Have I really been wrong about gangs all this time?

I’d thought their main line of work was almost legitimate. Parliament and voters decided ages ago that gangs would be the main distribution channel for psychoactive substances.

They provide these products to willing customers, at prices they are willing to pay, where other potential vendors are put off by the threat of criminal sanction. For reasons increasingly inexplicable, Parliament continues with this regime.

If Parliament did not want gangs and organised crime dealing drugs, New Zealand would have switched from prohibition to legal, regulated markets – at least for the least harmful substances.

Experts view those as more consistent with harm reduction anyway. Those experts will differ on their preferred alternative to prohibition but prohibition just does not work. And everybody kind of knows it.

And so, if we stick with prohibition, Parliament, and presumably voters, must really deep down want drugs to be distributed by gangs instead of through pharmacies or through other regulated retail outlets. Or at least Parliament prefers gang distribution of drugs to having to explain to voters that making something legal does not mean they endorse its use or think it is a good thing.

When you think about it that way, the gangs are practically legitimate businessmen.

But the Ministry of Social Development (MSD) this week told us that the gangs’ main line of work might really be dole bludging.

And that seems a far less legitimate line of work.

Appeals to the social cost of someone’s preferred way of being are a pretty standard way of rallying voter support against them.

People like me might be sympathetic to gangs so long as they stick to selling illegal drugs. But if gangs actually cost me through the tax system, that might change my mind about them. And it might make people like me more supportive of anti-gang measures.

In the 22 years studied, from the start of 1993 through the end of 2014, MSD tells us that 92% of gang members spent some time on benefits, with an average duration of 8.9 years. Older gangsters spent more time on benefits as they’d had more time to be able to be on benefits.

The total lifetime fiscal cost of main benefits and other assistance provided to gang members and their relations over that period was $714 million.

Just gets headlines

Now that’s a nice big fiscal cost number. The Dominion Post tells us summer costs ACC $2.2 million in sun, sand, barbeque and ice cream-related injury claims. Gangs cost the country 325 summers, if we follow this general line of reasoning.

But we should pause for a moment and go back to some classic Australian television: Hollowmen. That dark satire had boffins warning a politico against rolling many years’ spending into one big headline figure: “It might get you some headlines but who needs that?” So the politician naturally rolled all the annual numbers together into one big headline figure, because politicians need headlines.

If we look through the report, we find that the fiscal cost of benefits per gang member, in 2014 dollars, averaged $132,000. But remember, that is over 22 years. The average annual fiscal cost is then $8200 per gang member, when we add in all fiscal costs.

When you saw that big $714,000,000 figure, did you expect that that would cash out to $8200 per gang member per year? Probably not. And that’s the point of rolling a whole pile of annual numbers up into one big impressive number; $8200 doesn’t get you headlines but $714,000,000 does.

It gets worse than that. Lots of people cost taxpayers’ money. The only people that MSD really deals with are people who cost the taxpayer money. That’s why they deal with them. The question that would have been really interesting for MSD to answer, and that I thought was the whole point of the social investment approach, would have been this: If we compare two 10-year-olds from similar backgrounds and who have similar risks of getting involved in gangs, how much extra does the kid who gets involved with gangs cost?

Another view of it

The way that the problem has been framed makes it look like, but for the gangs, those individuals would have had characteristics similar to the average New Zealander. But the average New Zealander has little risk of becoming a gang member.

Gangs draw disproportionately from poor communities. People in poor communities who do not join gangs are at disproportionate risk of costing MSD money, too. And if we look at overall income support provided to households, gang members do not look like that bad a deal.

Let’s look to work by Omar Aziz and the Treasury in 2012. They showed that, if we take the value of all of the social services and income support provided to households in the lower deciles, and net from that all taxes paid, low decile households cost about $20,000. For households in the third decile, in 2009/10, the fiscal cost was over $30,000 per household in that year.

Or compare the costs of a gang member to the cost of a superannuitant. If you watched the Auckland Council hearings on the unitary plan, it might not seem ludicrous to compare superannuitants to gang members. After-tax super payments to a single elderly person living alone add up to over $19,000 a year. And there are far more superannuitants than there are gang members.

In short, the big headline numbers are ludicrous. They’re unbecoming of the investment approach that the government is trying to encourage.

Some of the policies they are working to justify are potentially highly worthy: measures to discourage kids raised by gang-members from joining gangs are potentially exceptionally beneficial. And the report does a great job of highlighting severe harms that kids raised by gang-members can face: high rates of abuse and neglect. But the case for those policies should be made on their own cost-effectiveness assessments. Other policies wrapped into the anti-gang push are far more worrying. If the government’s anti-money laundering crackdown weren’t already far too heavy-handed, killing iPredict, we now hear the government is working on measures to seize suspicious cash.

These kinds of measures have led to horrible abuses in the US. Traffic stop cash seizures have become profit centres for police departments, with all of the consequences you might expect.

If the government were serious about getting rid of gangs, crackdowns and seizures only deal with symptoms. Being able to profit from the drug trade keeps gangs alive. Flipping from drug prohibition to legalised and regulated markets would change that, and make gangs far less attractive over the longer term.

But that is if the government, and voters, really wanted to do something constructive about gangs, rather than just posture.