Crime and the economy

In making this statement, Mr Valley was attempting to eat his own words, since a few weeks ago he had suggested that crime was the reason that this country had dropped from 42 to 51 in the Global Competitiveness Index. But even then he hastened to add that the security forces would reduce crime in short order — a prediction we are waiting with bated breath to come true.

In rebutting himself, Mr Valley pointed out that for the first seven months of 2005, foreign direct investment (FDI) stood at US$1.7 billion as compared to a mere US$73 million in 2004. This is a very healthy increase, but the upward trend is the exception, not the rule. FDI declined from a high of US$ 834.9 million in 2001, to $US684.8 million in 2002, to US$534.5 million in 2003. In 2004, however, the FDI rose to a net total of US$ 972.7.

So Mr Valley is correct in denying any linkage between crime and FDI. Since violent crime has been on a steady upward trend since 2001, a correlation would have shown a steady downward trend in FDI. However, this does not appear to be the case — at least in the short-term. What might happen in the long-term, however, is a different kettle of fish.

It is true that the present pattern of crime is unlikely to affect FDI. Most murders occur in specific geographical regions among a particular socio-economic class. Since most FDI is in the industrial sector, this kind of crime isn’t likely to have any impact on such investment. But the high murder rate, and the still burgeoning kidnapping industry, will certainly have economic effects sooner or later.

Kidnapping, in particular, has already led to an exodus of business people. Even those who have stayed are following the example set since Independence by our political leaders, and sending their children overseas to live. Not all of these persons close their businesses, often preferring instead to hire managers. But the emigration of any country’s business class must inevitably lead to economic decline. After all, oil and gas prices will not remain high forever, and the Manning administration shows little or no inclination to prepare for that rainy day. In 2001, the government’s current account balance stood at TT$ 2,579 million. In 2002, just after the general election that broke the 18-18 deadlock, the current account balance had dropped to TT$ 475 million. In 2003, it climbed to TT$6,193. But this was mainly the result of rising gas prices and FDI, not prudent fiscal management on the part of the government.

The fact is, it is the country’s energy dollars which provide a shelter for the country’s economy. Yet the poverty rate still stands at 21 percent, and our dependence on oil and gas means we are always vulnerable to international shocks. Nor is any economy immune to social indicators — and the continuing rise in criminal activity will surely undermine any economic gains unless the government gets crime under control in short order.