mead cohen berger shevtsova garfinkle michta grygiel blankenhorn
Paved With Good Intentions

Dan Drezner has a post up that gives a pretty gloomy outlook on the global political and economic climate. He also links to the study (pdf) by the Center for Economic Policy Research that analyzes the link between economic austerity and social unrest. Budget cuts, conclude the authors of the study, lead directly to social upheaval.

The data shows 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…When expenditure cuts reach 1% or more of GDP, this grows to nearly 2 events [demonstrations, riots, strikes, assassinations, and attempted revolutions], a relative increase by almost a third compared to the periods of budget expansion. As cuts intensify, the frequency of disturbances rises. Once austerity measures involve expenditure reductions by 5% or more, there are more than 3 events per year and country — twice as many as in times of expenditure increases.

Studies like these only take you so far.  Countries that introduce austerity generally suffer from a variety of governance problems.  You wouldn’t be cutting so seriously today if you hadn’t had a dysfunctional political process dominated by rent seekers in the past. Overspending is a pretty good indicator for future austerity drives: can we say then that overspending and tolerance for rent seeking leads to violence down the road?

I think we can.

Features Icon
show comments
  • Bruce B

    The big question is whether the spending was actually “good intentions” or whether it was to create dependents for the purpose of vote buying. But your conclusion that overspending leads to austerity is no doubt accurate. Unfortunately, Drezner is probably correct too. We have been seeing some highly under reported incidents of social unrest, apparently of a racial nature in Ohio, Pennsylvania, Chicago and Wisconsin. But the spending cuts haven’t started yet. Wait till they kick in. “You ain’t seen nothing yet.”

  • WigWag

    The brilliance of capitalism is that when it works, it produces many more winners than losers. No economic system yet devised is better at creating wealth or economic growth. But untamed capitalism is unsustainable in the real world; the vast discrepancies in income distribution it produces were no longer sustainable by the 1930s; they are completely incompatible with social peace in the age of twitter and Facebook.

    Keynes and the “blue staters” who came after him figured out how to tame capitalism so that society could enjoy the fruits of it’s benefits without unravelling.

    As the “blue state” model is challenged we are already beginning to see the results; capitalism in it’s unregulated and laissez faire form cannot coexist with social peace. If Professor Mead’s thesis about the “blue state” model is correct, then we haven’t seen anything yet; the social unrest brewing throughout the globe may very well get worse, more pervasive and more violent.

    As school teachers, firemen and postal workers join construction workers, auto workers and manufacturing employees as a new downwardly mobile class in the United States, how long will it be before the social cohesion which undergirds American economic power and military strength collapses? Sign that that social cohesion is fraying can already be found almost everywhere.

    A country where tens of millions of formerly middle class people make a living flipping hamburgers or stocking shelves in Wal Mart while a tiny few earn millions engaging in legal financial shenanigans while subsidized by the tax payer, is not a country that will be safe or prosperous for any of us.

    Professor Mead’s solution won’t work either. That is if the word “solution” can really be applied to calling people who freelance to make a living after being laid off from good jobs, “value added “intermediaries”. Nor will the Professor’s solution of slapping the name entrepreneur on people forced to abandon good jobs and instead become concierges or high tech butlers.

    Either we will find a way to reform the blue state model to make it more affordable (fixing health care is the place to start) or we face increasing anarchy.

    Those are the choices; unregulated capitalism built around small government or some new social system no one but Professor Mead has thought of yet, are recipes not only for failure but for terrible and violent social upheaval.

    If we make the wrong choices, I fear that we haven’t seen anything yet.

  • back40

    Tyler Cowen said that the correlation stopped 30 years ago. It was true in the old days but hasn’t been so for decades. Now there is no correlation between austerity and misbehavior.

    Read the paper.

  • Corlyss

    “The data shows a clear link between the magnitude of expenditure cutbacks and increases in social unrest.”

    Correlation isn’t causation. Among the many substances the dependent classes are addicted to is other people’s money. Any analysis that ends with “don’t cut off the money!” started with “don’t cut off the money.”

    I’m with Bruce B. The dole serves the same purpose as laws in the 19th Century that forbad teaching slaves to read. It keeps a targeted class dependent on another class for everything: culture, religion, income, behavior. I question all that cloying propaganda about how the dole proves the wholesome intentions of the group that came up with the dole. In the end, the dole is itself the creator of moral hazard. Middle class values, the basis for democracy and civil society, can’t be taught to rising generations when the spectre of government money fostering idleness haunts the land.

© The American Interest LLC 2005-2016 About Us Masthead Submissions Advertise Customer Service