Shank and Gilchrest: Increasing the Peace Can Reduce the Debt
Three months in and 2012 is setting trans-Atlantic records for harsher-than-normal austerity measures and disillusioned voters.
East of the Atlantic, Greece struggles to regain footing while Portugal, Italy and Spain teeter on the brink. West of it, the politicians in Congress, for whom the public has increasingly little faith, ready their calendars for a do-little legislative agenda, save for some small-business incentives and transportation legislation, recognizing how hard it was to compromise earlier on payroll tax cuts and unemployment insurance.
For both camps, cost cutting has become the clarion call, be it the German chancellor speaking on behalf of the European Union or American presidential candidates speaking on behalf of Republicans. What neither seems to realize, however, is that while cost cutting is indeed possible, its demands for decreased minimum wages in Athens and “pay for” policies and deficit-reducing 2013 budgets in Washington, D.C., are not only short-term stopgaps but short-sighted, given the ample funds available elsewhere.
There is little need to cut away the social safety nets in the EU and the U.S. when savings could be secured in far more efficient and lucrative ways. Where is the answer? It’s in the violence all around us.
If the countries could commit to cutting back the rates of violence a mere 25 percent, for example, we could save the global economy well more than $2 trillion. Eradicate violence altogether and we create a stimulus of well more than $8 trillion.
Another way of understanding the effect violence has on the global economy: The global financial crisis’s effect on the gross world product (or GWP, the combined gross domestic products of all countries) was a loss of half of 1 percent. Compare this hit to what violence does to the GWP: a loss of 9 percent.
While the world’s leaders are right to remain obsessed with the global financial crisis’s continued effect on their economies, to ignore the far greater effect of violence on the economy misses an opportunity for easy economic gains. By increasing the peace, a country can quickly increase its GDP. For example, for every 10 rankings a nation improves on the Global Peace Index — an international ranking of the most peaceful countries — its GDP per capita on average grows by $3,100 and consumer spending increases dramatically, not a shabby gain in light of recent decreased consumption.
In the United States, the numbers are equally compelling. If we were to commit to a nationwide reduction in violence to meet Canada’s levels (a violence reduction of roughly 33 percent), we would create a stimulus of $361 billion and 2.7 million jobs. Some of that reduction could start in Maryland, the state in which former Rep. Wayne Gilchrest (R) served, which was one of the 10 least peaceful states on the U.S. Peace Index last year, given its high rates of homicide and violent crime.
So how to do it? The answer, ironically, is in the very policies that politicians are keen to cut.
First, on the prevention end: If we do not want someone to resort to violence, then we must give him every incentive not to. If you have an education, a good job, good health, good access to basic services and a supportive family or community, you are not likely to give all that up by becoming violent, risking death or imprisonment.
The austerity trends in the EU and the cost cutting measures in the U.S., however, undermine the ability of the public to reach these violence-reducing realities. And with poverty and inequality rates at record levels, leaders must think very carefully about anything that exacerbates this trend.
Second, on the reaction end: If we want to deal with violence in a way that does not increase the likelihood of more violence, we must radically rethink our reactionary policies. Incarceration is perhaps the best example (but recent wars also offer illustrations of trillions of taxpayer dollars spent with little violence reduction effect). The United States has the highest incarceration rates in the developed world, and they are only growing.
The wider effect of America’s incarceration rate on economic productivity is enormous: 70 percent of prisoners had jobs before going into prison, which equates to a serious hit on tax revenue. And yet, imprisonment is not substantially reducing violence. Not only is incarceration considered a badge of honor, with little deterrent effect, crime has also moved off the streets and into prisons (see the hundreds of thousands of cases of rape and assault), and nonviolent offenders — many of whom should be prosecuted in drug courts — become violent after even the briefest stints in jail.
The overall point here that politicians need to realize is that in the pursuit of available funds, there are untapped dividends available where they may least suspect it. Increasing the peace not only improves quality of life but the economy as well. Being tough on crime requires being tough on the causes of crime. Leaders on both sides of the Atlantic are indeed right: The time for radical reform is now; it’s just in a radically different direction that they’ve prescribed.
Former Rep. Wayne Gilchrest (R-Md.) served nine terms in the House. Michael Shank is the U.S. vice president at the Institute for Economics and Peace.