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Pandemic Unemployment Is a Recipe for Social Unrest

(Reason) Could the stalled economy we’ve inflicted on ourselves in our frantic efforts to battle the COVID-19 pandemic lead to civil disorder? History suggests that’s a real danger.

Around the world, high unemployment and stagnant economic activity tend to lead to social unrest, including demonstrations, strikes, and other forms of potentially violent disruptions. That’s a huge concern as forecasters expect the U.S. unemployment rate in the months to come to surpass that seen during the depths of the Great Depression.

“We’re putting this initial number at 30 percent; that’s a 30 percent unemployment rate” in the second quarter of this year as a result of the planned economic shutdowns, Federal Reserve Bank of St. Louis President James Bullard told Bloomberg News on March 22. Gross Domestic Product, he adds, is expected to drop by 50 percent.

Unlike most bouts of economic malaise, this is a self-inflicted wound meant to counter a serious public health crisis. But, whatever the reasons, it means businesses shuttered and people without jobs and incomes. That’s risky.

“Results from the empirical analysis indicate that economic growth and the unemployment rate are the two most important determinants of social unrest,” notes the International Labour Organisation (ILO), a United Nations agency that maintains a Social Unrest Index in an attempt to predict civil disorder based, in part, on economic trends. “For example, a one standard deviation increase in unemployment raises social unrest by 0.39 standard deviations, while a one standard deviation increase in GDP growth reduces social unrest by 0.19 standard deviations.”

Why would economic shutdowns lead to social unrest? Because, contrary to the airy dismissals of some members of the political class and many ivory-tower types, commerce isn’t a grubby embarrassment to be tolerated and avoided—it’s the life’s blood of a society…

President Donald Trump may be overly optimistic when he hopes to have the country, including areas hard-hit by the virus, “opened up and just raring to go by Easter,” but he’s not wrong to include the economy in his calculations.

By contrast, New York Gov. Andrew Cuomo’s insistence that “if it’s public health versus the economy, the only choice is public health,” sounds fine and noble. But it reflects an unrealistic and semi-aristocratic disdain for the activities that make fighting the pandemic possible at all—and that keep social unrest at bay.

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