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Investment in Crime Pays


Wednesday, 27th July 2016 at 9:40 am
Antony McMullen
With new investment coming through, cooperative and other forms of entrepreneurship in Australia could provide a vehicle for ex-offenders in the criminal justice system to be part of the solution to reducing harmful criminal activity, writes cooperatives expert Antony McMullen.

Wednesday, 27th July 2016
at 9:40 am
Antony McMullen


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Investment in Crime Pays
Wednesday, 27th July 2016 at 9:40 am

Opinion: With new investment coming through, cooperative and other forms of entrepreneurship in Australia could provide a vehicle for ex-offenders in the criminal justice system to be part of the solution to reducing harmful criminal activity, writes cooperatives expert Antony McMullen.

keys RS

In an Australian first, the New South Wales Government will target prisoner reoffending through a new impact investment (see Pro Bono Australia’s article New Impact Investment Targets Prisoner Reoffending). This is a positive public policy move and contrasts with the usual “law and order auction” that results in harsher sentencing and prison being only seen through the prism of punishment. Research tells us that longer sentences and time inside do not act as a crime deterrent.

Apart from reducing real harm in community there is money to be saved. It costs around $74,000 per annum (or about $200 a day) to incarcerate a prisoner. Costs particularly spiral when prison becomes a revolving door. According to the Saturday Age the Victorian recidivism (repeat-offending) rate for 2013/2014 was 40 per cent, up from a low of 34 per cent four years previous. This is where social impact bonds come in through investing in rehabilitation rather than more prison beds.

Evaluating the World's First Social Impact Bond (Rand Corporation)

Evaluating the World’s First Social Impact Bond (Rand Corporation)

It works like this. Through a contractual arrangement an enterprise or organisation delivers a social program to reduce, for example, repeat-offending. The program is funded through securing private investment (social impact bonds); if the government saves money due to the program or initiative achieving positive social outcomes (remember each prisoner costs $200 a day and that is not counting all other costs of harm to the community) then some of this is returned to the investor.

The first social impact bond issue in the UK was designed along these lines. Comprehensive services were provided to ex-offenders “at the prison gate” to reduce the likelihood of reoffending. However it appears that although valuable learning was undertaken and some progress was made, the initiative failed to hit a crucial target to trigger repayments. It is difficult to ascertain why this is so. However, possible reasons may be that the social impact bond contractual model involved six types of relationships (11 each governed by a separate contract) which appears quite complex; and, practically, most ex-offenders disengaged from the rehabilitative services well before the expiry of their 12 months of available support. The designers of the NSW initiative will have learnt from the evaluation of this program.

For effective rehabilitation of ex-offenders the late and revered Fr John Brosnan summed it up well when he said what’s needed are “friends you can trust, a good home and a job you can handle”. When it comes to a job you can handle, there is a strong correlation between people who are unemployed and people who have a criminal record; but, on the other hand securing employment contributes to discontinuation of criminal activity. The law says that a business cannot refuse to employ someone on the basis of their criminal record unless it would clearly stop them from being able to do the job. However, despite such legal protections being in place we know that most employers would at least be nervous about employing someone with a criminal record, even if it’s petty in nature.

A direct way to make change could be to consider the co-operative alternative as pioneered in Puerto Rico (and other places like Italy). Recidivism rates in Puerto Rico have been cut by more than 80 per cent for those participating in the world’s first prisoner-organised-and-owned cooperative, Cooperativa de Servicios ARIGOS. Remarkably, only six percent of graduates of the program have been rearrested in the past 10 years. Cooperative projects range from everything from making children’s clothing to pioneering renewable energy products; these projects start in prison and can continue outside.

We know that greater levels of inequality contribute to the level of crime in a society. With a more diverse economy, including distributed employee ownership through co-operative and other forms of partnerships, there is opportunity for greater sharing of economic development and reward (including in some cases business profit-sharing).

Most importantly, it can lead to a greater sense of dignity as one Cooperativa de Servicios ARIGOS member stated: “We’ve learned how to run a business, and some former inmates now have their own small businesses outside as a result – if you can change the way people think in prison, you can do anything. It is a model for social change.”

In Australia, the most prevalent criminal offences involve Illicit drugs with 13 per cent of these offenders being charged with dealing and trafficking and 8 per cent with manufacture or cultivation. Imagine the ‘business skills’ people learn in the black economy being put to use in new  and positive ways.

Another ex-offender in another US-based program (Prison Entrepreneurship Program (PEP) in Texas) put it this way: “I’ve always had entrepreneurial skills, I just used them in bad ways – I knew all about profit margins and managing people.”

In Victoria we have an unemployment rate of about 5.7 per cent and employment growth is primarily in part-time work that can be precarious in nature. To stay out of jail people need work. New jobs are created through successful entrepreneurship and this needs investment, whether it be social impact bonds or investing in co-operative startups.  

The PEP program in Texas has reported that within 90 days of release, every ex-offender has a job and only 5 per cent return to prison within three years. This results in less victims of crime and safer communities through effective prisoner rehabilitation. Let’s put this kind of approach to work.

About the author: Antony McMullen is a cooperatives expert who works for Employee Ownership Australia and undertakes policy work for the Catholic and Uniting denominations in areas such as prison reform. (The author thanks criminologist Arthur Bolkas for his inspirational use of the Fr John Brosnan quote.)

Antony can be contacted via email antony.mcmullen@employeeownership.com.au


Antony McMullen  |   |  @antonymcmullen

Antony McMullen coordinates membership and communication for Employee Ownership Australia and New Zealand.

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One Comment

  • Vern Hughes says:

    Rehabilitation of ex-offenders is primarily a social relationship-based activity, not a financial investment. It depends on members of the community (family, friends, neighbours, club members, mentors) encircling an ex-offender and providing circles of trust, belong and mutual support. These relationships are the critical factor, not external financial investment. Governments have failed to put in place arrangements of this sort, even though it is self-evident to most people that is the only way recidivism rates can be reduced.

    It is wildly inappropriate for governments to belatedly discover the relational only after lobbying from corporate interests turning up showing an interest in rehabilition as a means of getting a return on investment from taxpayers. This is an extraordinarily audacious exploitation of taxpayers. That social enterprises and governments have swallowed this corporate push for so-called Social Impact Bonds is a sad indictment of the pitifully primitive social policy debate in Australia.

    The really cruel aspect of this is the ignoring of families of offenders who have sought social support for ex-offenders for decades with no response from governments, only to see corporates walk in demanding a financial return from governments for showing an interest in ex-offenders and watching governments suddenly discover an interest in the social support they they should have had decades ago.

    Sadly, men in suits matter more to governments than families of people with challenges.

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