Thursday, April 19, 2012

Austerity and Anarchy: Is There A Relationship?

Updated February 2013

Recent news coverage from Europe has shown us just how unpopular government austerity measures are among the "sweaty masses".  People tend to express anger when the ruling class imposes cuts on entitlements, particularly when those cuts have been necessitated by economic mismanagement by the very people that are imposing austerity.  A Discussion Paper entitled "Austerity and Anarchy: Budget Cuts and Social Unrest in Europe, 1919 - 2009" by Jacopo Ponticelli and Hans-Joachim Voth provides an interesting look at the historical relationship between social instability and violence as it relates to government austerity.  This interesting paper could well provide us with a look at how North American societies could deal with painful cuts in government spending.

The authors open by noting that social unrest has been a key issue in history, particularly since the French Revolution.  Social unrest is a powerful mechanism for political change; one need look no further than the Arab Spring to see how powerful the public is when acting in concert against government.

The authors focus on a European database from 1919 to 2009 as the continent underwent changes from high levels of instability and low levels of prosperity in the first half, changing to become a very stable and prosperous society in the second half.  Social unrest includes rioting, demonstrations, assassinations, government crises and attempted revolutions.  The data is then compiled into an index that summarizes all aspects of social unrest which the authors term CHAOS and then compared to cuts in government spending in an attempt to answer the question - for every percentage cut in government spending, how much social instability should we expect?

Here is a graph showing the CHAOS or number of social unrest incidents over each year of the study:


In light of the current debt problems faced by Italy, it is interesting to note that in the 90 year sample, Italy had the highest number of incidents at 38 in 1947 alone including 7 general strikes, 19 riots and 9 anti-government demonstrations.  The period between the two World Wars showed relatively high levels of unrest and the period immediately after World War II and between the years of 1968 and 1994 showed unusually high levels of unrest with several years showing 30 or more events in a single year.

Here is a chart showing the causes of unrest in the period between 1980 and 1995, how many events there were related to each cause and the average number of protestors per event along with the numbers arrested:


In the 15 year sample, there were relatively few protests related to the imposition of austerity measures, however, these protests tended to be far larger by an order of magnitude when compared to protests related to other causes.

The data shows a very clear correlation between the size of austerity measures taken as a percentage of GDP and the degree of social unrest.  CHAOS, or the sum of all actions of social unrest in each country in a given year, tends to rise as budget cuts rise as shown in this graph:


As I noted above, please remember that this is real data taken from 90 years of European history.  When government expenditures are increasing (white bars), CHAOS registers less than 1.5 events per year.  When government expenditures are reduced by 2 percent of GDP, CHAOS rises to 2.4 events per year and, when government expenditures are reduced by 5 percent or more, CHAOS rises to more than three events per year per country.

On the graph, you can also see a rise in each component of CHAOS as governments enact more stringent austerity measures; the frequency of strikes, assassinations, riots and demonstrations increases as governments cut spending as a percentage of GDP.

The authors conclude that governments may be reluctant to impose austerity measures on their electorate until it is too late because of governments fear societal instability and unrest.  Cutting expenditures significantly increases the frequency of anti-government demonstrations, general strikes and attempts to overthrow the existing government order.  Another study has also shown that more heavily indebted nations tend to have higher levels of social unrest, a factor that is most certainly working against Greece and will not likely work in the favour of Italy should history repeat itself.

6 comments:

  1. They should not be imposing austerity measures on their people at all. they should all tell the banks to go ____ themselves.

    ReplyDelete
  2. It's funny how those who are responsible for overspending are not those who pay in the end when it comes to government indebtedness.

    ReplyDelete
  3. TBF,

    Just out of curiousity; who do you believe owns the money that the banks are holding?

    Just trying to understand your thought process.

    ReplyDelete
    Replies
    1. NOT the people who are paying the price.

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  4. The banking system is in effect a transfer of wealth from the poor to the rich.

    ReplyDelete