Do Budget Cuts Cause More Riots?
Critics have suggested that this is the behavior of a generation that’s been ignored by the establishment. The anarchy on the streets of London has been attributed to high unemployment and disaffected youth, combined with a trigger event — the death of Mark Duggan, shot by police last Saturday.
A couple weeks ago, Jacopo Ponticelli and Hans-Joachim Voth put out their working paper “Austerity and Anarchy: Budget Cuts and Social Unrest in Europe, 1919-2009.” It uses cross-country data in the 90-year period to examine whether riots and civil unrest increase as governments cut spending. They found a positive correlation between social instability and budget cuts. With regard to the recent riots, Voth writes on his blog:
Once you cut expenditure by more than 2% of GDP, instability increases rapidly in all dimensions, and especially in terms of riots and demonstrations.
We also use some additional, more detailed data on the causes of each demonstration to confirm our hypothesis that the link is causal.
So, if you ever found yourself reading papers by Alesina and co-authors arguing that i. budget cuts can be good for growth ii. there is no punishment at the polls for governments cutting expenditure, and wondering why governments don’t engage in more austerity – maybe here is your answer. Even if (and it’s a big if, given the IMF’s latest research) Alesina et al. are right, and growth can follow cuts, the pain may be concentrated amongst some groups. If these become massively unhappy… it can start to look pretty ugly out there in the streets, and I doubt that that’ll be good for growth.
The Guardian’s Datablog has a map of all the spending cuts made to local councils in the UK last year. Thirty-six councils got the maximum cut of 8.9%, with a 4.4% average across the total 350 councils. Former London Mayor Ken Livingstone has already jumped on the “spending cuts = riots” explanation, to much criticism.
(HT: Jonathan Hersh)