10

Honesty

In which evidence is presented that Belmont has never had a crime problem worth worrying about; that Fishtown has suffered from a transforming growth in crime; and that it is difficult to tell whether other kinds of honesty have deteriorated.

TRENDS IN HONESTY are most concretely reflected in trends in crime, so I begin with them. I then turn to broader questions of honesty not measured by crime data.

Crime and Class

Ever since criminology became a discipline, scholars have found that criminals are overwhelmingly drawn from working-class and lower-class neighborhoods. This remains true for incarcerated felons today, as shown in Figure 10.1. Because young males commit most of the crimes, the samples for the discussion of crime are limited to males and the age range is broadened from 30 to 49 to include ages 20 to 49.

In inmate surveys conducted periodically by the federal government from 1974 to 2004, about 80 percent of whites in state and federal prisons consistently came from Fishtown and fewer than 2 percent from Belmont. It is probably even worse than that. As discussed in appendix E, the imprisonment data are more likely to understate than overstate the proportion of serious crimes committed by people from Fishtown.

FIGURE 10.1. WHERE MALE INMATES IN STATE AND FEDERAL PRISONS COME FROM

Sources: Federal surveys of state and federal inmate populations. Sample limited to white males ages 20–49.1

Neighborhood Trends Over Time

Imprisoned Neighbors

Figure 10.2 shows the ratio of white prisoners of any age to white adults ages 18–65 in Belmont and Fishtown from the first inmate survey in 1974 through 2004.

The inhabitants of Fishtown were battered by three national trends. The first was the increase in crime from the mid-1960s to the early 1990s, the second was the increase in imprisonment from the early 1970s through 2009, and the third was the outmigration from Fishtown. The net result: Most of the national growth in white crime and imprisonment was concentrated into a shrinking part of the white population, the working class of Fishtown. For every 100,000 Fishtowners ages 18–65 in 1974, 213 were imprisoned. By the time of the 2004 survey, that number was up to 957. And those numbers are based on just state and federal prisoners. They don’t count people in jails, who amounted to around 100,000 whites in 1974 and 317,000 whites in 2004.

FIGURE 10.2. WHITE PRISONERS

Sources: IPUMS and the six federal inmate surveys (appendix A).

*The numerator is based on white male state and federal prisoners of all ages. The denominator is based on whites ages 18–65.

Interpreting the Ratios

There is no natural denominator for computing ratios of crime indicators to population. I use whites ages 18–65 as a way to think about the numbers relative to the working-age population.

In contrast, the environment in Belmont changed hardly at all. The parallel numbers for Belmont were 13 in the 1974 survey and 27 in the 2004 survey. It is statistically unlikely that someone living in Belmont knew of a family with one of its men in prison even in 2004. Someone living in Fishtown was likely to know of at least one such family, and perhaps several.

Neighbors on Probation and Parole

While imprisonment is likely to be a misfortune for the prisoners’ families, at least it has one positive effect on neighborhood life: It locks up people who otherwise would still be making trouble. The same cannot be said for persons on probation or parole. Some of them are getting their lives in order, but others are not. The size of the probation and parole population in a neighborhood is an indicator of ongoing risk for the rest of the people in the neighborhood. Alongside that direct effect is a cascade of damaging secondary effects on social capital and social trust.

The number of parolees increased in tandem with the increase in incarceration. When the first national data on parolees were released in 1980, there were about 79,000 whites on parole. That number had grown to 191,000 by 1990, to 275,000 by 2000, and stood at 337,000 in 2008. The government figures do not include background data, but there is no reason to assume that the educational and occupational profiles of parolees are radically different from those of the general prison population (although the offense histories may be different). Figure 10.2 for prisoners would apply in its broad outlines to a graph for parolees.

Probation, which often serves as a substitute for incarceration, represents a potentially different population. It is different first in its mammoth size. In 1980, there were about 581,000 whites on probation. Those numbers grew to 1,389,000 by 1990, 2,066,000 by 2000, and 2,392,000 by 2008. There has been only one federal survey of adults on probation, conducted in 1995, that includes information on the educational and occupational distributions of probationers. At that time, 38 percent of white males ages 20–49 who were on probation had not completed high school, more than four and a half times the overall dropout rate. Only 6 percent of the white male probationers of that age range had completed college or an advanced degree, compared to 29 percent for all white males ages 20–49.2

Overall, the population of probationers is less extremely concentrated at the bottom of the educational and occupational ladders than prisoners, but they are nonetheless extremely concentrated at the bottom in comparison to the general population. I cannot construct trendlines for probationers (the necessary data don’t exist), but go back to Figure 10.2 and envision a growth trend for Fishtown that is close to, but not quite as steep as, that for prisoners.

The Neighborhood Crime Rate

Optimistic readers may be thinking about a glimmer of better news. America’s increase in persons under correctional supervision in the last quarter century is well known, but so is the reduction in crime that began in the early 1990s and continued into the 2000s. These reductions were substantial. As of 2009, the FBI’s overall crime index was 40 percent below its peak in 1991. Figure 10.3 shows how arrest rates changed in Belmont and Fishtown.

FIGURE 10.3. WHITE ARRESTS FOR INDEX CRIMES

Sources: IPUMS, the FBI Uniform Crime Reports, the Bureau of Justice Statistics annual prison reports, and the six inmate surveys.

*The numerator is based on white prisoners of all ages. The denominator is based on whites ages 18–65. The top 20 percent and bottom 30 percent are shown for 1974 and 2004 because they depend on information about inmates not available earlier or later than those years.

In appendix E, I discuss the reasons for concluding that changes in arrest rates among whites reflect changes in the crime rate among whites. Perhaps the most interesting feature of Figure 10.3 is how few arrests occurred in Belmont at any point in the half century from 1960 to 2010. The American crime problem had been overwhelmingly borne by people who are not part of Belmont.

Fishtown has shared in the reduction in crime, but the levels of arrests in Fishtown, especially for violent crime, remain far above their levels of earlier decades. And there is the sobering reality conveyed in Figure 10.2: The reduction in crime has occurred at the same time that large numbers of Fishtown males have been taken off the streets and put into prison, and to some degree because they are no longer around to victimize their neighbors. There is no natural metric for adding up prisoners, parolees, probationers, and arrests in Fishtown that doesn’t double-count in unknowable ways, but we can combine them qualitatively. Lots more prisoners, lots more probationers, lots more parolees, and somewhat diminished arrests probably mean that, taken together, the rise in criminality in Fishtown continues.

Honesty as Integrity

Honesty as the founders talked about it encompassed much more than refraining from crime. What Jefferson referred to as American “plain honesty” developed throughout the nineteenth century into our national self-image of a straightforward people who said what they meant and kept their word. The topic is integrity—doing the right thing not because the law will put you in jail if you don’t, but because of moral principles that you follow regardless of consequences.

Integrity in the Business World

As I noted in chapter 6, American honesty existed side by side with the sharp American business practices that offended some foreign observers. It was an odd mix. To take advantage of another person in a business deal was not considered dishonorable, but there was a distinction between taking advantage and taking unfair advantage. If the other person signed a contract he hadn’t read or he failed to appreciate the real value of his property, an honest American businessman was not expected to protect the other person from himself. But to lie about the terms of a contract, to defraud someone, or to cheat one’s partners or stockholders were considered both dishonest and dishonorable. An American accolade was to say of a man that you could do business with him with a handshake.

Since the 1980s, one strain of thought has argued that the American business community has become more corrupt than it used to be. People who hold this view labeled the 1980s “The Decade of Greed,” with Mike Milken as the exemplar of the villain. Then in the early 2000s came a series of spectacular cases of corporate malfeasance, most conspicuously at Enron, Tyco, and WorldCom, and they prompted the Sarbanes-Oxley Act of 2002, intended to tighten corporate governance.

The most damning evidence of systemic wrongdoing has come out of Wall Street in the aftermath of the financial meltdown of 2008. Describing Inside Job, a documentary film about the behaviors on Wall Street leading up to the crisis, the New York Times’ Joe Nocera writes,

Here is Wall Street actively encouraging subprime lenders to lower their already low standards—and then buying those loans knowing they are likely to default, but not caring. Here are traders up and down Wall Street making millions in bonuses selling products that are … “ticking time bombs.” Here is Moody’s, one of the three big credit ratings agencies, quadrupling its profits in seven years by handing out triple-A ratings like candy. Here are the regulators, ignoring impassioned entreaties to investigate fraudulent lending practices and excessive leverage. These were not anomalies. This was standard operating procedure in the years before the crisis.3

Evidence for those behaviors gathered in Senate and House hearings led to the Dodd-Frank bill for regulating the financial markets, signed into law by President Obama in July 2010. To what extent is the subprime mortgage story indicative of broader rot within the American business community, or broader rot in the parts of the financial industry that did not get caught up in the subprime story? It is a question for which I have been unable to find good answers. In appendix E, I lay out data from investigations conducted by the Securities and Exchange Commission and the Internal Revenue Service. Neither provides quantitative evidence for a broad decline in corporate integrity. The IRS evidence on tax fraud actually points in the other direction, though inconclusively. The famous examples of corporate and financial wrongdoing are real, but it is not clear whether they reflect a growing loss of integrity within the business community as a whole.

Integrity in Personal Finances

The state of personal integrity is almost as hard to track as the state of corporate integrity. It would be nice to know if there have been trends over time in the consistency with which people keep their word, insist on taking responsibility for their mistakes, and tell the cashier when they have been given too much change, but I have been unable to find databases that would tell us what those trends have been, with one exception: use of the bankruptcy laws.

Personal bankruptcies have always been legal in the United States as a way of giving people a second chance. Some famous Americans have availed themselves of that remedy, notably Mark Twain. But Americans have also seen the act of reneging on a debt as dishonorable. Twain was part of this tradition, too, eventually repaying all his debts despite having no legal obligation to do so.

The quantitative indicator I use is a particular kind of bankruptcy, now known as Chapter 7 bankruptcy, in which the bankrupt walks away without any further attempt to repay debts.4 I restrict it to personal bankruptcies, to avoid conflating some important differences between personal and corporate bankruptcies. Persons declaring bankruptcy under Chapter 7 are required to sell most or all of their assets (the states have varying requirements) to pay off as much of their debt as possible, and are legally free to ignore the unpaid remainder. Figure 10.4 shows the overall trend in individual filings for bankruptcy from 1960 to 2008.

FIGURE 10.4. FILINGS FOR CHAPTER 7 PERSONAL BANKRUPTCIES

Source: Statistical Abstract of the United States 2070, table 752, and comparable tables in earlier editions.5 Nonbusiness filings under Chapter 11 are not shown because they represented less than a percentage point of all nonbusiness filings throughout.

From 1960 to 1978, bankruptcies increased on a shallow slope. Then in 1978, the bankruptcy law was changed in several ways that made bankruptcy more attractive.6 The big jump in bankruptcies in 1979–80 looks suspiciously like a result of the law, but bankruptcies leveled off again through the mid-1980s.7 In 1984, modifications to the Bankruptcy Code even weakened some of the prodebtor provisions of the 1978 act. But in 1986, bankruptcies began a sustained, steep increase that lasted until 2005, when the rate reached 7.2 times its 1978 level.

Then the rate plunged from 2006 to 2007, and from an easily identified cause. Another major reform of the Bankruptcy Code was passed in 2005, making it much more difficult for people with good incomes to declare bankruptcy under Chapter 7, forcing them instead to use Chapter 13—in effect, requiring them to establish a repayment plan instead of being legally forgiven their debt. Nonbusiness filings of bankruptcy subsequently plunged—not just for Chapter 7, but for Chapter 13 as well. They started to rise again in 2008.

How are we to interpret this history? One possibility is that I am wrong to think bankruptcy has any relationship to integrity. The propensity of Americans to declare bankruptcy has always been a function of the economic pros and cons of bankruptcy, it may be argued.8 When bankruptcy became more economically attractive after 1978, bankruptcy rose; when it became more penalizing in 2005, it fell. Integrity had nothing to do with it.

Another interpretation is that economic times got harder for people after 1978 and continued to get harder until 2010. It doesn’t seem plausible on its face, since the start of the sustained increase in bankruptcies coincided with the Reagan boom years and continued through the Clinton boom years. The authors of a book called The Fragile Middle Class nonetheless try to make the case, arguing that the government and the banks have seduced people into accumulating more debt than they should, that increased divorce and nonmarital births have created millions of financially vulnerable households, and that the incidence of ruinous medical costs has increased.9 But an examination of all personal bankruptcy filings in Delaware for 2003 casts doubt on the proposition that the increased bankruptcies can be blamed on events beyond people’s control. Divorce and unemployment were seldom implicated. Medical costs played a secondary role. The main cause of bankruptcy was imprudent expenditures on durable consumer goods such as houses and automobiles.10

A third interpretation is that the propensity to declare bankruptcy has changed and that integrity has deteriorated. Have the bankruptcy laws become more lenient? To respond to the increased leniency by declaring bankruptcy more readily is akin to deciding to shoplift if the criminal justice system becomes more lenient. Are the banks offering credit too easily? Someone for whom integrity is paramount is scared of incurring debts that can’t be repaid, and doesn’t take out the loan. Is a woman facing a divorce? Someone for whom integrity is paramount changes her lifestyle, drastically if necessary, to avoid the shame of being unable to repay her debts.

I am not arguing that people of integrity never declare bankruptcy. Rather, I am arguing that there are always temptations to get into debt and always patches in life where finances become dicey. In a nation where integrity is strong, the effects of temptations and of rough patches are damped down. That trendline in Figure 10.4, showing a quadrupling of personal bankruptcies over a period that included one of the most prosperous decades in American history, looks suspiciously like a decline in personal integrity. The data do not permit us to assess whether the decline has been more serious in Belmont or in Fishtown.