Economic Growth Leads to Lower Crime

A new study from the International Monetary Fund shows that there is a strong link between economic growth and lower crime. Specifically, the study examines the relationship between crime rates and economic activity in the three “Northern Triangle” countries of El Salvador, Guatemala, and Honduras.

Strong economic activity helps to decrease crime
Source: International Monetary Fund

The driving factor, according to the study, is the cost-benefit analysis for an individual’s choice of finding a lawful job versus a life of crime. In an environment of widespread poverty and lack of economic opportunities, as well as perceived corruption, criminal activity becomes a viable option for some, potentially explaining why crime is high in Northern Triangle countries.

As a result, the study finds that policies that promote more jobs and higher productivity—such as better infrastructure, lower barriers to entry for new firms, and more-efficient tax systems—are key to strengthening and sustaining growth and lowering crime.

Economic Growth vs. Wealth Redistribution

This conclusion is neither shocking nor counterintuitive and should add to debate on whether economic and social polices should focus on economic growth or on wealth redistribution. Unfortunately, too many politicians today push policies that use wealth redistribution to fight inequality, but at the cost of slowing economic growth.

If adopted, these redistributive policies would be counterproductive from their purported goals. The resulting lower growth rates would discourage individuals from looking for lawful jobs instead of opting for a life of crime. Rather than reducing inequality, these policies would cause many of the underprivileged to remain trapped in crime-ridden communities that offer few opportunities for improving their lives.

In the US, this policy debate is likely to manifest itself in this year’s presidential election. Although Bernie Sanders, a self-avowed socialist, is the worse of the lot, all of the Democratic Party presidential candidates are advocating for policies designed from a Marxist-derived emphasis on inequality. President Trump’s policies, which are more focused on encouraging economic growth, are a better long-run solution for actually reducing crime, poverty, and inequality.

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