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.