- The latest Chief Economists Outlook warns that rising costs are stirring social unrest.
- This economic discontent has fed into ‘febrile political dynamics.’
- History is full of examples of economic volatility fraying the social fabric.
The French Revolution, a traumatic event that ultimately cost millions of lives and kickstarted modern Europe, was preceded by an estimated 55% rise in the cost of bread. That’s a smaller price hike than some countries have endured recently.
According to the World Economic Forum’s latest Chief Economists Outlook, economic discontent has been fuelling “febrile political dynamics” – and the difficulty people continue to have when it comes to buying bare essentials is ramping up the risk of social unrest.
That echoes similar warnings issued by the IMF and the UN in May. Since then, the inflation rate in the euro area has ticked up a further percentage point, and by nearly as much in the UK. That still pales in comparison to the cost-of-living increases that places like Argentina, Lebanon or Venezuela continue to face.
A recently-published index found that more than half of 198 countries surveyed were at increased risk of civil unrest tied to the cost of basic necessities. And Italy recently provided a demonstration of the political upheaval that can result from such economic frustration.
This is nothing new. The notion that privation stirs unrest goes back at least as far as Aristotle, who described poverty as “the parent of revolution and crime.”
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In Moscow, anger over the price of salt sparked an uprising in 1648 that left hundreds of people dead (including advisers to the tsar). About 140 years later, many of the Parisians who triggered the French Revolution by storming the Bastille were on the hunt for ingredients to make increasingly precious bread.
By late 1923, buying a loaf of bread in Germany could cost 140 billion marks, which is just another way of saying that money had become virtually worthless. The role of hyperinflation in the rise of Nazism is now both closely studied and actively debated.
Shielding the public from price hikes
Historic examples of economic volatility preceding dramatic events abound. As the Nazis were being defeated, China was experiencing its own period of hyperinflation; people in Shanghai saw prices at their local shop increase multiple times per day. That arguably hastened the withdrawal of the Nationalist Party and the ascent of the Communist Party.
In the US, scarcity during the Great Depression helped spawn economic populism that veered into anti-Semitism and xenophobia, bolstering support for the 1940 founding of the “America First Committee” – which tried to keep the country out of a war waged to defeat of fascism.
Now, due to the impacts of the pandemic and war, real wages – the amounts people earn relative to their costs regardless of the numbers on a paycheck – are in “freefall” in many places, according to the Chief Economists Outlook.
The good news is that “the gravity of the current moment is not lost on political leaders,” according to the outlook. Many have sought to shield people from the worst impacts of rising costs.
California, for example, is expected to issue “inflation relief” payments of as much as $1,050. France has already capped gas and electricity price increases for households at 4%, and will spend a significant amount to retain a 15% cap. Yet, thousands of workers in France have taken to the streets to demand pay hikes that help them cope with higher prices.
In many places that may not be a simple task.
According to the results of a recent poll conducted in the UK, Germany, France, and Poland, more than 70% of respondents said they were “struggling or just coping” with rising prices.
More reading on cost-of-living crises and unrest
For more context, here are links to further reading from the World Economic Forum’s Strategic Intelligence platform:
- European unity can endure a winter of discontent – there are reasons for cautious optimism despite spiralling energy prices and what promises to be a dark and difficult period, according to this opinion piece. (Carnegie Endowment for International Peace)
- “Bangladesh’s economic miracle is under severe strain,” according to this piece, as fuel-price increases have amplified public frustration over the rising cost of food and other necessities. (The Diplomat)
- When climate causes an unravelling of the social fabric – an “unfortunate crescendo” of social unrest among the ancient Maya corresponded with a period of protracted drought, according to this study. (Science Daily)
- The rising cost of living is one reason Europe’s politicians and societies may lose interest in Ukraine’s plight, making it easier for Russia to sow division and discord, according to this analysis. (RUSI)
- “This was not the way it was supposed to happen.” The new constitution recently proposed in Chile was a logical outcome of mass protests over the cost of living, according to this analysis, so why was it overwhelmingly rejected? (Project Syndicate)
- “More than a nostalgic vote for a distant fascist past.” According to this analysis, the recent victory of Giorgia Meloni’s Brothers of Italy party reflects a discontent with the current economic and financial situation. (The Conversation)
- The Indonesian government spent billions of dollars to shield the public from the rising price of oil and other basic goods, according to this report. When that stopped recently, protesters promptly took to the streets. (The Diplomat)
Republished from the World Economic Forum