Pricing risks

The Security Economy
OECD Observer

High-tech security tools may well be making the world safer, but they are also a lucrative business. Estimates from The Security Economy put the security industry’s value at between US$100 billion and $120 billion worldwide, and growing. The largest share is accounted for by the US at $40 billion, while in Germany the figure is approximately $4 billion, followed by France and the UK at around $3 billion each.

The Security Economy – a series of articles by international experts from government, business and academia – examines what is behind the demand for heightened security, and how markets and societies are responding. Although crime rates have generally diminished in OECD countries, the impetus of globalisation – with its freer movement of goods, capital and people – facilitates robbery and smuggling. The overall cost of crime is huge, estimated at roughly 20% of GDP in the US and around 7% of GDP in the UK.

Furthermore, the potential for large-scale damage from acts of terrorism has increased, says The Security Economy. Fear, secrecy and suspicion are becoming more pervasive, and are influencing strategies in business and government. Some see new technologies as the solution, whether to check identities or to track credit-card spending.

But what happens when security technology is put to other, more intrusive and controversial uses? The Security Economy warns that there is a growing tendency to use databases not just to sort and identify people, or to clock them in and out of work, but to profile them, sometimes without their knowledge, into categories of, for instance, potential lawbreakers or customers. The Security Economy addresses the social and policy implications of these risks.

The question is how to achieve the optimal balance between security measures and efficiency, as the costs of extra security may be high in the short and medium term, but to the extent that they prevent serious damage and disruption, the long-term benefits can be enormous. The Security Economy cites a new electronic manifest handling system proposed by US customs whose improved tracking of goods could save US importers some $22 billion over 20 years, and the US government over $4 billion. The goods may go through port more slowly, but they will be processed more securely, and more economically too.

ISBN 9264-10772X.

©OECD Observer No 246/247, December 2004-January 2005

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