I am guilty of frequently neglecting this blog for long stretches, for various reasons.  Even if a lot of interesting events are happening around me (like the impeachment of Chief Justice Renato Corona or Scarborough Shoal or the new executive order on mining), I did not blog as often as expected.  I felt I did not have anything to add to the public discourse.

My professional responsibilities often get in the way.  I have to teach my students, mark their exams and papers, and compute their final grades.

I am also a family man.

There were many instances where my creative juices did not flow.  I did not want to settle with so-so pieces.  I don’t want to just write; I want to write well.

I feel guilty for this neglect because readers had kept faith even while I am inactive.

To make up, I will start a series of blog entries on the political economy of crime.

What is crime?

For punsters, ‘crime’ is what criminals do.  The pun ‘begs’ the question: who are the criminals?  It may be better to see crime as what or how a state defines it—usually through its penal code.  In this sense, crime is a state-defined concept.  

I presented the draft of this paper in Pattaya last May.  My friend Decha from Thailand challenged me to imagine crime without a state defining it.   The best I could come up with?  A crime is committed when one inflicts physical, psychological, and economic harm on another (or others).  But more on this later.

For acts defined by the state, we are interested particularly in a large family of crimes which produces material (and non-material) gain.  These gainful crimes are further classified into two ‘ideal types’: ‘white-collar crimes’[1] and and ‘violent crimes’ usually associated with criminal organizations like the Mafia, Yakuza, Medellin drug cartel in Colombia, and the Chinese triads. 

Colombian soldiers and corpse of Pablo Escobar, boss of Medellin drug cartel

Yakuza gang members

For this reason, crimes of passion and other crimes that do not produce economic gain for the criminal are excluded from our analysis.  A crime passionel is usually committed by an individual (or possibly a few persons), does not require an organization much less a transnational one, and does not (usually) require premeditation.

 

Blue-collar worker

 

In American English, ‘blue-collars’ are workers supplying manual labor in factories and the streets while ‘white-collars’ principally used their brains to work in offices.  Office workers (predominantly males at the time) dressed appropriately with a coat and the obligatory white shirt (with detachable white collars) plus tie.  White-collar workers steal and (on occasion) kill but they use guile and deception rather than threats and direct violence.  Lacking the presumed  ‘legality’ of white-collar criminals, violent criminals threaten or use force ‘earn’ illicit gains.  This is illustrated by the difference between a book-keeper who ‘cooks’ office accounts to skim off money and the street hood snatching a gold watch from a pedestrian.   The U.S. Congress defined white-collar crime as an illegal act or series of illegal acts committed by non-physical means and by concealment or guile, to obtain money or property, or to obtain business or personal advantage.

Modern version of detachable white collar

The idealized distinction between white-collar crime and ‘violent crime’ is simply that—an idealized one.  In reality, white-collar criminals may also threaten and use violence themselves or may employ strong-men to achieve their objectives.  And so-called ‘violent’ criminals can also deceive, dissemble, and use guile.  An example is the thief who slashes your bag or picks your pocket without you knowing it you are both in a bus or other means of public transport. In short, guile, deception, dissembling, threats, and direct violence are all in the criminal repertoire.

 It is hypothesized that as the scale of criminal operations increases, criminal organizations will have need for ‘front’ offices with white-collars and ‘back-room operations’ carried out by strongmen.  The criminal organization becomes a two-faced and a more complex one.

A special kind of white-collar crime is corporate crime which is criminal activity on behalf of a business organization.  They include crimes of fraud, concealment, and misrepresentation that continue to victimize all sorts of groups and individuals in society.  Corporate crime operations are not usually conducted by atomized individuals.  Corporate crime involve organizations especially when operations become transnational.  The skillful concealment of debts and losses by Enron’s executives led to the company’s bankruptcy, the dissolution of Arthur Andersen (at the time one of five largest accountancy partnerships in the world), loss of billions in dollars in pensions and stock prices sustained by employees and shareholders (not only in the US), and caused a crisis in confidence.  The event was reprised a year earlier with Worldcom with bigger losses.  While no criminal proceedings were initiated against Worldcom executives, many Enron executives were indicted for a variety of charges and sent to prison.

However, the jury is still apparently out if the massive sale of financial derivatives that led to the financial crises of 2007-2008 in the United States constitutes criminal fraud.  Picture this.  These new-fangled financial instruments were an amalgam of good and risky home mortgages.  This practice supposedly made good business sense since housing prices had been going up for quite a time.  As new instruments, the derivatives are sold in tranches—the good, the not so good, and the don’t bother.  These tranches are rated either by Moodys, Standard & Poor, or Fitch and the first tranche would rate AAA, the second BBB, and the ‘don’t bother’ may not be sold at all.  Since the last tranche is risky and will thus earn higher returns, the seller keeps them on its balance sheet.  Fraud is first committed by the seller’s non-disclosure of the risk surrounding such instruments to investors.  In fact, they actively promote the same as risk-free instruments.  However, sellers protect themselves against risk by buying insurance—again without informing the investors. 


[1] The term white-collar crime was coined in the 1930s by Edwin Sutherland who defined it as crime committed by a person of respectability and high social status in the course of his occupation.

 

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