When George Floyd died while in police custody in late May, most agreed his premature death was a tragedy. Yet the discussion on criminal justice reform that emerged in the weeks after Floyd’s passing was quickly overshadowed by the rioting, looting, and violence that broke out in major cities such as Minneapolis, Seattle, and New York.
Dozens of people were killed or injured in the violent unrest, and thousands of businesses and properties, many minority-owned, were looted, torched, or otherwise vandalized. Only now are we beginning to realize the full cost of the destruction. New reporting from Axios reveals that the total insured property losses incurred during the George Floyd riots will come in at $1 billion to $2 billion.
$1 billion-plus riot damage is most expensive in insurance history https://t.co/edlbO0xsfH— Axios (@axios) September 16, 2020
The US has experienced rioting over racial tensions before, but this report shows that the damage from the latest unrest will far exceed any historical precedent.
“The arson, vandalism and looting... will result in at least $1 billion to $2 billion of paid insurance claims,” Axios reports. “[This will] eclips[e] the record set in Los Angeles in 1992 after the acquittal of the police officers who brutalized Rodney King.”
However, there are many reasons that this figure vastly underestimates the true damage wrought by the looting and violence that has broken out in recent months.
For one, the Axios report only measures insured losses. The obvious problem here is that not all the damages were insured.
As I have previously explained, insurance is no panacea for the societal ills imposed by rioting. Indeed, 75 percent of US businesses are under-insured and about 40 percent of small businesses have no insurance at all. Their untold millions in losses don’t show up in the $2 billion figure.
So, too, insurance doesn’t account for the personal pain and suffering caused by rioting. For example, what about the more than 15 people who died during the unrest? Their lives and their families’ pain don’t get counted in any insurance company’s budgetary analysis. Nor does the pain of those such as an elderly businessman punched in the face while his store was ransacked in Kenosha, Wisconsin manifest itself in total reports on insurance compensation.
Moreover, looking at mere insurance totals fails to factor in the lost sales revenue and unpaid labor that businesses victimized by rioters face.
And that’s all without even considering the long-term economic impact rioting has on a community. We must also remember that riots leave a lasting shadow on a city that haunts its economy for decades. The afflicted areas face higher insurance rates, lower property values, higher prices, reduced tax revenue, and decreased economic opportunity.
As I’ve previously summarized, ample research confirms this:
One study of the 1992 Los Angeles riots concluded that not only did the destruction cause $1 billion in initial property damage, over time it led to an economic decline of $3.8 billion in sales activity and at least $125 million in tax revenue.
Moreover, a 2005 study examining similar riots in the 1960s found ‘negative, persistent, and economically significant effects of riots on the value of black-owned housing’ to the degree of ‘a 10 percent decline in the total value of black-owned property in cities.’
And seeing as the new reporting shows that the George Floyd riots were more destructive than the riots in either of the above periods, we can reasonably expect that the long-term economic consequences will be more severe as well.
This important reality shouldn’t be overlooked.
In politics, voters and policymakers have a consistent and rather unfortunate tendency to focus on the seen costs of a policy or event, rather than the many unseen ones. This is what famed economist Frédéric Bastiat described in his essay “That Which Is Seen and that Which Is Not Seen.” He wrote that when “a man absorbed in the effect which is seen has not yet learned to discern those which are not seen, he gives way to fatal habits, not only by inclination, but by calculation.”
Americans shouldn’t fall prey to such fallacious thinking when they consider the total costs that wanton rioting, looting, and violence have imposed on our cities in recent months. The true damage incurred undoubtedly extends far beyond the (already steep) insurance sticker price that readers see in headlines.