Fancy criminals cost extra

When James Wilson came out with his "broken windows" theory in 1982, I had only recently completed an urban rehab project in what was considered the toughest neighborhood in St. Paul.  So I was living in a really nice townhouse in a neighborhood that quite frankly scared me.  I latched on to Wilson's theory because I found it reassuring.  My project was in a neighborhood where there was a lot of crime among all those vacant buildings.  There were plenty of examples of nice houses fallen into extreme disrepair within walking distance.  I had discovered, however, that even neighborhood so rough it had been essentially abandoned by the city, my restoration project was left utterly un-burgled or vandalized because there seemed to be respect for signs of new life.  I reasoned that if Wilson was right, I was safe so long as my building looked good.  And I was.

I also had a third-grade experience where a schoolmate and I shot out some glass with his new BB gun.  I distinctly remember the decision loop for how we decided what glass to attack.  We decided our choice would be fine because the glass was already slightly cracked.  So Wilson's theory aligned with my experience that little examples of deterioration lead to even bigger deterioration—even in the heart of a choir-boy like me.

Where Wilson and I parted company was his notion that his "broken windows" theory only applied to the housing projects, the poor, and I suppose, the minorities.  I knew he was wrong because it applied to me and I was such a builder, my ONLY experience of deliberately breaking glass was in the third grade!

So here is Bill Black to correct the record.  Go Bill!!

Wall Street's Broken Windows
By William K. Black  MARCH 04, 2012

James Q. Wilson was a political scientist who often studied the government response to blue collar crime. The public knows him best for his theory called “broken windows.” The metaphor was what happens to a vacant building when broken windows are not promptly repaired. Soon, most of the windows in the abandoned building are broken. The criminals feel little compunction against petty destruction because the building’s owners evince no concern for the integrity of their building. Wilson took social norms, community, and ethics seriously. He argued that as community broke down fewer honest citizens were active in monitoring and policing behavior. The breakdown in community was criminogenic – it led to widespread serious blue collar crime. He urged us to take even minor blue collar crimes and breaches of civility seriously and to demand that they be contained through social pressure and policing.

New York City’s police strategy embraced “broken windows.” The police increased the priority with which they responded to even minor offenses that upset the community – “squeegee men,” graffiti, and street prostitution. Reported blue collar crime fell in New York City. It also fell sharply in most other cities, which did not implement “broken windows” programs, but Wilson and the NYPD got the credit and popular fame for the sharp fall in reported blue collar crime in New York City. Wilson became one of the most famous blue collar criminologists in the world.

Wilson’s broken window theory remains controversial among many blue collar criminologists. As a celebration of his life and research I offer this discussion of applying “broken windows” theory and policies to elite white-collar crime.

Wilson was strongly conservative. His research focus in criminology was almost exclusively blue collar crime. That was a shame because “broken windows” theory is most compelling in the context of elite white-collar crime and because the application would reveal interesting twists in the theory’s potential. Such an application, however, would have been outside Wilson’s comfort zone. Wilson tended to use the word “crime” to refer exclusively to blue collar crime and his emphasis was on very low status criminals. In a book entitled, Thinking About Crime, Wilson argued that criminology should focus overwhelmingly on low-status blue collar criminals.

This book [does not deal] with “white collar crimes”…. Partly this reflects the limits of my own knowledge, but it also reflects my conviction, which I believe is the conviction of most citizens, that predatory street crime is a far more serious matter than consumer fraud [or] antitrust violations … because predatory crime … makes difficult or impossible maintenance of meaningful human communities (1975: xx).

I am rather tolerant of some forms of civic corruption (if a good mayor can stay in office and govern effectively only by making a few deals with highway contractors and insurance agents, I do not get overly alarmed)…. (1975: xix).

Notice that Wilson’s explanation is antithetical to his “broken windows” reasoning. There are, of course, relatively minor white-collar crimes. Wilson emphasized that it was the willingness of society to tolerate relatively minor blue collar crimes that led to social disintegration and epidemics of severe blue collar crimes, but he engaged in the same willingness to tolerate and excuse less severe white collar crimes. He predicted in his work on “broken windows” that tolerating widespread smaller crimes would lead to epidemic levels of larger crimes because it undermined community and social restraints. The epidemics of elite white collar crime that have driven our recurrent, intensifying financial crises have proven this point. Similarly, corruption that is excused and tolerated by elites is unlikely to remain at the level of “a few deals.” Corruption is likely to spread in incidence and severity precisely because it undermines community and the rule of law and it is likely to grow more pervasive and harmful the more we “tolera[te]” it.

“Broken windows” theory, in the white collar crime context, would lead us to make the prevention and deterrence of consumer frauds and anti-trust violations through prosecutions a high priority because of their tendency to produce a “Gresham’s” dynamic in which businesses or CEOs that cheat gain a competitive advantage and bad ethics drives good ethics out of the markets. These offenses degrade ethics and erode peer restraints on misconduct.

The ongoing crisis demonstrates that anti-consumer frauds are a direct assault on community. Mortgage fraud – and it was overwhelmingly the lenders and their agents who put the lies in millions of liar’s loans – physically and socially destroy community by producing mass defaults, homelessness, and vacant homes. more

And in case you forget the best example of rich-guy vandalism, he is another piece of Goldman Sachs.

A Brief History Of Goldman Sachs, The Most Hated Bank In The World
Economy Watch | Mar. 8, 2012,

Goldman Sachs was not always the investment bank everyone affects to despise. Its bankers were once dubbed “billionaire boy scouts” because of their talent for making fortunes while maintaining a guilt-free, cherubic image.

But Goldman’s bankers are now far more likely to be compared to squids than boy scouts and have become the favourite target of anti-bank protestors. A week before Christmas, 300 protesters in the Occupy Movement dressed up in squid costumes and carried a giant puppet squid on a march to Goldman Sachs’ offices in New York.

The action was inspired by a Rolling Stone article which compared Goldman Sachs to: “a great vampire squid, wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.” The protesters shouted: “We fry calamari,” and “everyone pays their tax. Everyone, but Goldman Sachs."

”Public hatred of Goldman, fuelled by modern mass media, has intensified, but it would be naive to believe the banks’ character has fundamentally changed. Although there was nothing on the same scale as its nefarious role in the 2007 Financial Crisis, Goldman has been involved in controversy ever since it was founded by the German-born Jew Marcus Goldman in 1869. In 1929 for example, Goldman sponsored a pyramid scheme disguised as a mutual fund, which collapsed causing 42,000 investors to lose $300 million.

Then, in 1970, came the Penn Central catastrophe in which a default on short-term paper marketed by Goldman produced damage claims exceeding the bank’s net worth. In the late 1980s, Goldman’s head of risk arbitrage, Robert Freeman, was sent to jail for insider trading. And during the same period, Goldman was implicated in an illegal scheme to prop up insolvent businesses operated by the corrupt Czech-born newspaper tycoon Robert Maxwell.

“The reality is that the firm has been in and out of trouble throughout its whole existence and has constantly been pushing the edge of the envelope,” said William D. Cohan, a former investment banker and the author of Money and Power: How Goldman Sachs Came to Rule The World.

Cohan marvels at the hypocrisy embedded in Goldman Sachs’ 14 Business Principles, which were codified in the 1970s and are still being drummed into brainwashed employees’ heads today.

“They make the general public think they believe in them, but the most important principle is ‘putting the client first,’ whereas the reality is they are in business to make money and will do it any way they have to,” he said. more