The "Irregular Economy"

FOR many have-not blacks, Puerto Ricans and other ghettoized minorities, the exemplar of business success is the jaunty dude in a wide-brimmed hat and high-heeled shoes who has made good --as a pimp. A few highly enterprising procurers pocket $100,000 a year. Indeed, crimes like narcotics peddling, prostitution and gambling are major moneymaking activities in the ghettos. They constitute a kind of "irregular economy," which churns over huge sums that are never figured in the gross national product. Nor are taxes collected on most of this money. For all the harm that the rackets inflict, they do provide jobs and capital that many blacks and others find difficult to get in the regular economy. Lately this lawless economy has been growing so rapidly that it is attracting the attention of economists and other scholars determined to measure its dimensions.

Though figures are imprecise, the turnover in the ghetto from narcotics, numbers, prostitution and other rackets amounts to about $5 billion a year. According to one study, the black population of Brooklyn's Bedford-Stuyvesant section spent $88 million on drugs and policy gambling in 1970--about $11 million more than it collected in welfare funds. The report's authors, Harold D. Lasswell, a political scientist, and Jeremiah McKenna, a former Manhattan assistant district attorney, found that the numbers operation alone had an annual payroll of $15 million, making it the biggest private employer in the area. Today the revenues are substantially higher.

Francis Ianni, a Columbia University professor who is studying the impact of crime on black communities, notes that some criminal entrepreneurs plow back a part of their earnings into legitimate ventures like dry-cleaning shops, real estate developments, bars and nonlicensed gypsy-cab fleets. One Los Angeles police captain disputes this claim: "Ghetto criminals don't create businesses. Mostly they buy them up, suck them dry, and take tax losses."

Tax-Free. At the fringes, though, the irregular economy melts into the regular one. For example, when not transporting customers, gypsy cabs may transport stolen goods, and storekeepers sometimes act as fences. A ring of ghetto car thieves in Brooklyn ran locksmith shops and several auto junkyards that assisted the illegal enterprise, but also conducted legitimate business. A ghetto bar or grocery store often serves as a front for a numbers operation while making legal sales to customers, who may or may not know what is going on. The grocery may even use its tax-free profits from numbers gambling to extend interest-free credit to poor shoppers. "There is community support for some crime because it delivers vital services," says Ianni.

The greatest risks and richest rewards are in the narcotics trade, which in many slum areas is increasingly controlled by blacks. Some are even bypassing the big-time importers, who are white, and bringing in their own heroin, cocaine and other drugs from Latin America or Southeast Asia. In Boston, police estimate that street sales of heroin, mainly by blacks to blacks, totaled $65 million last year. Factory owners, who buy in bulk, may knock down as much as $26,000 a week. Their distributors can earn $3,800, and the lowly pusher, often an addict, gets about $ 125 and all the smack he can shoot--about $900 worth a week at current prices. Before he was jailed, one young black hustler, beginning from scratch five years ago, built up a dope-peddling business in Boston that employed 20 people and grossed $2.5 million a year.

Providing illegal gambling opportunities, especially numbers betting, is a lucrative enterprise for ambitious blacks. Chicago has ten major numbers operations, some black-controlled, which bring in as much as $10 million a year, mostly from blacks. In Bedford-Stuyvesant the numbers play last year came to about $40 million.

Opinions differ on how the Government should deal with the irregular economy. The Lasswell-McKenna report on Bedford-Stuyvesant calls for legalizing gambling as a means of taking the play away from criminals. A measure that would amend the constitution to legalize gambling is now before the New York legislature. Poor blacks tend to be against such a change because they distrust government, and they figure that the proceeds from gambling would be taken away from the black numbers runners and other local operatives. In addition, numbers men now extend credit to their customers, but legal betting parlors demand cash. Lisle C. Carter, a Cornell University sociologist, notes that ghetto crime "is a source of investment resources, of both equity and debt capital." Some criminal kingpins, for example, lend money to people who want to go into honest business. Carter warns against moving too fast in rooting out crime in the ghetto, lest this capital source dry up, leaving the inhabitants worse off than ever. Until more blacks are given greater economic opportunity, the brutalizing irregular economy may be the only crack at free enterprise that they get.

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