Unseen Crime Costs

Criminal behavior hurts in ways seldom appreciated and understood; and the level of crime in black communities has consequences far more devastating than the racism our ancestors experienced. Not only does crime reduce upward mobility, it reduces the value of anything in the community and turns whole neighborhoods into economic wastelands. Let's look at a very minor example that captures the essence of some of the unappreciatd effects of criminal behavior - the case of supermarkets.

Supermarket owners seek to maximize the rate of product turnover per square feet of rented or purchased space as a means to maximize profits or return on equity. As you travel around, conduct your own experiment by observing supermarket behavior in low versus high crime locations. In lower crime neighborhoods, you'll see maximum space usage. Merchandise will be seen beyond the cashier's booth along the walls or windows and in entry ways. In some cases, you'll even see merchandise placed outside of the store along the walkways. Sometimes merchandise (plants, fertilizer, and peat moss) is left outside overnight. All of this means that the supermarket enjoys a more profitable operation because it has a greater variety and quantity to sell.

This marketing strategy won't be observed to any significant degree in high-crime locations. Managers in high crime location can't place items near entry ways and outside. That in turn means they pay for square footage they can't put to commercial use. That raises their per unit cost of operation. In addition, supermarkets in high-crime neighborhoods often find they must pay higher insurance. They must purchase more protective equipment and hire guards; neither of which is free. Since supermarkets operate on a very slender margin, any kind of theft is very costly.

Chain supermarkets find it difficult to shift higher operating costs on to customers. The same supermarket charging one price for a product in one location and a higher one in another doesn't do much for goodwill and might even invite prosecution. They might adjust by reducing quality or customer service but that too is risky. Thus, a more likely supermarket response to higher cost neighborhoods is to move or simply not to locate there in the first place. Some would have us believe racial discrimination is the driving force. In other words, white supermarket owners don't like dollars coming out of black hands. That's nonsense.

Criminals not only impose costs on supermarkets but residents as well. Poor people, least able to afford it, must either incur transportation costs to shop outside of their neighborhood or patronize the more costly "Ma & Pa" stores in their neighborhood.

None of this is to say supermarket theft doesn't happen elsewhere but there's a difference. A $10,000 shoplifting loss will have one impact when total sales are $1 million a year and another when sales are $100,000. In the first case, theft may be a minor nuisance written off on tax returns and the second a business disaster.

The overwhelming majority of black people who live in high-crime neighborhoods are law-abiding people preyed upon a tiny percentage of criminals. What's worse they have a misguided sense of loyalty to black politicians and civil rights activists who give aid and comfort to criminals by making one excuse after another for their criminal behavior. For them crime is seen as a result of discrimination and poverty. Such a vision differs little from

saying that poor black people shall be condemned to chaos, crime and unspeakable living conditions until the day comes that the rest of society behaves themselves. From the way I see it, that's going to be a long wait.

Walter E. Williams

c54-98

December 18, 1998

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