Police States and Inner-City Economics

by Ryan McMaken
Aug. 18, 2014

The recent civil disobedience, rioting, and police brutality in Ferguson, Missouri reminds us of what happens when police states and bad economics are mixed together.

Devastated by decades of ruinous economic policies, the economies of many inner cities continue to languish as the self-ownership of local residents is treated with contempt by the police and any attempt at building a small business-based or wage-based economy is hobbled by government regulation.

The result is a local economy with chronically-unemployed wage earners coupled with entrepreneurs who lack the capital necessary to deal with government regulations. The social consequences of such a situation are dire and lead to a population that lives in the area, but is not invested in it.

Some conservatives have taken to asking why some of the residents are destroying their own neighborhoods through looting and other forms of violence. But of course, even if we make the obvious distinction between looters (a minority of the population) and the non-violent population, these are not "their" neighborhoods in any meaningful sense: the residents have not been allowed to attempt to build local capital or even have control over their own bodies.

Policing and Self-Ownership

The killing of Michael Brown, an unarmed teenager, by Ferguson police is just one of countless stories we see daily in which police use overwhelming force against unarmed citizens. The police, in the aftermath, only receive raises and huge pensions. Indeed, year after year, the cost and scope of police forces grow higher and higher while the quality of service (the percentage of murders solved has dropped from 91 percent to 61 percent since 1963) continues to go down.

This is exactly what we should expect from an organization that enjoys a total monopoly within its jurisdiction and simultaneously is the last word in whether or not it will be held accountable for the cost or quality of its work. The same organization that controls the police, controls the courts, and also has the power to tax. Consequently, as Hans-Hermann Hoppe has noted, the state at all levels is an "agency that unilaterally fixes the price that private citizens must pay for the state's service as ultimate judge and enforcer of law and order."

Murray Rothbard has explored the nature of non-monopolist policing, and how it would much more effectively protect private property. But in today's world, the average citizen, and especially the low-income average citizen, has virtually no influence over policing decisions and, in cases of abuse, he has little hope of assistance from those who control the police.

All citizens of modern nation-states are subject to police forces of this sort, but the aggressiveness of police in American inner cities has been shown to be far greater and with much higher likelihood of arrest of citizens for minor non-violent offenses ranging from smoking a joint to jaywalking.

The expansion of police prerorgatives has accelerated in recent decades, first with the "War on Drugs," and then with the "War on Terrorism," both of which have resulted in what we see today in the form of heavily militarized police forces, asset forfeiture, and an endless list of federal laws that bring long jail sentences, even when no criminal intent is proven.

As the prerogatives and wealth of the police expand, the personal freedoms and self-ownership of citizens continues to shrink, but nowhere is this felt more keenly than in low-income areas.

The War on Drugs has likely been the greatest catalyst for this, since as Ludwig von Mises explained, once it is established that the state can regulate what one puts into one's body, there are no grounds left on which to oppose other intrusions of the state.

Thanks largely to the War on Drugs, the police, in addition to enjoying a total legal monopoly on force, have become essentially unrestrained in questioning and detaining citizens. Once upon a time, the idea of it being a crime to merely possess a non-weapon like marijuana or cocaine would have been considered ludicrous. But today, any citizen at any time can be suspected of carrying an illegal substance, and subject to being questioned and detained.

This ever-present justification for disrupting the daily lives of peaceful private citizens perhaps does more to foster an environment of violence and suspicion than anything else. Not surprisingly, no-knock raids, aggressive questioning, frisking, and pointless arrests provide ample (and totally unnecessary) opportunities for interactions between police and citizens to turn violent.

The Destruction of Inner-City Economies

Naturally, the effects of such a state of affairs on the local economy are not good. Citizens who are constantly in danger of losing wages due to arrest or fines, or who may have their assets seized (without any due process) can hardly be expected to acquire much capital or develop a low time preference in the same way as people who are relatively free of repeated police harassment. Certainly, citizens who develop a criminal record for petty non-violent offenses will see economic opportunities severely limited, and act accordingly.

But even if one manages to escape the frequent harassment of street police, the constraints placed on average citizens by an ever-expanding regime of economic regulations hobble economies everywhere, and are especially damaging in places that already lack capital such as Ferguson.

The narrative among conservatives is that welfare, by distorting the incentive structure, has ruined the economies of the inner cities. This is true to an extent, but the problem is far more fundamental than this. This is not simply a matter of people choosing not to work (although that is often the case), this is a matter of people being excluded -- by law -- from participation in the economic system.

The most notable aspects of this are the minimum wage and the high cost of entry for small business into the economy.

For many residents of inner cities, entering the economy as an entrepreneur or wage earner is out-and-out illegal. In a place like Ferguson, a young person is prevented from working full time during much of his youth thanks to mandatory school attendance laws. If he misses school, he and his parents are harassed by police, and possibly arrested and left to face economic ruin. Upon graduating, the young person, thanks to the public schools, then faces the world with few marketable skills.

He is employable at some level, but as a low-productivity worker, the only entry-level wage he can command is at a level below the minimum wage. In this situation, federal law dictates that he shall remain unemployed indefinitely. Consequently, unemployment among black teenagers is over 20 percent. Common sense tells us that the best way a new public-school grad can attain any marketable skills is by working at a job. And yet, these jobs are all closed to him by law.

If our public-school grad then attempts to turn to legal self-employment, he will find himself similarly out of luck because the cost of entry into the economy as a small business owner has been raised to a largely-unattainable level by government regulation. Licensing, and compliance with OSHA, EEOC, forced "tolerance," and a bevy of other regulations render the small business avenue closed for someone in such a community. Even if such a person manages to somehow acquire an automobile in spite of all the licenses, taxes, and certifications required, he can't even rent out the car or drive customers for money without special permission from the government. Certainly some people are able to come from within the community and succeed under these conditions, but if your economy requires near-heroic levels of perseverance and luck just to open a burger stand, there is something deeply wrong with your economy.

How can we be the least surprised, then, when people in these communities simply give up or turn to black markets (i.e., illegal entrepreneurship such as drug dealing) to make a living?

Further complicating the situation is the fact that wage earners and entrepreneurs face a community stripped of capital in recent decades by damaging federal laws. During the 1970s and 1980s, federal "anti-segregation" mandates such as forced busing meant that the middle classes fled the cities, and took their capital with them, leaving workers behind, but not capital. Both racial and economic segregation became worse, and worker productivity plummeted. The government's solution of course, was not to deregulate, but to distribute welfare funds in amounts too low to provide a decent standard of living, but just high enough to prevent widespread revolt against the political system.

Conclusion

Naturally, this economic gutting of the inner cities, fostered by federal, state, and local laws, led to crime. But what has the response of both national policy makers and local "leaders" been? It most certainly has not been to call for the legalization of low-skill labor (lowering the minimum wage) or the empowerment of local entrepreneurs (by lowering taxes and eliminating regulations). No, the answer is always more police, more government, more regulation, and more welfare. Michael Brown and many like him have paid the price for this dead-end strategy. Freeing inner cities from militarized police forces is a good start, but government is destroying these communities in many ways, and police brutality is just one of them.
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Ryan W. McMaken is the editor of Mises Daily and The Free Market Send him mail. See Ryan McMaken's article archives.