Economic Impact: The George Floyd Riots

This article contains commentary which reflects the author's opinion
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Governors and Mayors Failed to Protect Citizenry, Property and Jobs

“Don’t burn, please . . . Kids live upstairs.” The Wall Street Journal reports one Minneapolis resident spray painted the shops below the apartment where he and his family live. The downtown area of Minneapolis has been decimated by the riots while many shops still have not reopened. Residents told reporters they asked the local government about their plan to help them rebuild, but no answer has been forthcoming. Even more disturbing were the countless reports detailing residents’ calls for help during the riots when police failed to come.

Similarly, New York’s Fifth Avenue and Soho were destroyed by looters while police were either absent or simply stood by. Looters also ravaged shops in Los Angeles and Chicago. Not only major cities, but even smaller cities and towns were affected. Businesses in downtown Eugene were looted and burned, as were businesses in Indianapolis. In Seattle, the police abandoned their precinct while sections of the city were destroyed. While downtown Portland was being ravaged, Portland police were given orders that severely restricted their ability to respond.

Police and Mayors Stood by and Let Destruction Happen

Louisville police told reporters that they had been instructed to stand down during the riots. Baltimore police reported having received a similar stand-down order. Minneapolis Mayor Jacob Frey publicly defended the stand-down order he gave to police. A 911 dispatcher in Columbus told a motorist who called seeking help after being surrounded by protesters that police would not be responding because they had been told to stand-down. When protesters seized a six-block area in downtown Seattle, far from defending the property and citizenry, Mayor Durkan allegedly referred to the zone as a perpetual block party and a “summer of love.”

The LA Times reported that some of the looting appeared to be coordinated. Looters seemed to be organized, driving to certain locations at opportune times to steal the best merchandise. New York City police commissioner Dermot Shea stated that he believed the looting of luxury stores appeared to be organized. Across the nation, 250 CVS pharmacies and 350 Walgreens, both of which housed drugs and controlled substances, were looted. The coordinated looting and drug theft were the sort of crime authorities should have responded to but, in many cases, they did not. Only in 21 states did governors call in the National Guard. New York City was one of the worst hit areas of the country and yet Governor Cuomo never activated the New York National Guard. In addition to the destruction of property, cities across the nation from Miami to Milwaukee are seeing violent crime rates and homicides steadily increase. New York reported 65 shootings and, in Chicago, 87 were reported during the first weekend of July. In America’s 25 largest cities, murder rates are up an average of 16.1%.

Quantifying the Damage

Market Watch reported that, as of June 9, insurers estimated that the bill for damaged businesses and homes in Minneapolis alone would exceed $25 million, and that number is expected to grow as more claims are filed. The largest insurance payout for riots in history resulted from the 1992 Los Angeles riots. That came to $775 million, which is $1.4 billion in today’s money. Those riots, as expensive as they were, were largely limited to one city. The current riots have spread to 140 cities. Preliminary reports from Minneapolis estimate that 1,025 properties were damaged. In Cook county, including Chicago, it is estimated that 135 businesses were damaged. The Chicago mayor said she planned to invest tremendous effort to convince businesses to reopen while some large retailers, such as Walmart and Target, have already said they may not reopen all of their locations.

The economic damage from the riots goes far beyond the destruction of property. It also includes loss of sales and forced closure. For many businesses, after several months of no sales or low sales due to the lockdown, the riots were the final blow. Market Watch reported that 41% of businesses on Yelp, which closed during the coronavirus lockdown, have said they will remain closed permanently. In Seattle’s China Town, 230 businesses took the precaution of removing merchandize and boarding up their storefronts. Many Minnesota businesses are boarded up while others remain closed and it is unclear when or if they will ever reopen. As some businesses close permanently, it is not known if new businesses will wish to reopen in riot prone areas. This could result in a permanent loss of tax revenue and jobs.

The so-called Seattle “Capitol Hill Autonomous Zone,” or CHAZ or CHOP, is one of the most glaring examples of damage done by rioters and of a mayor who failed to instruct the police to defend the city’s citizenry and property. Capitol Hill was home to an estimated 30,000 residents who owned or rented in the zone. Protesters moved in, looted nearly all of the shops, destroyed public infrastructure, and banned the police and emergency services from entering. Some reports claim that nearly 100% of the businesses in the zone were closed. The lawful residents of Capitol Hill reported repeatedly calling the police for help but that the police did not come. Amazon and other services refused to make deliveries into the zone, making it even harder for lawful residents to get food, medicine, and essentials.

In addition to the cost to families and individuals who lost their homes, businesses, and livelihood, cities were also faced with tremendous costs in destroyed infrastructure, police overtime, and equipment. Just to put this number in perspective, the City of Tucson, with a population of only about 500,000, estimated that in a single night of riots they spent $100,000 in police overtime. Multiply this by the number of cities and the number of nights of riots and the figure becomes staggering. In addition to police salaries, private and public entities will now be spending much more on private security. Chicago is planning to spend $1.2 million to hire private security firms to protect businesses.

Class Action Lawsuits

The residents of Capitol Hill are suing the city of Seattle for aiding the protesters by providing them with barriers, public restrooms, and medical supplies. Also mentioned in the suit is the fact that lawful residents found it difficult to access their homes and businesses or to receive deliveries or customers. Elderly and disabled residents, who had already suffered under coronavirus virus lockdown, were particularly hard hit as they depended on deliveries of food and medicine. The suit further alleges that police failed to come when residents called 911.

Carmel, a suburb of Indianapolis, threatened to sue the city of Minneapolis for its failure to contain the rioting within its city limits. The suit alleges that, if Minneapolis police had taken stronger action to halt the protests, they would not have spilled over into neighboring cities and states. Jim Brainard, Carmel’s mayor, said he invited other small cities in the area to join in the suit.

In New York, lawyer Sal Strazzullo is bringing a class action lawsuit against the City and State of New York, the New York City Police Department, Gov. Andrew Cuomo, Mayor Bill De Blasio and the NYPD Police Commissioner for negligence of duty and for failure to protect commercial properties from looting and damage. Currently, the lawsuit stands at $100 million and is expected to grow.

Tallying the Final Cost

The final figures for the total damage done by the riots have yet to be seen. The violence, looting and destruction are still going on in many cities while countless shops and businesses remain closed. Many more businesses and, perhaps, citizen groups will most likely join class action lawsuits, particularly in those cities where mayors failed to act.

A complication in the calculation of the loss of revenue due to the riots is seen in those cases where cities and states are considering a second lock down. If this happens, a likely political move by those who support both the lock down and the riots would be to claim that loss of revenue was caused by the lock down rather than the riots. This would greatly reduce the total cost of the riots, on paper at least. In the real world, however, the cost of the riots is clear to those families who lost their livelihood, sometimes businesses that had been in their families for generations. These losses could have been mitigated had governors and mayors not failed to protect the citizenry under their jurisdiction.