Link between economic development and crime and corruption - Research Paper Example

The first article by Plummer posted in the New Republic, explores the various links between crime and the economic growth which continues to be a highly debated issue till date. Economic upheavals in many countries are being viewed by many experts as major triggering factors for increase in crime and corruption rates. However, some experts disagree with this notion as believe that such deviant behavior is not always fueled by downturns or a robust economy. With regard to crime its relation with economic development is considered to be complex as crime rates have peaked both during economic recessions as well as during periods of healthy growth. Experts who have not found a close link between economics and crime have linked increased crime outbreaks to a rapid rise in drug markets. Some even linked crime to inequality and injustice meted out to certain sections of the population. However, many experts continue to maintain that recession is in most cases the trigger for a rise in crime rates. The main reason for a lack of clear understanding between the various factors has been attributed to the inability of economists to conduct appropriate studies to ascertain the links. Many crimes occurring in the society is driven by favorable opportunities and changes brought about by social and scientific developments. For example, developments of better locking systems and use of advanced monitoring systems can bring down the crime rates in society irrespective of economic upheavals. However, crime rates are also likely to soar due to increasing unemployment rates that cause marked behavioral changes among the youth. While some experts argue that lack of resources would prevent people from engaging in criminal activities, many others cite bouts of inflation and the increased demand for goods can also result in increase in criminal activities (Plumer, 2010).
The second article by Wei reported in the National Bureau of Economic Research, explores the effect of corruption on the economic development of a country. In the case of the link between corruption and economic development, one of the first studies conducted for this analysis was by Mauro, who conducted a cross country regression study. From his study he concluded that countries where there was widespread corruption showed a much slower economic growth. However, since many factors can contribute to slower growth it is much difficult to solely analyze the effects due to corruption. One of the ways by which corruption deters economic growth is by reducing foreign direct investment (FDI). Presence of a severe corruption in a country can reduce the amount of FDI. In addition, rampant corruption within a country also makes its currency more vulnerable by altering the capital flow composition. This is mainly attributed to lower inward FDI and increased fund borrowing from foreign banks. An evidence of this has been provided by data from the Bank for International settlement for bilateral loans and also bilateral FDI data. These prove that increased corruption practices have essentially resulted in a lower ratio of FDI to credit taken from banks. This is another major cause for a slower economic growth. Some of the other ways by which corruption hinders growth is by discouraging local business activities and increasing the growth of vested interests within a country. Thus growing corruption practices within a country is a sign of malfunctioning of the government and this in turn affects the economic growth in more than one ways. While countries where there is widespread corruption are attracting foreign direct investment by providing cheap labor, incentives on taxes and various educational policies, these are however, unable to bring in increased investments. Thus the paper provides empirical evidence that increased corruption results in reduced investments and raises the possibility of currency crisis thereby contributing to a slower economic growth (Wei, 2000).
References
Plumer, B. (2010). Crime Conundrum. New Republic. Retrieved from http://www.newrepublic.com/article/80316/relationship-poverty-crime-rates-economic-conditions
Wei, S-J. (2000). Local Corruption and the Global Economy. The National Bureau of Economic Research. Retrieved from http://www.nber.org/reporter/spring00/wei.html Read More