Debt-laden governments across the globe are slashing spending to bring budgets in line. At the same time, riots in Athens and in London are the latest examples of spreading civil unrest. Does economic austerity cause social anarchy?
A new working paper by economists Jacopo Ponticelli and Hans-Joachim Voth seems to say yes. Studying instances of austerity and unrest in Europe between 1919 to 2009, Ponticelli and Voth conclude that there is a “clear link between the magnitude of expenditure cutbacks and increases in social unrest. With every additional percentage point of GDP in spending cuts, the risk of unrest increases.”
“Expenditure cuts carry a significant risk of increasing the frequency of riots, anti-government demonstrations, general strikes, political assassinations, and attempts at revolutionary overthrow of the established order. While these are low probability events in normal years, they become much more common as austerity measures are implemented.”