THE BOTTOM LINE OF CRIME

Measuring The Economic Impact Of Criminal Activity Is An Inexact Science

According to reports published in the last year or so, the number of
marijuana-growing operations in B.C. is:

a.) 2,000

b.) 20,000

c.) Some number in between.

The correct answer is, of course, d.) All of the above.

Similar wildly differing estimates are found for the amount of
marijuana produced in a typical growing operation. Or for the price it
might fetch per gram, ounce, pound or kilo. Or for how much of it is
from organized criminals vs. mom-and-pop independents. Or for how much
is consumed locally vs. what's exported to other provinces or the U.S.
Etc., etc.

And, while most agree that growing marijuana is B.C.'s most-common
organized crime, it's not the only one. Yet there's no way to rank the
impact of others -- making and selling chemical drugs, trafficking
heroin or cocaine, smuggling goods or people, prostitution,
loan-sharking, credit-card fraud and more.

Indeed, trying to nail down the impact of organized crime on the B.C.
economy is like trying to nail jelly to the wall. All that's certain
is that it's really big.

There are two main ways to try to gauge the magnitude.

One is to make an educated guess -- or maybe a wild one -- at the size
of the marijuana industry, then add on estimates for other,
smaller-scale crimes.

The other is to try to calculate the overall size of the underground
economy -- the legal activities that are shielded from the taxman, the
haphazard acts of individual criminals and the proceeds of organized
crime -- and work backwards from that.

Both methods produce a wide range of figures, all in the
several-billion-dollar range and all amounting to a sizeable
percentage of the province's GDP.

At the low end of estimates, the Vancouver police department's website
estimates the total economic impact of organized crime in B.C. at
$1.8-$2.7 billion a year. It explains neither the breakdown of
criminal activities that contribute to that total, nor the math that
led to the calculation.

By contrast, the math in a paper published this year by Simon Fraser
economics professor Stephen Easton is spelled out in detail. It
concludes the total is $2 billion a year for marijuana exports alone,
not to mention local consumption of B.C. bud, plus all the other
things that criminal gangs do. All in all, Easton reckons,
marijuana-growing accounts for about 2.8 per cent of B.C.'s GDP. With
the GDP figure reaching $142.4 billion last year, that would be about
$4 billion.

Meanwhile, a Forbes magazine article late last year pegged the annual
value of the B.C. pot crop as high as $7 billion US. That would put it
in the range of more than six per cent of GDP.

Yet even that huge number, says Kelly Rainbow, a civilian analyst with
the RCMP in Vancouver, is "conservative, laughably
conservative."

Those numbers are, of course, just for marijuana, which is only a part
of the organized crime picture. And how big a part no one I talked to
was prepared to say. So if you're left no clue as to what number to
pick from that mess, try looking at the question from the other end of
the telescope -- by estimating the size of the underground economy and
working backwards. Sadly, however, what you come up with will be no
more definitive or precise.

You can find published estimates of the size of the underground
economy ranging from 3.7 per cent of GDP to as high as 28 per cent.
More often, however, they hover near or just above 15 per cent -- for
example, a 17-per-cent OECD estimate that applies to developed
countries in general.

Informed analysts like Jock Finlayson of the Business Council of B.C.
speculate that it's higher here. That's thanks in no small part to the
marijuana industry, as well as to an unusually high percentage of
self-employment and service-industry jobs. Service businesses in
general and those run by the self-employed in particular find it
easier to hide income from the taxman, though most of that activity
would not be considered organized crime.

And there's still a question of how much clearcut crime -- drugs,
prostitution, smuggling, fraud, loan-sharking -- is "organized" and
how much is not.

Police and government tend to define "organized crime" very broadly,
and, as they tell it, the percentage is huge. As are the economic
consequences.

A study done for the federal solicitor-general in 1998 by Samuel
Porteous is one of the few in-depth analyses that looks at the impact
of all organized crime, not just one or two activities. It's filled
with estimates of numbers that are now hopelessly out of date but are
still useful to understand what kinds of things criminals do and how
this impacts the economy.

Interestingly, Porteous puts environmental crime -- particularly
improper storage or disposal of hazardous waste -- as second to drugs
in economic impact. Next is securities and telemarketing fraud,
followed by, in no precise order, car theft, smuggling of tobacco and
other goods as well as people, counterfeit goods and money laundering,
which may be connected to most or all other criminal activities.

The relative importance of each of those activities may, of course,
have changed considerably in the seven intervening years. But the
areas of social and economic impact should remain pretty much the
same. The key ones he itemizes are social/political and
economic/commercial costs arising from virtually every kind of crime;
health and safety costs from such things as illicit drugs,
environmental crime and contraband tobacco; violence; and
environmental harm from illicit waste and, to a lesser degree, drugs.

Some potential costs of crime might not be obvious at first glance.

For example, Rainbow includes in the health costs growing respiratory
troubles in children which, she believes, can be caused by exposure to
chemicals used in growing operations that double as the family home.
She also worries about health dangers to adult workers in the
marijuana industry, and even to police officers who raid these places.

And just one item, the theft of electricity to power the lights in
growing operations, is estimated to cost rate-paying British
Columbians well into eight figures a year. However, nowhere in the
literature do I find entries on the other side of the balance sheet --
reasoned assessments of what crime adds to the economy.

Some criminal activities -- prostitution, for example -- tend to just
move money around. Others, like heroin or cocaine use, drain money out
of B.C., since the product is imported. And marijuana, grown for
export on the scale it is here, brings in several billion new dollars
a year.

Much of this money goes through sophisticated money-laundering
schemes, and there's no doubt that some of it winds up invested
outside the country. But a lot of it is spent here, on everything from
haircuts to Hummers to homes.

Insp. Paul Nadeau of the RCMP maintains drug money underpins much of
the market for large, luxurious SUVs in this part of the country. And
Rainbow says it's a major force in rising real-estate prices.
Marijuana growers "aren't price sensitive," she says, noting that a
few years ago, they used to rent small homes, but the profits are such
that now, they often own large ones. She cites an instance in her own
neighbourhood where a house sold for thousands more than the asking
price. "Six weeks later, the grow-op was up and running."

But the consequence, she said, is that more and more honest families
find they can't compete for a decent place to live. So, too, money
laundering can have dire consequences for honest business people. When
organized criminals set up sham businesses that don't have to earn
their own way because their main purpose is to legitimize ill-gotten
cash, legitimate competitors are undermined.