The economics of cities like Ferguson, Missouri

Okay, I said I wouldn’t say anything more about the situation in Ferguson, Missouri. But I couldn’t pass this up.

Like I said before, it’s not just about possible police brutality or crime. It’s about economics, too, and the economic policies in inner-cities are absolutely wretched, as Ryan McMaken, the editor of Mises Daily and The Free Market, explains.

These background circumstances have to be understood in order to comprehend the behavior of people who loot their local businesses and riot in the street. A high minimum wage, constricting regulations, poor quality of public education, and low skills leaves many people with few opportunities in the workforce and even less as entrepreneurs. The financial inability to own the property  also translates into feeling as though the business owners in the areas are not a part of their community, which explains why they will turn on them during times of strife.

McMaken writes:

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?

Read the entire article here.

There is more to this than a simple police shooting. Heavy handed tactics by police department is not the cause of the problem in Ferguson, Missouri. Removing the police entirely would not solve their issues. It is rather the product of misguided economic regulations that encourage crime when the legal means of earning a living are artificially restricted. Crime in turn begets a police force unable to maintain the peace. Tension and animosity brew.

If they want to diffuse the situation, then remove the regulations that make it impractical to earn a decent living. Remove the minimum wage to allow low skilled workers access to entry-level jobs and gain experience. Get the government out of the education system and allow communities to educate their children or to learn on their own.

I think you know as well as I do, however, it’s better off to expect more of the same.

And thus it continues. If people have no hope of improving their lot in life by living the decent way, they will live by whatever means they can. When even that is taken away, they turn desperate.

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6 Responses to The economics of cities like Ferguson, Missouri

  1. jobsdhamaka.com says:

    nice post i like this…….

    Like

  2. Thomas Knapp says:

    Interesting post.

    One problem with it (and with the McMaken piece it quotes): Ferguson is not “inner city.” It’s a suburb. And actually a reasonably typical “suburban” suburb, not just a suburb in name. I say that not only because I know the town well, but because the statistics bear it out:

    In 2012, the real inner city (St. Louis) had 35.5 murders per 100k population; Ferguson had 9.4 murders per 100k population.

    In 2012, the “City Data Crime Rate” average for the US was about 300. In Ferguson, that crime rate was 381.1; in St. Louis, 825.1.

    Ferguson estimated median household income in 2012, $36,121 — about 12% higher than St. Louis’s, $31,997. But per capita income is lower in Ferguson (larger families).

    Not saying Ferguson has no problems, but it’s a lower-middle-class suburb, not an inner-city poverty pit.

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    • The Question says:

      I did notice that as well when I was researching the city. Ferguson, Missouri is a suburb and by no means in the same condition as St. Louis. From what I’ve read, Ferguson used to have a high crime rate that has gradually gone down and mostly is about average.

      It’s not an inner slum, but Ferguson is moving towards that direction. Its unemployment rate has gone from five percent in 1990 to 13 percent in 2010, and the population has been dropping since 1980, along with a significant shift in population demographics. Major cities such as Detroit and St. Louis shared these qualities as they declined. There are obviously other problems that have led to the situation currently, but the economic aspect is often overlooked in favor of the more visual problems.

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      • Thomas Knapp says:

        Yes, there’s a definite ongoing demographic shift in that area.

        In the 50s and 60s, Ferguson was part of the early wave of “white flight” from St. Louis proper. Since then, that wave has continued to move west, further out into St. Louis county, St. Charles, etc., while the “inner belt” of suburbs has had increasing African-American populations.

        The suburb I lived in for 12 years (Greendale) is about four miles south of Ferguson and maybe a mile west of the St. Louis city limit. And there’s a definite difference in quality of life not just between those burbs and the city proper but between the north and south sections of St. Louis city.

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  3. greattomato says:

    Good point Thomas. West Allis is a lower middle class suburb and is predominantly white, but the economic strains that are mentioned in the McKaken piece exist there as well. Very great point to examine

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  4. greattomato says:

    Also, I think we have to remember the politics of word choice… The inner city of New York and Chicago are incredibly wealthy. Queens and the Bronx are effectively suburban slums, in addition to the whole jersey city/Newark area in comparison to manhattan. South side of Chicago is not a suburb but it’s a slum nonetheless. Location, has some to do with it in terms of white flight, but clearly, even poor white suburbs are hurting based on the same economic conditions

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