is a featured monthly columnist for Business Week magazine and is one of the initial fellows of the Society of Labor Economists. In addition to being a Nobel laureate, Becker is a recipient of the 2007 Presidential Medal of Freedom.