The news was shocking but not surprising. Starbucks announced that it is planning to close 16 locations across various cities, citing safety concerns. Here is how the Starbucks statement put it: “After careful consideration, we are closing some stores in locations that have experienced a high volume of challenging incidents that make it unsafe to continue to operate.” The stores are in Seattle; Los Angeles; Philadelphia; Washington, DC, and Portland, Oregon. They will be closed by the end of July.
Although Starbucks does not directly cite crime as the main factor in the store closings it intimates that it is broader than actual criminal activity in the sense that it includes simple bad behavior on behalf of customers. In its statement, Starbucks seems to borrow from the liberal explanation for crime, including poverty, social malaise, discrimination and all the classic buzzwords that we have become accustomed to as excuses for crime. While the store closures represent only 5% of its total number of Starbucks stores to be closed, it is significant when a brand chain store announces such a decision. It may trigger a chain reaction as other similar or neighboring stores also choose to abandon certain areas. The economic consequences for these areas are enormous.
The rising crime rate or the perception of crime being out of control is particularly significant in several large cities still struggling to bounce back post-Covid. For example, in Chicago recent crime statistics say that for every 100,000 people, there are 3,926 crimes committed. In New York, crime rates across the board further increased 5% in 2021, with murders also increasing to 488. As of April 2022, the city recorded a 42.7% increase in major reported crimes compared to the same period in 2021.
New York City is desperate to get the word out that it is back to normal following the pandemic, but the public does not seem to be buying the message. Less than 40% of office space in Manhattan has returned to full operations while vehicular traffic has increased exponentially. People are still fearful of crowded subways and busses where the virus is no doubt rampant. Added to that fear is the constant barrage of news stories about crime on public transportation. For those who do come into the city either to work or to shop, many have returned to driving despite the knowledge of unrelenting traffic. Hence heavy traffic is no longer reserved for the legendary rush hours but can occur almost anytime during the day or night.
While beating the pre-omicron record is an important step for the MTA, for example, ridership this year has been below what agency officials were estimating. About 301.5 million people rode MTA’s subway and buses in the first three months of 2022, which is 67.4 million riders or 18% short of budgeted estimates, according to MTA data. As a result, transit and commuter-rail farebox collections for that period are $170.2 million below budget.
The big cities like New York will have no choice but to take on crime head-on. The mayors will realize that token measures will not reassure the public or in fact bring crime statistics down. They will have to stop looking over their shoulders at the left and take the necessary measures to fight crime and to create a perception of safety. They will have to dismiss such outrageous rhetoric like defunding the police. The stark reality is that unless they take a much tougher approach towards crime and quality of life issues, the recovery they promised the electorate will not come and their own political futures will be in question.
For in the end, Criminal activity acts like a tax on the entire economy: it discourages domestic and foreign direct investments, it reduces firms’ competitiveness, and reallocates resources creating uncertainty and inefficiency. The city fathers will also have to realize that if crime levels rise, there will be less money for other services such as education and healthcare. Crime also costs individuals through higher prices in shops for good and services. If businesses are losing money to crime they pass this cost on to customers by increasing prices.
Crime not only affects economic productivity when victims miss work, but communities also are affected through loss of tourism and retail sales. Even the so-called victimless crimes like drug abuse and gambling have major social consequences.
Crime can cause direct and indirect burden on business owners. They may directly suffer from offenses such as thefts and robberies and spend on prevention and protective measures to increase private security. Crime could also affect businesses indirectly through potential decrease in revenues if crime scares consumers away.
Crime is most directly related to quality of life. Former Mayor Rudolph Giuliani made quality of life issues a centerpiece of his crime fighting agenda. His stop and frisk order to the NYPD helped bring crime in the city to record low levels. The city became a desirable place to leave and New Yorkers who have been leaving in spades for the suburbs made an about face. The proof was the record-setting prices for real estate in the city. True that the political climate has changed and some of the measures that were popular then would be dismissed today, but the reality is that if the city is to recover economically it will require draconian measures that the public can and will accept.
The effects of crime on business comes at a time when the business community has been fighting the new norm for shopping where people en masse shop online. City streets are dotted with trucks bearing the symbols of Amazon, UPS, and FedEx. Studies have shown that consumer habits are dictated by convenience but are equally affected by fear of crime, congestion, traffic, and the like.
For cities like New York and Chicago, fighting crime is more than a social obligation. It is directly tied to revenues. It affects the tax base if people and businesses move elsewhere. When consumers give up shopping on the street, it creates a perception of less safety.
Of late the public has been obsessed with the scenes of active shooters. Next to schools, shopping areas are a prime target for the shooters. This has caused many consumers to avoid malls altogether in addition to avoiding crowds due to the fear of being infected with the Covid virus.
Observers say that while the public rates crime as a leading concern, they have not necessarily voted that way, keeping legislators who are soft on crime in office. That will have to change if the city is to make a real and sustained comeback economically.