The argument that you only have a 0.5–2% chance of being arrested is not really accurate. If you're not a gang member, don't have gang tattoos, or are not associated with gangs, then your probability of being arrested would be around 0.01% or less. The El Salvadoran Bryan Caplan would not have gang tattoos or be associated with the criminal underworld. For law-abiding people, this hardly, if at all, affects them negatively.

Your point regarding the slow creep of state power and corruption is a fair one, and in the long term, they should be moving towards stronger institutions that can carry out fair trials while maintaining harsh punishments.

I think people underestimate just how different the criminal underclass is to ordinary people and what a menace they are to society if not properly controlled.