Racism, riots and economics: If history is the guide, why Baltimore won’t recover soon

Boston University economics professor Robert Margo, the incoming president of the Economic History Association, is a well-known scholar on race in America, He’s also known as “the musical economist” for his proficiency playing classical lute and mandolin. His most recent paper is “Obama, Katrina, and the Persistence of Racial Inequality,” but we sought him out for his work on the race riots of the 1960s, and their long-term economic effect. — Paul Solman

Paul Solman: You studied the effects of the ’60s riots on inner cities. What did you find?

Robert Margo: Well, with my colleague at the time, Bill Collins of Vanderbilt, we looked at the effects of the 1960s riots on income and employment, focusing on African Americans, comparing outcomes in 1960, 1970 and 1980. So, before, after, and then a little bit later. And then, we also looked at the impact on housing values. And, what we found was that the riots were unambiguously negative. They reduced incomes of African Americans’ employment, and they reduced housing values. In the case of housing values, it was broader; it actually affects overall housing values in cities, but the impact is primarily felt by African Americans.

Paul Solman: Why would wages fall, or at least fall relative to other people, after a riot?

Robert Margo: Well, I tend to think of these things a little bit in terms of my own personal experience. I grew up in Detroit, and I remember the 1967 riots. They were very severe. Many people killed, huge amount of damage. And the damage was concentrated in what was the heart of the African-American business community at the time, 12th Street in Detroit. And it devastated that community. So you have lots of businesses go under; they were providing employment and jobs to area residents. Lots of people who would go downtown to go shopping stopped going downtown. I happen to be an example of this. When I was growing up, we would go to downtown Detroit to go shopping. We never did after the riots. We were like a lot of white families of that era. So, the effects are very much concentrated on those neighborhoods. And it’s affecting the incomes of those people there, and also their housing values.

Paul Solman: Well, that would seem pretty obvious, I mean, if you burn down houses or retail establishments in a neighborhood, presumably it negatively affects the value of the housing in the neighborhood.

Robert Margo: Well, we’re not talking about the houses that were destroyed. In most cases, we’re talking about nearby neighborhoods where local amenities — shopping, things like this — basically went away. There was also a perception that crime was going up in these cities. And so, the things that would negatively affect housing values because of local amenities really suffered a lot. And I would also add that these were not transient effects. They persisted. We found no evidence that they got better, so to speak, between 1970 and 1980. We didn’t go beyond that, but I’m quite sure if we went to 1990, they would have still been present. So, they were long-lasting.

Paul Solman: It’s always been a puzzle to me why people who would have a reasonable expectation that it would do their community some significant harm would act out within community setting, rather than going downtown, say, or somewhere else?

Robert Margo: I would answer in two ways. It’s not completely obvious these effects would be negative, or they would even be large. Because it’s certainly the case in many cities that experienced riots that there were attempts afterwards to fix the damage and respond to the underlying causes. What we’re finding is that the net effects of that were negative. That, whatever was done afterwards was not enough to compensate for the damage and whatever economic consequences came after that. As for why they happen, I think it’s important to note that the causes of these events are not necessarily the kinds of causes that many people think of in general when they think about the 1960s riots.

We sometimes refer to them as being caused by poverty, discrimination. And those are underlying causes. But, these events were very idiosyncratic, and they very often, just like the events we see today, involved confrontations with the police that got out of hand. And they got out of hand very quickly, I think, in the ’60s, because many of the police departments didn’t have experience with anything like this.

The Detroit riot’s a classic example of this: a case of a police raid of a blind pig — an illegal drinking establishment — that just immediately got out of hand and it took days, really, for it to go away. So, they’re not rational when they start. And they’re essentially very hard to control once they get underway.

There was recognition by the 1970s that this was very counterproductive, and that’s a good reason why we don’t see them after that. And when they do happen, they’re really shocking events in our country. They happen every so often now, and they’re the subject of huge amounts of media attention, right?

In the 1960s, by our calculation, there were 750-odd of these events in 1968 alone, very commonplace. Much different than we have today.

Paul Solman: Yeah, I remember ’68 Chicago, Boston after the Martin Luther King Jr. assassination.

Robert Margo: The Martin Luther King Jr. riots figure very prominently on our work. We have this horrible event hat happened in early April of 1968. And it’s important for our analysis, because when King was assassinated it was a spark that ignited riots seemingly everywhere. But we realized that the riots didn’t happen literally everywhere, and we were able to leverage that variation between places to tease out the actual effects of these riots on their cities. And those were very destructive, those particular riots. So they play a pretty critical role in our analysis of the ’60s events.

Paul Solman: And they were destructive to the communities both in terms of the incomes of the people in the communities, and the value of the housing?

Robert Margo: Even broader. We were able to observe an effect on the median value of owner-occupied housing in the cities that experienced these events. It’s not as large as it is on African American-owned homes. That’s where the primary effects were felt, in the local communities.

Paul Solman: One reason that people have given me, when I’ve interviewed them over the last few years, as to why there haven’t been any riots, is that so many young people are at home, playing video games, as opposed to out on the street. Does that seem at all plausible to you?

Robert Margo: I never thought of that one before! (laughter) It’s certainly the case that there were more people out on the streets in the ’60s, and it turns out that the likelihood of these events in the 1960s was very strongly related to the absolute number of African Americans in a community. When the absolute number was large, two things occurred. The probability that one person would be the spark, say, was stopped by the police, that goes up. And the probability that you would have people joining a riot would go up.

These were events that mushroomed. And we do know that in the ’60s there were cases where people would phone their neighbors and they would join in, and we also can see some of that in the recent events, right? Where the use of social media is potentially proliferating in terms of participation.

Paul Solman: The other thing I remember from the ’60s, I read the Kerner Commission Report in ’68, and the people in the Kerner Commission were surprised by the fact that the people who were arrested, for the most part, had jobs.

Robert Margo: That’s right.

Paul Solman: So, the phrase I remember from that era was “the crisis of rising expectations,” the notion that people were expecting change to happen even more rapidly than it was.

Robert Margo: That’s true. And it also speaks to the fact that the occurrence of riots in the 1960s across the cities that we see is not correlated with the extent of black poverty, or unemployment or anything like that.

These things could happen anywhere there was the possibility of a spark happening, such as confrontation with police, where there were sufficient numbers of people where that could happen, and people to participate. So that’s why you see people with jobs participating. That’s why you see people with jobs being in some cases the actual spark.

The Detroit riots happened when two African-American servicemen came home from Vietnam. These were people who had served our country, right? And, they happened to be caught up in this particular police raid.

Paul Solman: One thing that I’ve heard from people I’ve interviewed, experts, is a measure of surprise at how little urban unrest there’s been now compared to the 1960s, given growing inequality.

Robert Margo: It is surprising, because if we look over the course of the full 20th century, the dominant trend between African Americans and whites is one of narrowing inequality. Differences between blacks and whites in income, wealth, education were vastly larger 100 years ago than they are today, and they’ve narrowed over time pretty persistently.

Those differences have narrowed more slowly in recent years. And, there’s a lot of reasons for that, it’d take a long interview to talk about that. And, it is to some extent surprising that we don’t see more of these events. But I don’t think we will ever go back to the events that we saw in the ’60s, where riots were very commonplace, because I do think that most people recognize that they’re counterproductive in their effects.

Paul Solman: Am I wrong to think that the narrowing of the gap between African Americans and the rest of American society has stopped? Stalled?

Robert Margo: It stalled relative to what it was, between 1940 and 1980. Between 1940 and 1980, it was relatively rapid. But it’s a process that’s been going on since the end of the Civil War, and the pace that we see now is not very different than the pace that we saw between, say, 1870 and 1940, which was persistent but still quite slow.

Paul Solman: But that’s the era of Jim Crow, the era of absolute suppression of voting in the South –

Robert Margo: That’s true. It’s also, it’s the period in which African-American children begin to go to school for the first time, after the Civil War, and it’s a period in which there’s a lot of investment on the part of their parents in their schooling. It’s the period where African Americans leave the South to move to the North, and get higher incomes as a result.

There were a whole range of things going on in the African American community that slowly narrowed the gap, before World War II. After World War II, we see the effects first of the war, which were significant, and then ultimately the Civil Rights Movement. What we have more recently is a return to what we might call in economics the long run trend. It’s disturbing, right? Because we would like to believe that the progress that was made during the civil rights movement would continue to the present but it hasn’t. Instead, we’ve moved back to this much longer run, persistent narrowing, but quite slow.

How does Baltimore’s economy recover after the riots? Watch Paul’s report.

Paul Solman: Do you expect that Baltimore will feel really long-term, negative effects from this?

Robert Margo: I think that in Baltimore there will be some effects, but it’s hard to say how much. The amount of damage that was done, compared with a typical riot in the ’60s, is not great. It was severe by the standards of what we imagine today, because we so rarely see these events. But, in comparison with a severe riot of the 1960’s, it was not that severe. I think what’s very different about the riots today, and this is true as well of Ferguson, is the amount of attention that’s been paid to these events, and what is discovered as a result of the attention that’s paid to these events, probably will have effects that are much more long-lasting.

For example, I asked my friends, would you have known where Ferguson, Missouri, was two years ago? Did you ever hear of it? Nobody had ever heard of it. But now everybody knows where Ferguson, Missouri, is. And not in a positive way. The Justice Department uncovered a lot of stuff under the rock there. It’s true there are lots of other communities with similar stuff under the rock, but Ferguson is the one that’s in the limelight. These are not good things in terms of making that community attractive in the long run. And I think the damage there will be more extensive than one would ever have predicted from what actually happened during those events. Baltimore may be very similar.

The physical damage isn’t huge, but the media attention is enormous. And we don’t have ways of extrapolating from the experience of the 1960s to the world today with that level of media attention, both in the professional media, as well as social media. We simply don’t know how important that will be. But I’m pretty concerned that will be more long lasting than one might expect. Remember, in the ’60s there were hundreds of riots. And most of them were never reported in the national news. Ferguson, Missouri and Baltimore are on the world stage, right? And that affects people’s perceptions of these places well beyond the immediate environment of those cities.

Paul Solman: Also, in the ’60s, it happened everywhere, so you didn’t single out Pittsburgh, Cleveland, Chicago when there were riots in each of those cities. It was a country-wide phenomenon!

Robert Margo: It was a country-wide phenomenon. It is true that the most severe riots happened in a relatively small number of places, but the occurrence of a riot was much more common. Today, these events are extremely uncommon, and they receive intense media scrutiny when they occur.

Paul Solman: So this really might stigmatize Baltimore.

Robert Margo: It might.