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The Terrible Handling of the Economic Crisis Is a Cause of the Ferguson Riots

August 19, 2014
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Source: Washington's Blog

Bad Economic Policy Is Partly to Blame for Ferguson

We noted 3 years ago that the terrible handling of the economic crisis would lead to civil unrest and riots.

We noted that:

A study this month by economists Hans-Joachim Voth and Jacopo Ponticelli showsthat – from 1919 to the present – austerity leads to violence and instability:

Does fiscal consolidation lead to social unrest? From the end of the Weimar Republic in Germany in the 1930s to anti-government demonstrations in Greece in 2010-11, austerity has tended to go hand in hand with politically motivated violence and social instability. In this paper, we assemble cross-country evidence for the period 1919 to the present, and examine the extent to which societies become unstable after budget cuts. The results show a clear positive correlation between fiscal retrenchment and instability. We test if the relationship simply reflects economic downturns, and conclude that this is not the key factor. We also analyse interactions with various economic and political variables. While autocracies and democracies show a broadly similar responses to budget cuts, countries with more constraints on the executive are less likely to see unrest as a result of austerity measures.

As CNN notes:

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.”

The looting and chaos in Ferguson, Missouri is not justifiable … but it’s largely caused and inspired by the looting on Wall Street.

As basketball great Kareem Abdul-Jabbar notes, this isn’t a race war … it’s a class war.  And corrupt government policy is largely to blame. 

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