The Electric Commentary

Wednesday, August 18, 2004

It is a crime.

Doug Kern has a fantastic article today at Tech Central Station about the costs of crime. The important part:

Poverty can be resolved through individual effort; crime cannot. We know what prevents poverty. Acquire as much education as you can, get a full-time job and work hard at it, get and stay married, and avoid substance abuse -- take these steps, and you won't be poor. Each step is within the abilities of even a below-average person. But how can individuals resolve crime? No amount of hard work or personal initiative will stop a mugger from waving a knife in your face. A responsible lifestyle won't put your car radio back after some thug steals it. For the crimes that afflict the poor, our society has only one approved solution: stop being poor, so you can move somewhere safe. Some solution.

Worse, crime corrodes the very ability of the poor to improve their own situation. Everyone knows that government corruption and incompetence leads to capital flight; no one wants to invest in a place where the rule of law is spotty and ill-enforced, because property rights become meaningless. The poor need investment opportunities more than anyone else -- but who wants to build anything in communities that aren't safe at night?


The threat of crime to business is too often ignored, and entrepreneurs are the keys to any successful neighborhood. They are more important than good schools, and more important than "government help."

When a neighborhood has a strong small business community, it will have less unemployment than other neighborhoods. Businesses create jobs, and while activists in blighted urban areas often look to the government to provide jobs the government is notoriously bad at this. Crime is the biggest deterrent to job creation in any given city, but government solutions generally take the form of subsidies, or "outreach programs" and other expensive nonsense. But small business growth is not just a boon unto itself. It also produces many positive externalities.

A strong small business community will also result in greater instances of home ownership. In general, where home ownership is increasing, crime is decreasing. Just look at this report from the Department of Justice:

Home ownership: Property crime, regardless of the type, occurred more often to those living in rented property. In 2002--
Households in rented property experienced 207, while those that are owned experienced 136 overall property crimes per 1,000 households.
Rented households were burglarized at rates 56% higher than owned households.
Households living in rented property had more than twice the rate of motor vehicle theft than those in owned property.


Small businesses also increase the tax base in the community. As schools are primarily funded though local property taxes, good schools follow good businesses. Measures taken to increase the quality of schools will be only marginally effective without proper funding, and funding can not be produced from thin air. If a community has no tax base, there is only so much educational reform that can take place.

Finally, the small business community will produce an educated and productive second generation. One of the great things about starting a business is that almost anyone can do it, from the most intelligent Harvard grad to the poorest immigrant just off of the boat. Many immigrant communities have grown surprisingly sophisticated and have formed credit-sharing cabals when traditional fund raising attempts have failed (See this link, dealing with Caribbean immigrants. A quick google search reveals that his strategy is used by all ethnicities). The only skill truly necessary to run a business is a strong work ethic. While first generation small business owners may remain uneducated, (and that is a shame) their children will often benefit immensely from their parents sacrifice. Most will take advantage of the superior education they receive and accomplish greater things, get better jobs, or come home and increase the efficiency of the family business.

Crime is the single biggest obstacle to small business owners. In high crime areas, there will be more shoplifting, higher security costs, and poor customers. Crime also severely restricts a business's hours of operation. It is difficult enough to succeed in ideal conditions, but in a high crime area, it is almost impossible.

When the government stresses job creation (not corporate welfare, but job creation aimed at helping the poor), crime is seldom addressed.

The conventional wisdom is that poverty creates crime, however there are countless examples of very poor low crime areas, particularly in the rural south. From the DOJ:

Urban, suburban and rural Urban residents had the highest violent victimization rates, followed by suburban resident rates. Rural resident had the lowest rates. In 2002--
Seven urban residents, four suburban residents and three rural residents per 1,000 were victims of an aggravated assault, and urban residents were robbed at about 4 times the rate of rural residents.
Suburban and rural residents were victims of simple assault at similar rates. Surveys of 12 cities in 1998 found that black residents in urban areas experienced a higher rate of violent crime than urban whites in a majority of the cities. See also
Homicide Trends in the United States and Data Online for characteristics of homicide victims by State and large locality.

On the flip side, there are almost no examples of high crime areas that are not infected with poverty.

Crime truly doesn't pay - and not just for the criminal.

Update:

More from Jon Rowe here, and Eugene Volokh here.

3 Comments:

  • Thanks.

    By Blogger Jonathan, at 7:39 PM  

  • "The threat of crime to business is too often ignored, and entrepreneurs are the keys to any successful neighborhood. They are more important than good schools, and more important than "government help.""

    I agree with this 100%. Small business owners are more inclined to care about their neighborhood because their well-being depends on it. They are more likely to attend neighborhood meetings, more likely to reinvest in the neighborhood, more likely to be involved in the political process and more likely to take the law into their own hands.

    "government solutions generally take the form of subsidies, or "outreach programs" and other expensive nonsense."

    Not only that, but they are ill-fated subsidies. Before I opened my business, I was under the mistaken impression that government cares about small business...they don't. The government (this may vary from state to state) only will offer assistance to those businesses that are going to employ a large number of people, usually around 50-100. People savvy enough to open a business that is going to employ 50-100 people certainly are savvy enough to obtain financing on their own without goverment help. Also, a business that employs 10 people when it opens, may grow to employ 100. Why wouldn't they want to grow? Why should they be excluded from goverment financing? Another qualifier to goverment assistance is race. If you are a minority, it is easier to obtain grants and low interest loans through the government. Why should race matter? If a white person wants to open a business in a blighted neighborhood, isn't that good for everybody?

    "A strong small business community will also result in greater instances of home ownership. In general, where home ownership is increasing, crime is decreasing."

    Yes, but look at where cheap houses are available: the suburbs and rural areas. There's low crime there to begin with. I think those stats are irrelevant. Do you think landlords want crime around their properties? Crime drives down their profits.

    "Small businesses also increase the tax base in the community. As schools are primarily funded though local property taxes, good schools follow good businesses."

    This implies the businesses own the property. For most small businesses this isn't the case.

    "The only skill truly necessary to run a business is a strong work ethic."

    Not true. A multitude of skills is needed to effectively run a business. Accounting, managment, marketing, merchandising, janitorial, coversational, law, and political skills are all necessary to run a business, and that's just off the top of my head.

    "Crime is the single biggest obstacle to small business owners."

    I wouldn't say this is true. High rents, labor costs, and insurance were tougher on my bottom line than the break-ins and vagrants ever were.

    By Blogger RyanSimatic, at 9:22 PM  

  • "Yes, but look at where cheap houses are available: the suburbs and rural areas. There's low crime there to begin with. I think those stats are irrelevant. Do you think landlords want crime around their properties? Crime drives down their profits."

    Landlords? No. Tenants, on the other hand, are another matter. Many, many studies (sorry for relying on the generic "studies." It's a bad form of argument, but I don't have time to track them down right now)have shown that when people own their abode they act more responsibly. Upkeep is better, they call the police more, and they invest more in improvements. I believe crime tends to go down because home owners have an increased respect for propery rights. If you're renting, it's not yours, so who cares what you do to the place? I remember having that attitude in college.

    "Small businesses also increase the tax base in the community. As schools are primarily funded though local property taxes, good schools follow good businesses."

    "This implies the businesses own the property. For most small businesses this isn't the case."

    True, but the landlord will see his property value increase with a successful business on it or around it. Plus (At least around here) much land is vacant or abandoned, and not doing anyone any good.

    "Not true. A multitude of skills is needed to effectively run a business. Accounting, managment, marketing, merchandising, janitorial, coversational, law, and political skills are all necessary to run a business, and that's just off the top of my head."

    I overstated this a bit. I guess my point was that these skils can be acquired can be acquired independant of schooling. People have figured out accounting on their own for years, customer service is primarily, I think, simply a commitment to making them happy, even if they're idiots, janitorial is all about hustle. You can be a good besiness owner without FORMAL training in these aspects.

    "I wouldn't say this is true. High rents, labor costs, and insurance were tougher on my bottom line than the break-ins and vagrants ever were."

    But doesn't it severely hit your customer base? Especially at night. Maybe, since you sold more of a specialty good those who wanted it would actively seek it out. But what if you run a dry cleaning business or a convenience store. I guess a lot of it probably depends on the individual business.

    By Blogger PaulNoonan, at 8:27 AM  

Post a Comment

<< Home


 
Search:
Keywords:
Amazon Logo