A number of years ago, some friends of mine from the Los Angeles area moved into a neighborhood just south of LA proper. Not unlike many areas, it was a mix of good neighborhoods and bad. Bad neighborhoods would have new groups of housing built on undeveloped pieces of land (called "infill" projects) and wealthier people would move in. After they moved in they found out that their neighborhood was part of a certain street gang's turf. For a small "fee" the gang would protect their neighborhood from crime. Those in the neighborhood took the gang up on their offer. And it worked.
Much of a street gang's criminal activity would be aimed at other rival street gangs themselves and not at ordinary citizens living within their turf. Drugs would be a source of income as well. Ordinary criminals knew where gangs' turf boundaries were, and avoided them due to fear. They preferred working in normal neighborhoods merely patrolled by local police, because they knew police were a relatively ineffective bureaucracy. Gangs were far more efficient and effective at curbing ordinary crime within their own neighborhoods. And since the gangs took ownership of their own neighborhoods, they generally left the ordinary people alone to live their lives.
So the small fee took care of far more than any police presence, and they lived without burglary or auto theft. (See also this similar post at Blessed Economist)
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