How Much Does the Economy and Dwindling Middle Class Impact Crime?

In 2015, crime increased significantly in Los Angeles. Violent crime was up 20.2 percent compared with 2014, according to Los Angeles Police Department data. It’s happening in other large cities too.

Economists have long debated causal factors such as a tough economy and unemployment on crime. See this article by James Q. Wilson (http://www.city-journal.org/2011/21_3_crime-decline.html) or (http://freakonomics.com/2011/06/freakonomics-quorum-why-during-a-bad-economy-does-crime-continue-to-fall/)

We have been in a meager economic recovery since 2009, the longest and slowest on record: (https://www.visionandvalues.org/2015/06/our-dismal-economic-stagnation-diagnosing-the-slowest-recovery-since-the-great-depression/)

So far in 2016, we’ve seen the stock market reverse itself by about 10%. Wages have been flat for years, job growth is lackluster (clustered in part-time/seasonal jobs), government debt continues unabated, health care costs are increasingly unaffordable, Baby Boomers are retiring in droves, the labor force participation rate is the lowest in 40 years, and the economic cycle timing is almost two years past the post WWII average. In the fourth quarter of 2015, GDP slowed to an anemic pace of just 0.7%. Citigroup warned last month there is a 65% of a U.S. recession in 2016.

This tepid recovery included a largely unsuccessful stimulus (costing $278,000 per job), three rounds of quantitative easing, increased bank regulations, and keeping interest rates so low as to incentive unreasonable risk. All this resulted in an artificially inflated stock market and real estate market, but not enough good jobs and or real wage growth. Millennials are swimming in student loan debt.

Is all this influencing the increase in crime? Quite possibly. Then there is Proposition 47 in California, which reduces some drug violations to misdemeanors. Prison realignment is sending offenders to local lockups with shorter stays. Homelessness is on the rise in many cities.

As evidenced by the workforce participation rate decline, the rising number of workforce dropouts has negative implications for entitlement programs, consumer spending and – most likely – crime.

There’s also the theory that police are less proactive in enforcing the law in the face of increased scrutiny and criticism. LAPD Chief Charlie Beck has pointed to gang crime as being particularly acute and increasing.

“2015 has been a very tough year for policing in American and policing in Los Angeles,” Beck said.

On September 13, 2015 the Los Angeles Times published an article about crime in South L.A: “On Sunday, LAPD Deputy Chief Bill Scott said that 80% of the homicides in South L.A. this year were related to gang violence. But, he said, a lack of educational opportunities, jobs and other programs to help improve the community also played a role.”

So what’s on the horizon for the economy, jobs, and crime? Almost every economic expansion in the past 100 years has been associated with a trigger. The automobile, electricity, the television, post-war housing, defense spending, dot-com, housing fueled by low interest rates, mortgage backed securities – just to name a few. However this last feeble recovery has not had an identifiable driver. President Obama has been promoting green energy as the new economy, but that has not been meaningful or economically viable enough to trigger real GDP growth.

We have been taking on debt while entitlement programs continue to grow. Essentially, we are in uncharted economic territory. We have never had this much debt – it is now in excess of the GDP. President Obama and Congress have taken the debt from about 60% of GDP in 2008 to over 100% today. It cannot be without long-term negative implications.

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In 1960, pension, healthcare, and welfare equaled about 5% of the GDP. Now it’s approaching 20%. LBJ’s “Great Society” began to diminish the middle class while bolstering entitlement spending. Reagan-Bush 41-Clinton held it somewhat steady, but Bush 43 and Obama increased the spending, largely paid for by the middle class.

I’ll leave the study of crime causation to the economists and criminologists, but it’s clear to me that we are increasingly in an environment where economic vitality for the middle class is being threatened. Where those individuals who lack enough positive influences may find it easy or necessary to turn to crime.

The larger question is whether there is a toxic brew of discontent under the surface, like before the 1992 Los Angeles riots. Only this time it could be widespread among both lower and middle classes, and perhaps at a national level. We now live in a world where TV shows like The Kardashians and Real Housewives flaunt glitter and money, yet income disparity is growing. Poverty should be shrinking but instead it is growing. In Southern California, it’s very common to see a $100,000+ Tesla at a red light right next to a 20 year-old Honda Civic.

Instead of meaningful job creation and an environment friendly to business growth, we have created taxpayer funded programs that may be counter-productive to the economic ladder. What the lower class and middle class both need are 21st century skillsets, affordable education, and access to quality jobs that pay good wages.

By the way, there is a movie out, based on a book, called The Big Short. It’s fascinating. All about the housing bubble and the collapse of mortgage-backed securities in 2007-2008. Nobody really saw it coming, but the story profiles a few who did. There is a new storm brewing right now. It is economic, political, demographic, and perhaps structural. The question is what will happen? Whatever hits the economy next will be largely unseen by most people. That’s just how it works. Just like a housing collapse came out of nowhere and had never happened at that magnitude before. I doubt the next downturn will be that severe, but be prepared for some rough seas ahead.

A lot of fiction, crime and otherwise, incorporated the Great Recession as a backdrop and/or thematic element. Gone Girl is a great example. With crime and economic uncertainty on the rise, it will influence crime fiction in the years to come.


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