Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Stocks, Bitcoin and Crypto Markets Breaking Bad on Donald Trump Pump - 21st Nov 24
Gold Price To Re-Test $2,700 - 21st Nov 24
Stock Market Sentiment Speaks: This Is My Strong Warning To You - 21st Nov 24
Financial Crisis 2025 - This is Going to Shock People! - 21st Nov 24
Dubai Deluge - AI Tech Stocks Earnings Correction Opportunities - 18th Nov 24
Why President Trump Has NO Real Power - Deep State Military Industrial Complex - 8th Nov 24
Social Grant Increases and Serge Belamant Amid South Africa's New Political Landscape - 8th Nov 24
Is Forex Worth It? - 8th Nov 24
Nvidia Numero Uno in Count Down to President Donald Pump Election Victory - 5th Nov 24
Trump or Harris - Who Wins US Presidential Election 2024 Forecast Prediction - 5th Nov 24
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24
At These Levels, Buying Silver Is Like Getting It At $5 In 2003 - 28th Oct 24
Nvidia Numero Uno Selling Shovels in the AI Gold Rush - 28th Oct 24
The Future of Online Casinos - 28th Oct 24
Panic in the Air As Stock Market Correction Delivers Deep Opps in AI Tech Stocks - 27th Oct 24
Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump! - 27th Oct 24
UK Budget 2024 - What to do Before 30th Oct - Pensions and ISA's - 27th Oct 24
7 Days of Crypto Opportunities Starts NOW - 27th Oct 24
The Power Law in Venture Capital: How Visionary Investors Like Yuri Milner Have Shaped the Future - 27th Oct 24
This Points To Significantly Higher Silver Prices - 27th Oct 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

One Year After: Freddie Gray and ‘Structural Statism’

Politics / US Politics Apr 26, 2016 - 06:36 PM GMT

By: Mike_Whitney

Politics

When Freddie Gray was born in 1989, Baltimore hosted 787,000 residents and 445,000 jobs. By the time his fatal injuries in police custody provoked riots last April, the city’s population had fallen by one fifth, to 623,000, and its job base had shrunk by one quarter, to 334,000.

Little wonder that throughout his life, Mr. Gray had never been legally employed. Nevertheless, friends and family considered him “a good provider,” according to The Baltimore Sun.


This was because he worked in the drug trade, which filled his city’s economic vacuum. An average day on the corner can yield take-home pay ten times that available in the low-skill warehousing or service jobs sometimes available to high-school dropouts like Gray.

The catch, of course, is that such rewards carry two great risks. The lesser of these is regular involvement with the justice system. Gray was arrested 18 times and served three years behind bars in his tragically brief life.

Far more dangerous is how competition works in illegal markets. When selling contraband, one does not pursue market share by advertising high quality or low prices. Sales are increased by acquiring territory from rivals, often violently.

For Baltimore’s drug cartels, the post-riot disequilibrium provided an opportunity for market expansion. Inevitably, each strategic assassination produced reprisals and collateral damage.

As a result, 2015 saw the highest homicide rate in Baltimore’s history, at 55 per 100,000 residents — over 13 times New York’s rate. This horrific suffering was concentrated in the African-American community: 93% of victims were black, of which 95% were male and 65% aged 18 to 34.

In Freddie Gray’s demographic, then, the homicide rate was 450 per 100,000 — higher than the peak U.S. combat death rates recorded in the wars in Iraq and Afghanistan.

The prevailing narrative is that all this is a by-product of structural racism and exemplifies a society “built on plunder” (according to the celebrated black radical Ta-Nehisi Coates). This is a myth.

It is not that racism doesn’t exist but rather that it is relatively constant. When explaining variations in economic and social outcomes, constants have little power.

It’s the application of destructive public policies that explain why neighborhoods like Gray’s Sandtown-Winchester are deprived. If one had to put a label on this malignant force, it might be structural statism: an addiction to market-unfriendly governmental approaches to every problem.

The federal government encourages this addiction. Its partial subsidies for a vast array of entitlements and so-called urban renewal programs induce dependency and leverage the expansion of bureaucracies in Baltimore and elsewhere.

The damaging effects of the statist compulsion are best seen in housing policy. Shortly after the 1937 passage of the Wagner-Steagall Act — premised on the notion that government landlords would serve poor and working-class tenants better than private ones — Baltimore established its Housing Authority. At the end of WWII, the city had built ten projects. By 1980, it would have 30 more.

The resulting intracity diaspora destroyed vast amounts of social capital. The neighborhoods that were leveled to access urban renewal subsidies may not have been pretty, but their residents had accumulated valuable but invisible capital — relationship networks, commercial contacts, and bonds of trust — that government planners simply ignored.

And if that weren’t bad enough, those placed in projects often found City Hall to be a slumlord. Baltimore recently paid $8 million to tenants alleging that Housing Authority workers demanded sex before making needed repairs. Federal audits have been consistently critical over the years, citing deteriorated public properties and administrative inefficiency that often resulted in high vacancy rates and unspent Section 8 voucher monies.

But most critically, this and other renewal programs opened a budgetary vein. Initially, federal housing loans covering 90% of construction costs were irresistible, but Uncle Sam later paid only one third of operating costs. Tenants and the city were supposed to cover the rest. But revenue shrank as subsidized, poor tenants crowded out working-class rent-payers, while costs soared.

In consequence, Baltimore raised its property tax 19 times between 1950 and 1975, and wrecked its economy. Each rate hike imposed capital losses on home and business owners. Predictably, they fled — not plunderers, but plundered. Repeated financial crises, job losses and social dysfunction followed.

Over time, city leaders understood that their tax policy was toxic to investors. Rather than pursue broad-based relief, however, they handed out special breaks to well-connected developers who focused their efforts on the waterfront, far from Mr. Gray’s neighborhood.

Now, at the anniversary of his death and as Baltimore’s primary election approaches, there is much talk that the city is about to chart a new course.

But course changes long have been advertised and seldom delivered. There is no meaningful political competition in cities like Baltimore, which has not elected a Republican mayor since 1963. Among the platoon of Democrats vying to fill the leadership vacuum, the platforms are as different as Tweedledum from Tweedledee — and predictably statist.

The city recently cadged hundreds of millions of dollars in aid from the state for new social-service programs and slum clearance projects. Officials have also pledged a $535 million tax subsidy to a billionaire for yet another waterfront development — its latest attempt to attract new capital without cutting taxes for the little guy. Most troubling, the City Council is advancing legislation to wrest budgetary power from the mayor, which will diminish Baltimore’s already-feeble fiscal discipline.

Post-“unrest” Baltimore seems less interested in effective reform than in more extravagant statism: new programs, projects and pork. We are doubling down on a failed strategy, hoping for different results.

By Steve H. Hanke and Stephen J.K. Walters

www.cato.org/people/hanke.html

Twitter: @Steve_Hanke

Steve H. Hanke is a Professor of Applied Economics and Co-Director of the Institute for Applied Economics, Global Health, and the Study of Business Enterprise at The Johns Hopkins University in Baltimore. Prof. Hanke is also a Senior Fellow at the Cato Institute in Washington, D.C.; a Distinguished Professor at the Universitas Pelita Harapan in Jakarta, Indonesia; a Senior Advisor at the Renmin University of China’s International Monetary Research Institute in Beijing; a Special Counselor to the Center for Financial Stability in New York; a member of the National Bank of Kuwait’s International Advisory Board (chaired by Sir John Major); a member of the Financial Advisory Council of the United Arab Emirates; and a contributing editor at Globe Asia Magazine.

Copyright © 2016 Steve H. Hanke - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Steve H. Hanke Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in