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by Dr. Richard W. Morris, J.D., Ph.D.
Social scientists and public officials have long identified poverty as a ‘root cause’ of crime or, at least, as a significant ‘risk factor.’ Roman emperor Marcus Aurelius (121-180 A.D.) saw this linkage and declared, ‘Poverty is the mother of crime.’
Psychologist Dr. Stanton Samenow, in Psychology Today, shows this statement is false.
And I agree with him: Crime causes poverty, not the other way around. People who claim poverty causes crime are typically those who justify forcibly taking wealth from one person and giving it to another. Both viewpoints lead us to think about economics.
Despite what some say, economics is not a dry subject. Economics is the study of how people use limited resources that have alternative uses. There has never been — and there will never be — enough of everything to satisfy everyone. Everything is scarce at some level.
If each resource had only one use, the questions would be simpler. But virtually any resource can be put to many alternative uses. For example, petroleum, iron ore, or even water, can produce an almost limitless number of products.
How does “society” decide how much of each resource to allocate to each of the many uses? Every society must answer that question by adopting an economic system. The chosen system determines whether the people living in that society will be prosperous, poor, or in between.
What does crime have to do with economics? First, crime affects how people plan for the future. Management experts Wayne Gable and Jerry Ellig, in Introduction to Market-Based Management, explain how street crime affects business planning, wealth and customers:
If lawbreaking becomes widespread, it is much harder for people to accomplish their goals, because the behavior of other people is too unpredictable. An urban store owner faced with the threat of looters, for example, will try to protect himself from uncertainty by carrying a smaller stock of merchandise and charging higher prices to pay for a security system. As a result, the threat of looting harms not just the store owner but all of the customers in the surrounding community.
Gable and Ellig also explain how respect for, or disrespect for, property rights negatively affects productivity and harms the produces and the buyers of products:
A corn farmer, for example, fully plants his acreage because he knows where the boundaries are, and he knows others respect them. If the boundaries are in dispute on one quarter the property, he probably will not invest as much time and money in planting that area as he would in the areas where property rights are certain.
If a gang periodically burns his crop or if the government periodically confiscates it, he will invest less time and money in developing that farm. Many people in the modern world, from residents of America's inner cities to inhabitants of war-torn countries, are in a position little better than the farmer beset by bandits—and for similar reasons. Prosperity slips away when the rules of just conduct break down, because people lack the predictability needed to make long-term plans and investments.
What happens when the government rewards indolence, conflict, and power-seeking, and fails to protect or (worse) actively works to punish those who work hard, innovate, or provide services to others? It should not take much thought to conclude that the general standard of living will suffer.
When the standard lowers to a given level, it is called poverty. On the individual level, it matters not whether what you produce is stolen by thugs or a “legitimate” government. The results are the same: Producers are themselves impoverished, and they will turn to things other than producing for the pleasure of bums.
The riots we see across the United States, with the looting and physical attacks upon people, provide ample evidence of this truth: crime causes poverty. To understand this clearly, let’s follow the sequences of incentives and actions.
When riots and looting occur frequently enough, Macy’s leaves Chicago, Target and CVS leave Minneapolis. Businesses leaving because of crime in these and other cities are too numerous to list. Large companies are damaged and move locations, but the hardest hit are the small businesses — the ones that local customers know and love.
Samenow explained the sequence in 2014, and we see the same truths in the 2020 riots.
A person saves for years to open a business. He or she rents space, buys equipment and works hard. The business grows and people are hired to help.
Then the riots come. Thugs walk the streets. Customers are afraid to enter. Thugs break in, take what they want, and destroy the rest. The businessperson has no way to earn a living, or pay rent, or pay wages.
Yesterday, the business provided jobs, products, and services — today it closes. Those good things disappear, replaced by an unproductive empty shell.
Like the farmer beset by bandits, the businessperson has no reason to clean up and rebuild because it will happen again. Without police protection, criminals run society. The small businessperson has to pick up and go someplace else.
As Elon Musk said, “If you don’t make stuff, there’s no stuff.” Thus, eventually the thugs and politicians are left with no stuff left to steal. Everyone loses.
Wealth is not created by riots or destruction.
Crime causes poverty.