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Archive for May 7th, 2015

Let’s revisit the issue of urban unrest, with special attention to the challenges for both entrepreneurs and ordinary citizens.

While potential police misconduct may serve as a trigger for riots, the powder keg is already in place because of decades of bad government policy.

Jay Steinmetz, who runs a supply-chain management company in Baltimore, provides a real-world perspective on what it’s like to be an entrepreneur in a city run by kleptocrats. Here are some excerpts from his Wall Street Journal column.

When the building alarm goes off, the police charge us a fee. If the graffiti isn’t removed in a certain amount of time, we are fined. This penalize-first approach is of a piece with Baltimore’s legendary tax and regulatory burden.  …Maryland still lags most states in its appeal to companies, according to well-documented business-climate comparisons put out by think tanks, financial-services firms, site-selection consultants and financial media. Baltimore fares even worse than other Maryland jurisdictions, having the highest individual income and property taxes at 3.2% and $2.25 for every $100 of assessed property value, respectively.

Here’s what it means, in terms of lost revenue, to Mr. Steinmetz’s company.

The bottom line is that our modest 14,000-square-foot building is hit with $50,000 in annual property taxes. And when we refinanced our building loan in 2006, Maryland and Baltimore real-estate taxes drove up the cost of this routine financial transaction by $36,000. State and city regulations overlap in a number of areas, most notably employment and hiring practices, where litigious employees can game the system and easily find an attorney to represent them in court. Building-permit requirements, sales-tax collection procedures for our multistate clients, workers’ compensation and unemployment trust-fund hearings add to the expensive distractions that impede hiring.

So it’s no surprise to learn that the geese with the golden eggs (as well as the silver and bronze eggs) are flying away.

Our employees reduce their tax burden and receive better public services in the suburbs.  …The financial problem Baltimore does face is a declining tax base, the most pronounced in the state. According to the Internal Revenue Service, $125 million in taxable annual income in Baltimore vanished between 2009 and 2010.

I’m not sure why Mr. Steinmetz hasn’t left as well. I guess it’s both admirable and foolish for him to persevere is such a hostile environment.

Thomas Sowell, in an article published by National Review, demolishes the argument that criminal behavior can be blamed on racism or poverty.

He starts by drawing attention to the 1960s as a key turning point.

The “legacy of slavery” argument is not just an excuse for inexcusable behavior in the ghettos. …Anyone who is serious about evidence need only compare black communities as they evolved in the first 100 years after slavery with black communities as they evolved in the first 50 years after the explosive growth of the welfare state, beginning in the 1960s.

Prof. Sowell then makes the obvious point that blacks faced much harsher conditions before the 1960s, yet crime was much lower.

And the black family was much more stable before the so-called war on poverty in the 1960s.

We are told that such riots are a result of black poverty and white racism. But in fact — for those who still have some respect for facts — black poverty was far worse, and white racism was far worse, prior to 1960. But violent crime within black ghettos was far less. Murder rates among black males were going down — repeat, down — during the much-lamented 1950s, while it went up after the much celebrated 1960s, reaching levels more than double what they had been before. Most black children were raised in two-parent families prior to the 1960s. But today the great majority of black children are raised in one-parent families.

Sowell’s point is that the welfare state created incentives for dysfunctional behavior.

And he stresses that this isn’t a racial issue.

Such trends are not unique to blacks, nor even to the United States. The welfare state has led to remarkably similar trends among the white underclass in England over the same period. …You cannot take any people, of any color, and exempt them from the requirements of civilization — including work, behavioral standards, personal responsibility, and all the other basic things that the clever intelligentsia disdain — without ruinous consequences to them and to society at large. Non-judgmental subsidies of counterproductive lifestyles are treating people as if they were livestock.

I particularly appreciate his point about the importance of social capital, what he calls the requirements of civilization.

But this doesn’t mean black citizens don’t have some legitimate grievances. Radley Balko of the Washington Post explains that African-Americans are getting abused by greedy governments, just like Mr. Steinmetz.

He starts his article by sharing some good news on falling crime rates and big reductions in police deaths. But for our purposes today, the most powerful and relevant part of his story deals with one citizen’s interaction with government.

Antonio Morgan [is] a 29-year-old resident of Hazelwood, Missouri. He owns his own small business, a car repair and body shop he’d been saving up to buy since he was a teenager. He has also been arrested more than 20 times. All but two of those arrests were for misdemeanors. Morgan saved up for his business by fixing cars in his mother’s driveway. That required him to occasionally park cars on the street. That earned him parking tickets. He paid them when he could, but he occasionally missed deadlines. And that would lead to an arrest warrant. All of this also put Morgan on the radar of local police.

As you continue reading, keep in mind he was “on the radar” even though he did nothing to infringe on the life, liberty, and property of other citizens.

His unpaid parking tickets led not just to arrest warrants, but to the occasional suspension of his license. That led to more citations, although like many in the area, Morgan was sometimes pulled over and issued only a ticket for driving on a suspended license, or driving a car that wasn’t registered to him. (Morgan sometimes drove his clients’ cars to test them.) But there was no underlying traffic violation — which raises the question of why the officer pulled Morgan over in the first place, if it wasn’t to profile him. Those citations then led to more arrests.

It certainly seems as if St. Louis County in Missouri has been treating Mr. Morgan as a revenue-generating milk cow, much as Baltimore has been squeezing Mr. Steinmetz.

Different approach, but same result.

Cops would show up at his garage and cite his employees for operating without a business license. Morgan has a license; his employees didn’t need one. But to get the citations dismissed, Morgan and his employees would have to go to court, which was held once a month, at night. If they missed their court date, they too would be hit with an arrest warrant. Wealthy people can hire an attorney to go in their stead, and to negotiate their way out of a citation. But neither Morgan nor his employees were wealthy.

Some of you may be wondering about the two ostensibly more serious arrests on his record.

Radley’s column discusses both, and it certainly looks like Mr. Morgan has been mistreated by the justice system.

Here’s the first arrest. And remember it only occurred because he had to be in court to deal with ridiculous fines and petty harassment.

As Morgan walked toward the courthouse a police officer asked him the kids in the truck were his. He replied that they were. The officer asked him why he had left them alone. Morgan replied that he hadn’t, and that the woman parked next to him had agreed to watch them. ..Morgan pleaded with the police officer to flag down his friends, who he said would vouch for him. He says the officer then threatened to Taser him. Morgan put up his hands. The officer then arrested him for child endangerment. …The incident still upsets Morgan — not even the arrest so much as that his children had to see it. “I’m a good father,” he says. “I own my own business. I provide for my kids. Do you know what it’s like for your own children to see you get arrested? For a cop to say, right in front of them, that he’s arresting you because you’re a bad parent?”

I’m not someone who sees racism under every bed and behind every tree, but you can’t help but wonder whether this incident would have even happened if he was a white guy in a business suit.

The second arrest is equally dubious.

…the officer confronted Morgan because he was “trespassing” on a neighbor’s lawn. Morgan responded that he wasn’t trespassing, because the neighbors didn’t mind. Morgan says the cop moved to arrest him, and he lost his cool. He claims he never struck the police officer, but he does admit that he screamed at him. Once he did, he was hit with a Taser and arrested for assaulting a police officer. That charge was later dropped. (The neighbors back Morgan’s account of the entire incident, including his assertion that he never touched the cop.)

It’s always a smart idea to act servile and obsequious when dealing with cops, so Mr. Morgan obviously didn’t play his cards right.

But imagine if you had been endlessly harassed. Wouldn’t you be angry? Radley sure would have been.

I was stunned. But not because Morgan lost his cool with the cop. I was stunned that it had taken him so long to do so. And that even then, he’d manage to restrain himself from physical violence. I’m not sure I’d have been able to say the same.

Here’s the bottom line. Or, to be more accurate, two bottom lines.

First, we should sympathize with Mr. Morgan just as we should sympathize with Mr. Steinmetz. Actually, we should sympathize more with Morgan.

Morgan is no one’s definition of a “thug.” He’s a guy who breaks his back to keep up the business that supports his family, despite obstacles that, frankly, most white business owners don’t have to endure. For all he’s been through, he is remarkably composed. He deals with the daily harassment in a remarkably manner-of-fact way. …Morgan isn’t a drug pusher. He isn’t an absentee father. He isn’t in a gang. He’s a guy trying to do right by his family.

Second, we should recognize that one “root cause” of the problem is greedy government.

The primary source of revenue for the local towns is sales tax. But the poorer (which means blacker) towns don’t generate enough income from sales taxes. So they turn to municipal fines to keep themselves from going under. The poorer the town and its residents, the more likely the town relies on fines for a greater percentage of its annual revenue. Which means that the blacker the town, the more likely its residents are getting treated like ATMs for the local government.

None of this justifies rioting. And I have to imagine that Mr. Morgan would be one of the good guys during any unrest (much like Stretch and his friends in Ferguson).

But stories like this should make all of us appreciate how some communities may have a very sour impression of the police.

Let’s close with some economic analysis of riots (hey, I’m a policy wonk, so bear with me).

Here’s some of what Professor Edward Glaeser of Harvard wrote a few years ago for Bloomberg.

…public disturbances are a classic example of tipping-point phenomena, which occur when there is some positive feedback mechanism that makes an activity more attractive, or less costly, as more people do it. …There is a tipping point in rioting because the cost of participating — the risk of going to jail — gets lower as the number of people involved increases. …riots occur when the shear mass of rioters overwhelms law enforcement.

He then looks at the more challenging issue.

But how do these mass events get started? In some cases, …such as the 1965 Watts Riot, a peaceful crowd provides cover for initial lawlessness. Sporting events, such as Game 7 of the Stanley Cup Finals in Vancouver this year, can easily produce the crowds that allow a riot to start. Most strangely, riots can follow an event that creates a combination of anger and the shared perception that others will be rioting. The acquittal of police officers in the Rodney King case seems to have created these conditions in Los Angeles in 1992.

The left-wing excuse for rioting doesn’t seem to have much merit.

…across U.S. cities, there has never been much of a link between unrest and either inequality or poverty. In fact, the riots of the 1960s were actually slightly more common in cities that had more government spending.

But economic analysis gives us good clues, both about how to deter riots and who is most victimized when they occur.

Light penalties widely applied and serious penalties applied to a few can both deter unlawful behavior. This is a central conclusion of Gary Becker’s path-breaking economic analysis of crime and punishment. …Even when they are connected to understandable grievances, they do great harm, particularly to the poorest residents.

The moral of the story is that we should be tough on crime, but that doesn’t mean mistreating people like Antonio Morgan.

Instead, the legal system should focus on trying to deter bad behavior, which is when genuinely bad people infringe on the life, liberty, and property of others.

But how do we get politicians and bureaucrats to properly focus?

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