NUMBERS GAMBLING AMONG BLACKS: A FINANCIAL INSTITUTION* Ivan Licot University of California, Los Angeles American Soctolagical Review 1977, Wol, 42 (Decemiber):892-904 ‘Mainsiream financial institutions have never been able ta provide generally prevailing service levels in poor communities. In the resi pambling. Numbers-gambling hanks became sources af capital and a major sa urban black communities. In conjunction with the usury industry, alternative éastirutional sysiem for the savings-Investment cyele in. if Partial-service vacuum, blacks invented nunshers ws device af umbers banks framed an ‘slum, Numbers barting illustrates the conjoint contribution of institutional and cultural causes in anelvsis of poveriy. CULTURAL AND INSTITUTIONAL EXPLANATIONS OF POVERTY ‘The literature on poverty conven- tionally distinguishes institutional and cul- tural explanations (Light and Wong, 1975, Elesh, 1977). The distinction hangs upon whether an explanation identifies social institutions or the culturally-induced be- havior of the poor as the cause of poverty. Although this taxonomy satisfactorily encompasses the structures of explana- tion, two intervening processcs always precipitate poverty. These two are low in- come and wastful and/or destructive con- sumption. Low income is the most obvious cause of poverty, but the balance between in- come and consumption is always the technical issue. Even where disposable family incomes are above the poverty level, wasteful or destructive expendi- tures may deplete a family’s reserve until income is na longer adequate. In this case, ‘wasteful consumption—not low in- come—actually caused a family's pov- erty. Naturally, when incomes are in- adequate, low income becomes the im- mediate cause of poverty but, even here, wasteful or destructive consumption can exacerbate it, ** The author gratefully acknowledges a grant from the University of California Academic Senate, Los ‘Angeles Division. The American Bankers Assacia- tion permitted inspection and reproduction of their unpublished research findings. The author also wishes to thank Oscar Grusky. Robert Herman, Jaan Huber and Lynne Zucker for advice, The intervening processes of low in- come and wasteful/destructive consump- tion are compatible in principle with either institutional or cultural explanations of poverty. For example, institutional expla- nations of income-induced poverty have stressed external barriers imposed by ra- cial discrimination, structural unemploy- ment, minimum wage laws, labor exploita- tion, the split labor market, and so forth. Cultural explanations of low income- induced poverty have stressed unfavor- able work habits (absenteeism, soldiering, tardiness) which reduced employability, attributing these variously to the lack of a Protestant cthic, or the presence of em- ployment and earning-inhibiting cultural residues (Banfield, 1974). ‘On the neglected consumption side, cul- tural explanations have emphasized the adverse consequences of wasteful destructive consumption habits allegedly characteristic of the “disreputable poor” (Matza, 1966). For example, in the dec ades. of temperance agitation preceding the Prohibition Era in the United States, much social research concerned insobri- ety among the working class and the puta- live connection of drinking and pauperism (Koren, 1899; 64-99). Many other con- sumption habits have been linked to pov- erty, among them: unsophisticated shop- ping, purchase of luxuries, big families, unhealthy diet, excessive use of install- ment purchase, failure to save and gambl- ing (Glazer and Moynihan, 1970: 33; Foxall, 1974). 892NUMBERS GAMBLING One institutional response to this catalogue of wasteful consumption prac- tices has been to question the scope of culturally-induced consumption —dif- ferences between the poor and nonpoor. This issue produced a complex and con- tradictory literature which permits na ‘easy encapsulation (Alexis, 1962; Nixon, 1963; Simon and Simon, 1968; Stafford et al., 1968; Sturdivant, 1969; Cicarelli, 1974). In some cases, undeniable income- linked differences have appeared—for example, lower rates of life insurance pur- chase by the poor. Even here, institutional writers have insisted that poverty pro- duces situational pressures which require ‘the poor to seek irregular and often more ‘expensive altematives to those prevailing elsewhere in the market (Light, 1972: 152-69; Ferman and Ferman, 1973; Wong, 1977). In a memorable phrase, ‘Caplovitz (1963) observed that “the poor pay more” because the retail stores of the slum compel it. Similarly, successive studies of pawnbrokers and loan sharks have concluded that poor people turn to high-priced lenders because they are un- able to obtain credit in cheaper institu- tions (Forman, 1906; 622; Seidl, 1968: 88-9). In all of these cases, the poor are making unwise, destructive or wasteful purchases, but circumstances rather than improvidence necessitates the waste. ‘The ideological implications of any sim- ply cultural or simply institutional expla- nation of poverty are mutually repugnant (see Huber, 1974), and a spirit of dog- matism often has characterized social sci- ence discussion as a result. The source of ‘this dogmatism is the insistence that cul- tural and institutional theories of poverty must exclude one another. This insistence fallacious becausé cultural and institu- tional explanations can produce poverty jointly as well as singly. Recognizing this possibility of conjoint causality, Valentine (1968; 117) nonetheless condemned it as “eclectic,” and social scientists have been dismayingly willing to accept this unwarranted constraint. ‘The treatment of Lewis’ (1968) “culture of poverty thesis is a case in point. Lewis" detractors as well as his defenders accepted the premise that his thesis is a 893, premise is strictly untrue for, in Lewis’ view, historic institutions gave rise to con- temporary cultures of poverty. His total explanation actually included both institu- tional and cultural components so it was never a purely institutional nor a purely cultural explanation. The controversial Moynihan report was only a specific ap- plication of Lewis’ formula to American blacks (Rainwater, 1967). Moynihan as- serted that slavery, a bygone institution, had engendered a matriarchal cultural tra- dition among blacks, The female-headed family, a cultural survival of the bygone institution, had become the principal cause of poverty among American blacks today. Moynihan's thesis contained cul- tural. and institutional components; it was never a purely cultural explanation. True, a purely cultural phase succeeded a purely institutional phase in both the Lewis and Moynihan versions. (The se- quence might, in principle, have been re- versed.) On the other hand, no barrier prevents inslitutional-income and/or institutional-consumption causes from coexisting in time with cultural-income and/er cultural-consumption causes. Numbers gambling offers empirical con- firmation of this logical possibility. Num- ‘bers gambling is a wasteful consumption practice of the poor. Existing literature attributes this wasteful consumption to cultural causes. This cultural-consump- tion orthodoxy is simplistic. Actually, numbers gambling combines institutional and cultural causes in the same time span. ‘Therefore, this empirical case supports the conclusion that institutional and cul- ‘tural causes of poverty may operate con- jointly in a situation, and that empirical ‘determination of preponderance is neces- sary in every case, NUMBERS GAMBLING: A FINANCIAL INSTITUTION In the late nineteenth century and until roughly 1949, policy wheels were the vailing type of lottery among urban blacks and whites of the lower class. Although policy gambling persisted in Chicago and Detroit until 1940, numbers gambling by now has replaced policy in all major cultural theory (Leacock, 1971) Yet, the American In numbers gambling. aova “gig bettor stakes # sinall sum on thice digits, 000 to 999. Instead of 2 wheel or drum, the house takes its winning number from published numbers such as bank clearing totals, volume on the New York ‘Stock Exchange, or parimutuel totals. The published figures eliminate the possibility of a rigged outcome, a decisive technical advantage over the policy format (Light, 1974), Beale and Goldman (1974: $41; ef. Roebuck, 1967: 136; Black Enterprise, 1973: 12) estimate that numbers gamblers in the United States wagered 2.5 billion dollars in 1973, roughly ten percent of all illegal gambling revenue. Discursive evidence claims that blacks were overrepresented among policy gamblers, but the implications of these 1872: statements are unclear (Crapsey, 104; Martin, 1868: 517; Du 265). There is no evidence were overrepresented relative to poor nonblacks; in addition, white ethnics commonly had their own lotteries which may have been functional equivalents of policy gambling (Ianni, 1972: 67; Carlson, 1940; 24). However, Caribbean blacks in- vented and popularized numbers in this country during the 1920s. As a result, numbers gambling was still 60 percent black in 1934 (Light, 1974: 55). Carlson (1940; 3-4; see also Caldwell, 1940:2) noted that although white people of the lower economic classes” had begun to bet ‘on numbers, this form of gambling re- mained “predominantly an urban negro [sic] activity.” Currently, Marcum and Rowen (1974: 31) observe that numbers gambling is “concentrated among blacks and ethnic groups in the older cities, espe- cially in the East and Midwest. The Fund for the City of New York (1972) found that blacks represented 30 percent of numbers bettors, but only 20 percent of the city’s population. This progression indicates that numbers began as an exclu- sively black lottery, but diffused to nonblacks. Studies of lottery gambling, even those most sympathetic to blacks, have always regarded the betting as superstitious non- sense justifying a prodigal waste of money (Riis, 1892; 155; Peterson, 1952: 194; Drake and Cayton, 1962: I, 491), The amount wasted is substantial. Drake and AMERICAN SOCIOLOGICAL REVIEW Cayton (1962; II, 481; of. Warner and Junker, 1941: 19) concluded that the pol- icy syndicate on Chicago's South Side employed 3,000 persons and grossed at least 18 million dollars in 1938. This sum would represent $64 for every black per- son in Chicago and $256 for a family of four. The median income of all familie ‘Chicago was $1,463 in 1940, so numbers gambling of blacks accounted for about “I7.S percent of family income, More re- cently, the Pund for the City of New York (1972: 9) concluded that New Yorkers wa- gered 600 million dollars a year on num- ‘bers bets. Blacks represented 30 percent ‘of New York's numbers bettors, so the city's black population presumably laid 180 million dollars on numbers in that year. This sum represents $87 for every black person in New York City. Since the median family income of blacks in New ‘York was $7,309 in 1969, nearly five per- cent of black family income went for numbers gambling. This estimate is con- servative. Director of Political Affairs for the Congress of Racial Equality, Ed Brown (1973) has claimed that in Harlem alone blacks wager “‘at least’ 300 to $00 million dollars a year on numbers. If only 300 million dollars were wagered yearly. this betting gross would represent about $300 for every black person in Harlem or 16 percent of family income. In the 94 percent black Bedford-Stuyvesant section of Brooklyn, Lasswell and McKenna (1972: 55.62) examined numbers gambling between 1963 and 1970. Their estimates are the most reliable of any. They found that impoverished residents spent be- tween 2.5 and 5.1 percent of per capita income on numbers bets. Admittedly, these estimates of betting volume are crude and vary widely. Nonetheless, even the lower estimates indicate that numbers betting represents a significant waste of money by poor people ‘Why do poor blacks waste money on numbers? The sociological literature on gambling is scanty (Scimecca, 1971: 56; ‘Tec, 1964: 105) and it offers only two ef- forts to explain numbers gambling as op- posed to gambling in general, the usual focus. The two offer exclusively cultural explanations. Carlson (1940) called atten- tion to “the culture complex" underlyingNUMBERS GAMBLING the numbers gambling of Detroit blacks. ‘This complex included dream interpreta- tion, folklore and music, social roles, spiritualism, ceremonial festivities, fad and fashion in playing style, and an exten- sive gambling jargon. McCall (1963) stressed the “'symbiatic™ relationship be- tween spiritualist cults and numbers gambling, claiming that the superstitions mutually reinforced each other. The cul- tural source of the superstition McCall identified as animistic religions of West Africa and Caribbean “hoodoo,” In view of the heavy folklore surrounding the numbers complex, cultural explanations have an undeniable plausibility. Mare- over, the metropolitan black press con- tinues to depict numbers gambling as a “soul preoccupation (E. Brown, 1973) while reminding readers that blacks in- vented the game. In all cases, what is evoked isa specifically black cultural heri- tage rather than a generalized “culture of poverty.” Nonetheless, the prevailing cul- tural interpretation of numbers gambling among blacks comes down to a cultural. consumption interpretation of poverty among this group. ‘The evidence supporting the cultural side of black numbers gambling is too strong to deny, but a close look at num- bers gambling rns up three telling anomalies. First, of cultural theories of gambling in gencral, the preeminent is Devereaux (1968; see also Thurner, 1956) who stresses the incompatibility between gambling and the Protestant work ethic. ‘The obvious difficulty is that black num- bers gamblers are predominantly Protes- tant fundamentalists whose gambling can only occur despite the restraint of this religious tradition. Hence, the cultural baggage of blacks does not provide un- mixed support for numbers gambling Second, a cultural explanation of black numbers gambling cannot account for the 70-88 percent af numbers gamblers who are now nonblack. This objection was less serious when numbers was an exclusively black preoccupation, but the subsequent diffusion of the game to nanblacks com- pels the conclusion that cultural con- tinuities originating in the black heritage cannot give the whole explanation, The 895 offers a class cultural explanation for numbers gambling by the black and nonblack poor. However, the actual dis- tribution of gambling among social classes lends little evidentiary support. Li and Smith (1976) reported national survey data which show that the propensity to gamble is positively associated with sacioeco- nomic status, a result repugnant to any class cultural theary. The best evidence cited in support of a negative relationship between socioeconomic status and gam- bling is Tec (1964; see also Newman, 1972; 85). However, Tec concentrated only on football pool gambling, an admitted preoccupation of the working class. Numerous studies (Bloch, 1951: 218 Commission, 1975: 13) report that ide fiable social groups have favorite gam- bling activities. For example, the Fund for the City of New York (1972) reported that low-income gamblers preferred numbers, but high-income gamblers preferred casino games; at middle-income levels, sports and race tack betting prevailed This mosaic of gambling preferences im- plies that the correlation between social- economic status and gambling depends upon which gambling game is under scrutiny. ‘Third, a fundamental assumption of any cultural theory of gambling is the expecta- tion that rates should remain stable over long periods of time in reflection of cul- tural divergences. But the history of lot- tery gambling in general (Light, 1974: 52-3) and numbers gambling in particular (Carlson, 1940; 4, 138, 158; Caldwell, 1940: 30) shows abrupt shifts in participa- tion: lottery gambling increases in fre- quency in economic hard times and de- clines in periods of prosperity. Cultural theory cannot account for cyclical fluctua- tion, ‘On the other hand, the increase in num- bers gambling in periods of business de- pression immediately suggests the anomie theory (Durkheim, 1951: 241-46). Merton (1957: 149) also identifies the numbers gambling of blacks as a form of “‘innova- tive deviance.” Big prize lotteries offer the possibility of immense wealth to win- ners, and sociological treatments of these have commonly asserted that war896. ng. 1992; 550; Marcum and Rowen, 1974, 30; Lanni, 1974: 110), 2 conclusion conge- nial fo anomie theory (Tec, 1964; 62; Zt lerberg, 1962: 122), A related view has developed in ecanomics since the analysis of Friedman and Savage (1948) reversed the economists’ long-standing belief that gambling is always irrational. Even the ‘enemies of gambling within the economics profession now acknowledge that gam- bling is “rational when a person's wish to obtain an otherwise unattsinable large prize is very large” (Rubner, 1966: 52). Eadington (1972; 24; see also Of Track Betting Corporati 1973: I) assumes that numbers gambling satisfies this condi- tion and, thus, justifies its economic ra- tionality. Anomie theory fits big prize lotteries, but it does not fit numbers gambling be- cause numbers bettors de not expect to change life-style when they win, On an average bet of one dollar, a numbers win- ner receives & pot which may range from $500 te S600, Players are expected to tip the runner ten percent of winnings, u prac- tice which reduces net gain to 3450-8540, In the depressed Bedford-Stuyvesant sec tor of Brooklyn, slum dwellers averaged only 50 cents a numbers wager, so their expected retum was only $225 to $270 in 1970, These calcualtions exaggerate ex- pected retumm because the game permits less radical bets than the three-digit gig. In “single action,” for example, a bettor selects only one digit at odds of 10 to I. The maximum return in this popular bet is only $6, less the runner's tip, These re- tums fall far short of riches permitting a change in life-style. Personal Serving Sellin (1963:19, see also Luni, 1974; L10) supposes that numbers gambling thrives because a “segment of the populs- tion enjoys betting" and does not regard it as harmful. But the entertainment theory does not correspond with the bettors’ understanding of the numbers game. On the contrary, they vigorously disclaim bet- ting for the thrill, fun of sport of it, Num- hers gamblers view the game as # rational economic activity and characteristically AMBRICAN SOCIOLOGICAL REVIEW refer to dheit numbers bets as ments" (Carlson, 1940; 138-9), Most gamblers understand their num- bers betting as a means of personal saving. ‘This ubiquitous self-justification is the crucial prop for the entire gambling order {Eadington, 1972: 29; Lanni, 1974: 78). The bettor’s justification for this seemingly Preposterous misconception arises from unsatisfactory experiences with depos- itory savings techniques. Once a numbers collector has a man’s quarter, they aver, there is no getting it back in a moment of weakness. If, on the other hand, the quar- ter were stashed at home, a saver would have to live with the continuing clamor of unmet needs, In a moment of weakness, he might spend the quarter. Therefore, in the bettor's view, the most providential employment of small change is to bet it on a number (Grow, 199% 213; see also Whyte, 1943; 41). “The dime or quarter which one bets is scarcely missed,”” writes R. Brown (1973), “but when one ‘hits’ the payoff is a chunk of money large enough to be really useful to the winner.” Bettors do win (Johnson, 1571: 42). On an average day, the betting public receives back in hits" fifty percent of its total wager. From the bettors’ perspective, numbers gambling is a means of converting change into lump sums; in effect, a savings method (see Samuelson, 1973; 423; Com- mission, 1975: 17). The methodical style of numbers gam- bling also indicates that bettors have adopted a long-range perspective, suggest- ing a rational savings strategy. The Fund for the City of New York (1972; Appendix 15) found that 72 percent of numbers bet- tors placed a bet “two or three times @ week” and 42 percent bet every day. The Off Track Betting Corporation (1973) con- eluded that: “'The typical numbers player currently wagers on the game between 2 and 4 times a week."" Even more strik- ingly, the Fund for the City of New York (1972: Appendix 25) found that 41 percent of numbers bettors had been betting on the game for ten years or more, and 59 percent for six to ten years. Indeed, the largest bettors were those who had been playing the longest. The frequency of wa- ‘ering and the decades-long perseverance ‘of numbers gamblers outlines an average eslNUMBERS GAMBLING playing career which encompasses 1.300 tials. In a decade of gambling at this rate, @ gambler confidently can expect to Ieast once (for $550) against his 10% vesiment of 31,300, Viewed from a dec- ade's perspective, the expected return of a numbers gambling career approaches the expected value of the game (Ignatin and Smith, 1976; tani, 1974: 78, Badington, 1973: 205). Numbers games attract funds which would not otherwise be saved in depas- itory accounts (cf. Rubmer, 1966: 36). First, numbers gambling is convenient, Numbers runners make a regular circuit of their customers who thus do not have t ge out of their way to bet. In addition, numbers stations are located in news stands, pool halls, cigar stores and groceries which people visit on an average day. Therefore. even people who have savings accounts find it convenient to lay adollar on a number while at the barber shop rather than risk making no “invest ment” at all in the day. The fund for the ity of New York (1972; 57, see also Hal- ler, 1970: 623) concluded that a legalized numbers game would require seven to ten thousund outlets to compete with the il- legal game in convenience. In 1970, Bedford-Stuyvesant alone contained 1,343 numbers runners whose business was making it easy to bet (Lasswelll and McKenna, 1972: 11 The friendly atmosphere of numbers gambling encourages “saving.” People choose to deal with a numbers runner whom they trust and like (McKay, 1940: 112-3}, Therefore, interactions with this person are enjoyable. An established numbers station is usually operated in a small grocery store, eandy shop or heauty parlor. Stores of this sort often serve as neighborhood hangouts as well as cetail outlets (cf. Whyte, 1943: 143; Firey, 1947: 190). Wheo placing a bet, a gambler has an opportunity for a few moments of sociable interaction with whomever is hanging around. The sociable atmosphere of a numbers station thus stimulates to ‘sav. ing" these persons who would otherwise simply have spent all small change. ‘Numbers gambling also appeals to the race pride and community spirit of the ghetto public. The real extent of altruistic oT motivations is unclear, but the experience of state lotteries suggests that altruistic motives do induce some people to gamble. Whea asked why they purchased Connec- ticut state lottery tickets, 62 percent of bettors mentioned financial reasons and 33 percent the benefit to the state.’ In some cases, blacks have actually gotten together im order to set up an unemployed friend as their numbers runner (McKay, 1940; 112-3). However, even in cases where the direct support of a friend is not involved, blacks understand their num- bers gambling as a local form of work: relief (Drake and Cayton, 1962: 1, 493; Gidley, 1943: 155: Black Enterprise, 1973: 44; Ofari, 1970: 44-5), Numbers gam- bling syndicates do provide a lot of em- ployment in black communities. Lasswell and MeKeana (1972: 168) found that num- bers gambling syndicates were the largest employers in the slum, second only to the federal government. Numbers collectors frequently double as town criers and fund raisers on their rounds. One black infor- mant, an experienced collector in Detroit, observes that passing the hat for hard-luck cases was a regular function of his daily rounds. Th this manner, the people who regularly dealt with him put themselves into a loose federation for mutual assist- ance in time of need. Constuner Credit In addition to drawing savings out of an impoverished population which finds sav- ing difficult, numbers-gambling banks also- make credit available t poor people who would otherwise be unable to obtain it (Domingtiez, 1976: 38). The capital fund from which this credit derives is the gambling play of the neighborhood, The methods by which this capital returns as ‘credit to the local economy are sometimes circuitous and sometimes direct. Numbers runners muke irect loans to- customers. These direct loans are of two sorts. Firat, numbers runners sometimes Permit the needy to borrow the where- "Lam grateful to Jobn T. Macdonald and Falls W. Staber, Stale of Connecticut, Commission on Spe- cial Reveeue, for showong me these unpublished {abulabons,B98 withal to bet. Eighteen percent of numbers: players in New York City acknowledged placing bets on credit (Fund for the City af New York, 1972: Appendix 29). Among those whe bet a dollar or mote per day., this percentage increased to 23. Second, some runners lend cash to steady custom ers. Nine percent of numbers players in ‘New York City had borrowed cash from ‘their numbers runner for some purpose other than betting. Among persons whe usually bet a dollar or more per day, this percentage increased to 15 percent. These percentages are modest, and there is no indication of how recourse to credit varies ‘with income or color. On the other hand, a 1970 sample of California households (Day and Brandt, 1972; Table 6.2) found that eight percent of white and 15 percent of minority households with annual in- comes less than 39,500 reported borrow- ing money from a credit union, Therefore, the direct credit service of numbers gamblers is roughly comparable to eredit unions in a low income population. A wider credit conduit is the return to the local community of numbers gambling, profits as loan shark's capital. This return isthe standard underworld employment of numbers gambling profits (Seidl, 1968: 323; Kaplan and Matteis, 1968). Con- sumers and small businessmen are the principal customers of slum loan sharks who actually frequent banks in order to approach disappointed loan applicants, sometimes being waved or pointed out to these by the platform official (Seidl, 1968: 16-7; 109-19, 139; Congressional Record. 1967), In many cases, numbers gamblers and loan sharks are the same individual, who simply transfers money from one pocket to another when he changes roles (Anderson, 1974: 25, 127, 1M-1; lanni, 1974: 80, 136; Knudten, 1970: 140). Business Investerent ‘Numbers rackeleers have been the largest investors in black-owned business Or ghetto real estate and the chief source ‘of business capital in the ghetto (Roebuck, 1967: 142; Drake and Cayton, 1962: 487; Caldwell, 194: 153: Strong, 1940 133; sec also Whyte, 1943; 145; cf. Ofari, 1970; 46), In addition, numbers bankers AMERICAN SOCIOLOGICAL REVIEW have been virtually the only sources of business capitalization available to local blacks lacking collateral or credit rating (Cook, 1971). As a result of these loans, black-owned businesses mot actually owned by numbers bankers were often in debe to them (Drake and Cayton, 1962; [1, 469), Finally, numbers bankers have been Jeading philanthropists in depressed black neighborhoods, making donations to churches and athletic teams, and provid ing Christmas and Easter baskets for the poor (cf Perucci, 1969, Whyte, 1943: 142-5). MAINSTREAM FINANCIAL INSTITUTIONS: MALFUNCTION ‘One way to appraise the importance of numbers gambling in the financial life of the slum is to compare this subterranean financial system with the saving and in- vestment services of mainstream financial institutions, such as banks. Even a casual review of relevant literature proves that mainstream institutions do not now, nor have they ever in the past (U.S, Immigra- tion Commission, 191E: 216) been able to provide the same standard of financial service in depressed communities which they routinely provide in aMuent ones (Hil, 1971; Dominguez, 1976: 18). The chronic malfunction of mainstream finan: cial institutions in the slum leaves an enormous service gap in which a diversity of popular financial —_ institutions— including the umbers racket—pluusibly may flourish. Saving Poor people in general and nonwhites in particular make less use of banks for sav- ings or checking accounts than do non- poor (Lewis, 1968: 190-2; Irons, 1971: 420). Low income is the most obvious cause: the less maney people earn, the less they have to deposit in banks. Na- tional survey data confirm this expecta tion {see Table 1), The consumption of banking services declines as income de- clings. OF those who own no savings ac- count, 75 percent (1972) and 80 percent (1970) explained that lack of “money left over” after paying bills was the reasonNUMBERS GAMBLING 899 Table 1. Usage of Banking Services by Color and Family lacome, 1966 and L972 Have a ‘Have a Reeelar Savings Ascent (% ) Checking Account (9%) 1986 1972 1966 1972 All Persons 32 56 %6 Family incon: ; : $15,000 8 over . as 10-14,599 pm a 8a a ous 68 n 18 76 +s a a 2 Cadet £00 x % = {@ ‘Calor: ‘White 0 “ nm 80 Nenwhite 0 a Py 48 Sources: Opinion Research, 1966: 35, 71; Hazris, 197 "Regular and/or special ehecking soso, (Harris, 1972: 73; Opinion Research, 1966: 39), Among these who had no checking account, #8 percent (1962) and 46 percent (1966) blamed lack of money, the modal explanation. Investment A result of nondepositing in banks is nonereation of capital Funds in them, This shortage begins the “capital gap" in the inner city, condition which strangles consumer, mortgage and business credie alike (Garvin, 1971: 445). Moreover, such funds as do make their way imo deposit accounts in low-income areas do not, in general. find local investment outlets. Be- cause they lack collateral and have irregu- Jar and low income, poor residents make bad risks for bank loans (King, 1929: 189; Neifeld, 1939: 169; Dominguez, 1976; 19), In addition, the sums poor people borrow are normally too small to permit profitable lending (U.S. Senate, 19% 89, 160; 1968: 404), Even credit unions require federal subsidies to offer Toans to the poor at legally permissible rates of interest (Cargill, 1973). Therefore, consumer finance companies, like bunks, also avoid poor families (Baath, 1973; 71) Small business loans in poverty areas are more risky than investments in corpo- rate or government securities (Cross, 1969: 45, 46; U.S. Senate, 1970: 148). Ad- verse profit considerations also have shaped mortgage lending policies in inner cities. Savings and loan associations routinely refuse to issue mortgages in “‘red-lined'’ areas deemed to be in deteri- oration (U.S. Senate, 1975), The unde- sirability of consumer, business or mortgage investment opportunities has re- sulted in a flight of capital from the inner city to more profitable suburban locations (see Oven, 1974: 145-78). A source of interracial tension, this flight of capital owes more to economic calculation than to color prejudice. In 1971, for example, U.S. banks had 13 percent of total as- sets in government securities whereas the nation’s 20 blackowned banks had 10 percent of their assets so invested. The ultra-conservative investment policies of the black-owned hanks led Brimmer CISTI} to observe that the black banks were “diverting resources from the black community into the financing of the na- tional debt.” This investment policy con- tributes to the “almost total vaid of law cost credit and capital” in the inner city (U.S. Senate, 1968; 408). Bank-Cammunity Relations Nonfinancial harriers to the normal op- eration of depository institutions anse from the mutual lack of sympathy of bankers and the poor, The cultural ethos of a bourgeois society provides bunkers with no basis for an indulgent view of poor people, and the problem is more acute when the poor are also nonwhite. Blacks have complained for over 200 years that900 AME! white bankers discriminate against them (Light, 1972: 19). ‘This persistent. com- plaint turned up in Harris’ (1972: 94) re- search for the banking industry. In this survey, 43 percent of nonwhites but only 18 percent of whites agreed thut banks made it "too difficult” for nonwhites to obtain loans, Banking industry research (Harris, 1970; 97-8) confirms that the loan tumdown rate “has been highest among lower income groups and nonwhites. Bankers also have acknowledged the in- terpersonal problems which arise when white credit managers refuse nonwhite customers (U.S. Senale, 1970: 195-6). However, banking industry spokesmen have denied that bankers’ race prejudices: were. the source of the problem (Haugen, 1968: 103; 1.8. Senate, 1970: 160 see also Marsh, 1971). The practical line between prejudice and an stlverse but impartial bank decision is difficult to draw because of the connection of color characteristics with economic marginality. A U.S, Senate (1968) investigation addressed allegations that the racism of white bankers was re- sponsible for the inner city financial gap. However, the extensive hearings provided no evidence of more than a clash of cul- tural standards; and subsequent researcl: algo has unearthed no evidence that the colar antipathies of bankers distort their business judgment. Nonetheless, poor minorities fervently believe that bankers discriminate against them and discourage their patronage (Day and Brandt, 1972: 102), This belief nourishes the antipathy of these people to banks (Crass, 1969: SI, 54, 66; Kurtz, 1973: 55). Hanking industry research shows a decline of confidence in banks as family income declines (Harris, 1972: 28. 1970: 46), but calor makes an autonomous contribution. Black people are more alienated fram hanks than would be ex- pected on the basis of income or educa- tional attainment alone (Reot, 1966; 65). Selby and Lindley (1973) found that At- lanta blacks were less prone than whites to maintain a@ checking account, even hoiding constant the blacks’ generally lower income and educational level Simiarly, banking industry research (Har- nis, 1972: 49) found that among families ICAN SOCIOLOGICAL REVIEW with incomes under $6.00 3 year, the poorest class, 62 percent had checking ac~ counts but only 48 percent of nonwhites did (Table 1). More generally, surveys record a level of disenchantment with business and banks which is higher among, nonwhites than among the poor. For example, Harris (1972: 131) found that among families with annual incomes less ‘than $6,000, 47 percent rated banks ‘very high" in their concern for helping the local: community, but only 28 percent of non~ whites agreed, Harris (1970: 130) also found that among families with annual in~ ‘comes less than $6,000, 34 percent per- ceived bankers as “highly concerned’ with helping their community, but only 16 percent of nonwhites mace this friendly rating. Naturally, many expressions of mistrust reflect hostile stereotypes rather than harsh experience. Harris (1970: 46; also Hitz, 1971: 996) reported that nonwhites indicated less familiarity than whites with every type of financial institution except ‘ihe sales finance company. Ignorance and public image in principle are open to change through “education” which bankers now view as the key to extending their market in black and low-income areas. The banks’ record af recent exten- sions in response to “advertising and promotional activities" proves thal poor people’s unfavorable attitudes are open to suasion (Opinion Research, 1566: 74), However, the malfunction of main- stream service in inner cities is neither epiphenomenal, nor easily rectified within 8 profit system. To extend service mar- kets in low-income neighborhoods. depos- itory institutions must surmount the bar- riers posed by the residents’ poverty as ‘well as their ignorance of and antipathy toward banks. Although the record of re- cent extensions proves these barriers arc not insuperable, the dollar costs of attract- ing new bank customers increase ax the income of the new customers decreases, but marginal revenues dec profit-making i ns cannot provide normal service levels in poverty areas. Ax a result, the private burden of supporting the savings-investment cyele in such lo- calities falls upon whatever financial in- stitutions the poor improvise.NUMBERS GAMBLING CONCLUSIONS Banks combine the savings of depos- itors to create a capital fund for business, mortgage and consumer investments. Numbers banks mimic this rhythm, first taking in the “savings” of the poor. then returning capital to the poor eemmunity in the form of usurious loans, free loans, philanthropy and direct business invest- ments by racketeers. Therefore, numbers gambling banks are an irregular financial institution, Prevailing economic conditions in black neighborhoods mutely suggest that num- ‘bers banks have not provided a level of financtal service sufficient to sustain cco- nomic development, even though they helped to clase a gap left by the chronic malfunction of mainstream financial in- stitutions. Numbers banking did not, therefore, represent a “sensible, strong, and adequate response to environment” (Glazer, 1971: 42), From the point of view of local economic development and col- lective social mobility, the numbers-loan shark system is less efficient than rotating credit associations, another financial im- provisation of urban blacks (Light, 1972; Bonnett, 1976). ‘This explanation extends and amplifies the strictly cultural view of numbe gambling which has hitherto prevailed in sociological literature. Numbers gambling of blacks aetually reflects the conjoint in- fluence of institutional as well as cultural causes. On the institutional side, the mal- function of mainstream financial com- munities in low-income communities reales a financial problem. Residents reach into their cultural repertoires for solutions. The solutions they extract have ‘consequences for the rate and character of local economic development. 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