Outsourcing and Insourcing Crime: The Political Economy of Globalized Criminal Activity

Abstract

This Article presents a novel theory of the political economy of transnational crime control, answering three consecutive questions. First, why does crime travel across national borders? The Article demonstrates that in the globalized economy, profit-driven crime (e.g., money laundering, drug trafficking, gaming and the sex trade) responds - much like legitimate economic activity - to local regulation, by shifting to the territorial jurisdictions in which it incurs lower expected sanctions, making it most profitable for criminals. Second, how do governments react to the international mobility of criminal activity? The Article argues that the crime control policies adopted by individual states influence the global distribution of transnational crime, and that they subsequently impact upon the crime control policies adopted by other states. More specifically, it demonstrates how in a dynamic setting states engage in two types of regulatory crime control races, depending on differential national attitudes towards the activity involved. The first is the outsourcing race, in which increasingly strict policies cause crime to shift to other states. The second is the insourcing race, in which increasingly lenient policies attract crime to the state. In each of these races, states impose externalities upon each other, and inefficient levels of both enforcement and crime arise, in what may be seen as a global collective action problem. Finally, how should global crime control be designed to enhance global welfare? Building on theories of public choice and international relations, the Article offers a critique of existing policies in the area, and explores innovative crime control policies.

Keywords: political economy, crime, control, profit-driven crime, money laundering, drug trafficking, gaming, sex trade, international, crime control, race, outsourcing, insourcing, globalized crime