Three Seas Economic Journal 10 Vol. 4 No. 1, 2023 1 Georgian Technical University, Georgia 2 Tbilisi State University, Georgia 3 Batumi State University & Batumi State Maritime Academy, Georgia (corresponding author) E-mail: giazoidze@yahoo.com ORCID: https://orcid.org/0000-0002-0155-5775 This is an Open Access article, distributed under the terms of the Creative Commons Attribution CC BY 4.0 DOI: https://doi.org/10.30525/2661-5150/2023-1-2 IMPACT OF ECONOMIC CRIME ON THE SUSTAINABLE DEVELOPMENT OF THE STATE Ramaz Otinashvili1, Shota Veshapidze2, Gia Zoidze3 Abstract. Purpose. The purpose of the paper is to study the impact of criminal business activities on public order and stability of the country. Methodology. The methodological basis of the research is the theoretical and philosophical foundations of the origin of criminal business, its economic reasons, economic crime, competition, institutions. Practical Value. Depending on the scale of distribution and the volume of sales, drug trafficking is considered to be one of the most important areas of criminal activity. Criminality is a complex synthesis of legal, social, economic, political, psychological and other factors. The science of the mentioned phenomenon and its causes under the name of criminology was developed in the second half of the 19th century. However, the views were expressed by those who thought about it much earlier. The relevance of the topic. The scientific novelty of the research can be discussed in relation to the modern scientific and historical situation of the development of this research problem in the scientific community. Based on this, it is new to generalize, analyze and study the challenges of foreign economic security. It is important to reveal the mentioned trends and to develop recommendations in the direction of overcoming and perfecting the new challenges of economic security. Practical implications. There is no lack of relevant sources in the world scientific literature on specific research issues of criminal business. At the same time, in the modern stage of globalization, in today's changed conditions, it is important to comprehensively examine the domestic and foreign economic security priorities of the country. Expected results of the study. To reveal the modern trends and priorities of ensuring the internal and external economic security of the country, to identify the existing challenges and to determine the optimal ways of overcoming them. Key words: business, crime, criminology, competition, institutions. JEL Classification: K14, K42, O17, O43 1. Introduction The concept of national security of the country, based on the priority of protection of national interests, determines the threats, risks, challenges faced by the country and establishes the main directions of the national security policy. From these directions, together with political, social, demographic, legal directions, it is important to ensure the economic security of the country. Transnationalization and globalization of business create a fertile ground for the use of international relations for criminal purposes, which is facilitated by differences in legislation of different countries, availability of cheap economic resources, ease of money laundering in offshore zones, etc. The dynamics of guilt depends on the socio-economic conditions of society, cultural traditions, national identity, religious views, etc. In other words, its "roots" come from the negative social conditions of society. Publicity and open statistics are necessary for crime detection and warning measures: first of all, research into its causes. A healthy lifestyle, moral and material well-being in the family significantly reduces the social factors that cause guilt. Criminality has a long history in Georgia as well as in other countries. In a short period of time, criminals have acquired considerable financial resources and improved their organization. If in the past there was mainly violent crime, today there is an impressive variety of crime: drug trafficking, smuggling, arms trafficking, gambling is slowly being legalized, prostitution is taking Three Seas Economic Journal 11 Vol. 4 No. 1, 2023 on hypertrophic forms, and especially cybercrime has increased. As long as the unemployment rate in the country is high, the trend of increasing crime will always be relevant. Criminal activities cause irreparable damage to public order and stability of the country. It is a special form of socialization with specific values. It has high adaptability and self-organizing ability, is strict within its own structures, easily establishes the necessary connections with the corrupt state apparatus, and thus poses a significant threat to the country 's national security. Despite many attempts to estimate the global extent of crime, it is still impossible due to its complexity. The information is always incomplete. As researchers of this problem point out, an important assessment that can be made about crime is that it is constantly increasing in the world. For example, in the United States, the annual loss due to economic crime is about 300 billion USD. (Gardner, 2022) The total cost of economic crime in France is twice the total budget of the Ministry of the Interior. As an antisocial act, crime involves a complex synthesis of legal, social, economic, political, psychological, and other factors. Therefore, all these public disciplines are the object of research. 2. Literature review The study of the nature of guilt is mainly the arena of representatives of two directions. The first school considers guilt as a biological phenomenon. The second as social. There are also attempts to combine these two approaches. (Dubinin et al., 1989) The scientific study of the criminal world is an interesting topic. Mankind has always been troubled by the dilemma: why does a person commit a crime? When the law is so strict and the criminal has already tested it. (Beccaria, 2016) The science of crime and its causes under the name of criminology was formed in the second half of the 19th century. However, the views were expressed by those who thought about it much earlier. The first theoretical discussions in this field can be found with Plato (Mackenzie, 1981) and Aristotle (Engle, 2013). Thinkers such as Voltaire, Diderot, Locke, Montesquieu and others paid great attention to this problem. (Kent, 2002) Not even famous writers Hugo, Dickens, Dostoevsky, Javakhishvili and others avoided this problem. (Otinashvili, 2021) The anthropological school of law, whose founder was the Italian psychiatrist Cesare Lombroso (1835–1909), made a great contribution to the development of the theory of guilt. The philosophical basis of his theory is a combination of social Darwinist ideas and positivism. According to Lombroso, guilt is as natural a phenomenon as human conception, birth, sickness, and death. (Bretherick, 2019) However, he later admitted that it depends to some extent on the environment. In the works "Criminal Man" (Lombroso, 2006) and "Crime, Its Causes and Remedies" (Lombroso, 1911), Lombroso claims that a person is born a criminal. Such people are characterized by specific anthropological, physiological and psychological signs, peculiar appearance, look, etc. Hence the famous saying: "Eyes and face are the mirrors of the human soul". Lombroso considered treatment, permanent isolation and even physical extermination as measures to prevent guilt. (Knepper and Ystehede, 2013) These ideas gained state recognition under the conditions of Fascism. Lombroso's obviously reactionary views were tried to be moderated by his students and followers. E. Ferri – the author of the penal code of Fascist Italy, identifies both social and anthropological factors that contribute to criminality and considers criminality to be a disease. (Ferri, 1929) In the second half of the twentieth century, biological theories of guilt are increasingly combined with cultural, psychological, and other types of research. The theory of hereditary predisposition to guilt has gained considerable acceptance. According to the representatives of the mentioned school (O. Lange, E. Geyer, O. Kinberg), since many mental traits are passed on to the offspring, the same is characteristic for the tendency to crime. (Hannum, 2023) The psychoanalytic theory of Sigmund Freud and his followers is quite popular. Freud views guilt as innate, unconscious instincts and habits that are deeply embedded in the human psyche and are primarily sexual in nature. (McLeod, 2018) For the first time, scientists and statisticians began to study the social positions of guilt. The famous Belgian sociologist A. Kettle studied trends in the prevalence of crime by gender, age, place and time, paying attention to their rela- tionship with various aspects of social existence. (Kettles, 2004) Three Seas Economic Journal 12 Vol. 4 No. 1, 2023 It is noteworthy that the studies of French scientists P. Dupont and J. Brosseau, who saw the causes of guilt mainly in social existence. Based on the analysis of statistical data, Dupont came to the conclusion that the number of crimes committed each year should be approximately the same, since there are common and constant causes of crime. (Balhara, 2021) This was the basis of the social theory of the "eternity of guilt" developed in the studies of E. Durkheim and N.D. Sergeyevsky, and in modern times in the works of P. Solas and M. Kleinerd. According to them, it is impossible to imagine a society without guilt. (Harrington, 2021) The representatives of the sociological theory criticized the biological theories and pointed to them to carry out reforms. However, they discussed the causes of guilt less in connection with the trends and processes of social develop- ment. As a result, the representatives of the sociological school classified the causes (factors) of guilt (see Table 1). Table 1 Classification of the causes of guilt Causes of guilt Examples 1. Social unemployment, wages, prices, etc.; 2. Individual gender, age, race, etc.; 3. Physical-geographical environment, seasons, climate, etc. 4. Cultural family type, social institutions, traditions, etc. Source: compiled by the authors It is worth mentioning the research of the outstanding American scientist E. Sutherland, who developed the theory of "differential association", separating social factors, physical and physiological factors (seasons, hereditary diseases, physical defects, age, sex, etc.) from cultural factors: family type, social institutions, traditions, and so forth. (Sutherland, 1983) Finding many contradictions between the mentioned factors and their manifestations, Sutherland came to the existence of "differential association'', by which he meant recognition of a part of values by a person and neglect of a part. Sutherland's research on the analysis of the so-called "white-collar" criminality of the ruling class (elite) brought him special recognition. Modern criminological science increasingly tends to the social origin of criminality, since it consists of specific acts of human social behavior. These acts represent a deviation from the moral and legal norms established by society. In general, the relationship between the biological and the social began in the process of the long formation of man as a social being. If at the initial stage the natural-biological factors were decisive, after the development of public relations the social factor becomes more and more important. A person is formed by socio-psychological signs throughout his life and work. He establishes contacts with society, learns and assimilates norms of behavior, cultural values, new requirements, interests and aspirations are constantly emerging. In Western countries, the economic theory of crime has existed for more than five decades. Its origin is associated with the name of the famous American economist, 1992 Nobel laureate Gary Becker. In his 1968 paper "Crime and Punishment: an Economic Approach". (Becker, 1968) He formulated the main principles of the neo-institutional concept. A rational subject participating in business relations, as a result of calculating possible costs, chooses the type of activity that brings him the maximum prosperity. Becker's publication seemed to be a light at the end of the tunnel. This theory was widely recognized and developed. Today it has many followers. The problems of crime have been addressed by such luminaries of modern economic theory as M. Friedman (Nobel laureate 1976), M. Buchanan (Nobel laureate 1986), J. Stiglitz (Nobel laureate 1998) – (Stiglitz et al., 2010), etc. In general, according to neo-institutional economic theory, crime should be viewed as a kind of risky business. The criminal behaves like an economic agent, trying to use the human capital (mental and physical) at his disposal as efficiently as possible. According to this paradigm, an individual always and everywhere makes a rational choice to maximize his or her personal benefit, choosing the action that is most profitable for him or her. Modern society is an association of such individuals, whose members enter into relationships with beneficial interests. The conception of the neo-institutional concept in the USA was facilitated by the lack of cultural traditions in this country. According Three Seas Economic Journal 13 Vol. 4 No. 1, 2023 to this theory, the model of "homo economicus" created by Adam Smith is universal and can be used not only in economics, but also in any sphere of public life, family, politics, law, etc. 3. Methodology The sciences of economics and law are getting closer to each other. The subject of their study is, on the one hand, the role of legal institutions in the economic development of the country, and, on the other hand, the importance of personal motivation in the perfection of legal norms. On this basis, new disciplines were created: the theory of property rights, economies of crime, economies of low, economies of organization, etc. In developed market (mixed) economies, the role and importance of business is extremely large. Nowadays, healthy conditions for business development determine the level of economic development of any country. Therefore, business becomes an integral part of the country 's economy. With the help of business, it is possible to discuss the extent to which the market mechanism and agricultural methods are or have been introduced into the country 's economy. Therefore, the methodological basis of the research is the theoretical and philosophical foundations of the origin of criminal business, its economic reasons, economic crime, competition, institutions. In addition, attention is given to general scientific economic, quantitative and qualitative research methods, especially expert studies and evaluations. 4. Results and discussions Delinquency is a historically variable phenomenon. It changes quantitatively and qualitatively in accordance with changes in the organizational, governmental, socio-aesthetic, ideological and other objective conditions of society. In the course of time some forms of criminal activity die out and new ones appear. For example, in the Soviet system speculation was considered one of the serious economic crimes. In just 25 years (1966–1991), 1 million people were convicted. (Kudryavtseva and Eminova, 2009) Today, guilt is one of the types of trading business. Despite the existing differences in the world, including economically developed countries, there is an absolute and relative increase in crime. According to the United Nations, crime in the world is growing by 56% annually, while the population growth rate is 23%. (Luneev, 2004) The sciences of economics and law are getting closer to each other. The subject of their study is, on the one hand, the role of legal institutions in the economic development of the country, and, on the other hand, the importance of personal motivation in the perfection of legal norms. On this basis, new disciplines were created: the theory of property rights, economies of crime, economies of low, economies of organization, etc. In the work "The returns to Burglary ", published in 1972 (Sesnowitz, 1972), the American economist Michael Sensowitz provides a general theoretical model for calculating the income of criminal business and considers the fact of specific theft. According to the author, this is a high-risk business, the income of which depends on various factors and is expressed by the formula: R = S – PD, – R – (Return) – Thief 's income return; – S – (Stolen) – Amount of stolen goods; – P – (Probability) – The probability that the thief will be caught and punished; – D – (Dollar) – Expenses incurred to punish a thief. This formula is universal and can be used to determine the income of any type of crime (tax evasion, corruption, bank robbery, drug trafficking, etc.). Analyzing a specific case, Sensowitz obtained the following result: the average annual profit of an American thief amounted to a negative amount of "200" dollars. But this is in the USA, where the remuneration of law enforcement structures and, accordingly, the work is at an appropriate level, which increases the importance of the P-value. If there is corruption in the law enforcement structures for various reasons, the value of the quantity P decreases and the criminal business can turn out to be quite profitable. A separate direction of the theory of guilt is the economics of organized crime (Economics of organized crime), whose pioneer is T. C. Schelling (USA). (Schelling, 1971) It is well known that crimes are committed not only by random individuals, but also by Three Seas Economic Journal 14 Vol. 4 No. 1, 2023 criminal groups of various sizes and stable quality. As a social system, organized crime has a closed, rationally structured bureaucratic management structure with a strict hierarchy of criminally oriented roles and functions. It permeates all spheres of public life: business, politics, law enforcement, education, mass media, sports, etc. Cybercrime should be mentioned separately, as it has reached unprecedented proportions in the context of the development of today 's information technologies. However, this problem does not represent the research area of this article. (Veshapidze et al., 2022) Depending on the scale of distribution and the volume of sales, let's consider the drug business separately as one of the large branches of criminal business. As it is known, the market economy has a very complex, contradictory nature. The main thing for it is the demand for goods, if it exists, regardless of whether it brings benefits to society or not, the market produces it. It is the same with drugs, only legal prohibition cannot change the technological processes without promoting the socio-economic environment. The global scale of the drug business allows us to consider it as a special field of criminal business. According to UN experts, the annual turnover of the drug market reaches $900 billion, which is 10% of international trade and exceeds the volume of global car sales. (Netflix, 2020) Manufactured narcotics can be divided into three main groups: natural or herbal. This includes: – drugs derived from natural products: hemp, cocaine, poppy, etc. – semi-synthetic. made chemically, but using natural impurities: heroin, morphine, etc.; – synthetic. Produced only by chemical processes: amphetamine, etc. An elementary laboratory with a set of school chemistry utensils is sufficient for drug production. The wholesale price of the country manufacturer is quite low. However, the retail price in the consumer country is several times higher. According to the data of the Investigation Department of the British Customs, the price of heroin changes as follows: if 1 kg costs 2,000 dollars in Pakistan, its price increases to 15,000 dollars in Turkey, to 30,000 dollars in the Netherlands, and to 50,000 dollars in England. This is only the wholesale price, the retail price is 150,000 dollars. (World Drug Report, 2010) Price increases are not only due to the cost of doing business, and they have specific causes. There are illegal agreements and contracts on the conditions of movement. A normative order is formed, which is established not by legal laws, but by market practice and illegal law. The approach to the key market increases the risk of activity, which requires high costs. Because of the delay, for the addict to be without medicine is equivalent to losing everything, so he agrees to pay the increased amount. High income and big money are sources of corruption. Exploitation of prohibition is the food of the official. Moreover, the greater the prohibition, the greater the "amount to be paid". A drug is a specific good that itself creates a market demand. It needs no advertising. A person who tries it several times becomes addicted. As a result, it is difficult to fight drug addiction in the conditions of a free local market and requires joint efforts of the countries of the world. In Georgia, as in the entire post-Soviet space, the problem of crime is very relevant, but it has not been properly studied scientifically (from an economic point of view). Until the beginning of the 20th century, such activities were limited to so-called traditional crimes such as theft, robbery, etc. Criminal groups kept their distance from the authorities. After that, the process of "getting closer" to them began step by step. During the communist rule, the one-party system gave absolute power to the leaders of the Communist Party, which extended not only to the political, but also to the economic and legal spheres. However, totalitarian regimes are characterized by a low level of fascist, religious-fundamentalist, communist criminality. Political and ideological control by the state prevented the growth of crime. But after Stalin's death, totalitarian control weakened. As a result, the average annual growth rate of crime in 1956–1991 was 5.03%, while the annual population growth in the same period was 1.1%. Thus, the growth of crime was 4 times higher than the growth of population. (Luneev, 1991) Since the 60's of the last century, completely new structures of organized crime have been formed, which have been approaching the state management elite since the 70's. In the 1980s, many areas of public life were criminalized. All this happened before Georgia's formal and Three Seas Economic Journal 15 Vol. 4 No. 1, 2023 official transition to a market economy. At the beginning of the 1990s, a significant part of the population was characterized by a high propensity to commit economic crimes, which unfortunately was not taken into account during the reforms. 5. Conclusions This study identifies the remaining challenges to the country 's internal and external economic security and provides the necessary tools and recommendations to address them. In the modern world, the socio-economic development of any country depends on both internal and external factors. Therefore, in the conditions of modern socio-economic development, international economic relations are one of the most important factors of sustainable development of the country. It contributes to the acceleration of scientific and technological progress, rational use of natural resources, globalization of the world economy, exchange of industrial experience, accelerated development of international economic relations and world trade. The main goal of the development of the world economy is the maximum utilization of the advantages of the common economic potential of the world community. At the same time, it is necessary to realize that countries play different roles in this process, and the international importance of any country or its individual region is based on the existing natural resources, the dynamics of economic development, their availability, its place in the world system of production of goods and services, and the existence of financial resources. During the transition period, the criminal underworld accumulated considerable capital in a short period of time. Its organization improved and grew. Not only the rate of growth of economic crime was noticeable, but also its transition to a new level. If before it was mainly violent crime, the share of distributed crime increased: drug business, smuggling, arms trade, gambling was gradually legalized, prostitution took hypertrophic forms. If unemployment is high in the country, the trend of increasing crime will always be relevant. The dynamics of delinquency (in a broad sense) depends on the economic and social conditions of the society, cultural traditions, national identity, religious beliefs, etc., in other words, the roots of delinquency come from the negative social conditions of the society. Publicity and open statistics, especially the study of their causes, are necessary to identify culpability and take preventive measures. Many countries have traditionally published crime statistics in full. Others publish them partially, some distort the data, and some prefer to remain silent. 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