What Impact Will Rioting Have on the Economy?
The 1992 Rodney King riots show that effects of rioting persist long after graffiti is removed from storefronts.
June 2020 has been marked by protests and violent rioting throughout many of America’s most populous cities. The protestors have been driven by anger about the murder of George Floyd at the hands of a police officer, anti-blackness in the criminal justice system, and police brutality. While many protests have been peaceful and emphasized legal reforms, businesses in New York, Chicago, Los Angeles, and Minneapolis have been the target of looting and rioting connected to the protests.
Although the social unrest triggered by the murder of George Floyd seems unprecedented, there are many similarities to the 1992 riots in Los Angeles, which occurred after the acquittal of four officers who beat Rodney King, an African-American man, to death. Former Democratic Gubernatorial Nominee Stacey Abrams said the two incidents both center around “a deep sadness that a black man’s life did not matter”. The comparison of riots after Rodney King’s death not only shows similar social undercurrents but can be used to make predictions about the broader economic effect of rioting today.
Information from the riots after Rodney King’s death predicts that negative economic impacts from the rioting this month could last for a decade. After the 1992 riots, there was a downward trend in property values in areas affected by the riots. Over one thousand buildings were damaged by fires, and thousands of jobs were lost. Although there has not been a similar scale of damage in a single city, the national effect of riots in 2020 makes any economic effect detrimental to more than one community. Already, there have been over $25 million in damages in Minneapolis alone, as well as the deaths of several police officers.
Already in the midst of severe economic turmoil from Covid-19, some businesses may be forced to close as looting shuts them down for good. The broader economic effects of the rioting may not be realized for some time, but it is likely that property values and economic activity will be severely decreased in areas impacted.
Some commentators have claimed that insurance coverage protects many business owners from lasting damage. But with many businesses having been closed or working at minimum capacity for months, insurance won’t be enough to make up for further closure to repair damages. However, it is the long-term impact of rioting which will be most problematic for businesses. It is likely that there will be fewer investment programs in looted areas, as well as a decrease in economic activity, resulting in the bankruptcy of businesses. Many people will be impacted by looting, whether directly or indirectly. The economic consequences of widespread rioting and looting will add severe hardships to small businesses already struggling in the midst of lock-downs.
Despite the pessimistic news of rioting and the continued fight against coronavirus, volunteers in cities affected by rioting have been cleaning up broken storefronts and providing hope to neighbors. The National Guard has been deployed to several cities, resulting in a decline of violent protesting and riots. The economic damage may already be done to businesses and communities across the country, but a cease in violent riots can leave June 2020 remembered as a time of social change and the triumph of American virtues.
