How Civil Unrest Affects the Economy: A One-Minute Guide to the 2020 Crisis and Beyond

The Economics Behind Civil Unrest Explained in One Minute: From 2020 Realities to Long-Term Issues

Civil unrest is a term that refers to protests, riots, and other forms of social disorder and conflict that challenge the authority of governments or institutions. Civil unrest can have various causes, such as political, economic, social, or environmental grievances, and can have significant impacts on the economy and society.

In 2020, the world witnessed a surge of civil unrest events, triggered by the COVID-19 pandemic, racial injustice, political polarization, and rising inequality. According to the IMF’s Reported Social Unrest Index ¹ , which measures media mentions of words associated with unrest across 130 countries, the fraction of countries experiencing large spikes in unrest rose to around 3 percent in February 2020, close to its highest levels since the onset of the pandemic ².

Civil unrest can affect the economy in several ways. On the one hand, it can disrupt economic activity, reduce consumer and investor confidence, damage infrastructure and property, and increase public spending on security and social services. On the other hand, it can also reflect social demands for change, accountability, and justice, and pressure governments to implement reforms that can improve economic and social outcomes in the long run.

The economic impact of unrest also depends on its duration, intensity, frequency, and motivation. For example, IMF research shows that protests motivated by socio-economic concerns result in sharper GDP contractions compared to those associated mainly with politics/elections ³. Moreover, civil unrest can have spillover effects on neighboring countries or regions through trade, migration, or contagion channels.

The economic causes of civil unrest are complex and multifaceted. Some of the factors that can increase the risk of unrest include inequality, poverty, unemployment, corruption, repression, discrimination, and lack of opportunities. However, these factors are not sufficient to explain why some countries experience more unrest than others. Other factors, such as institutional quality, social cohesion, political participation, and cultural norms, can also play a role in shaping the likelihood and nature of civil unrest.

In conclusion, civil unrest is a phenomenon that reflects both the challenges and the aspirations of societies. Understanding its economic drivers and consequences can help policymakers design policies that can address the root causes of discontent, foster social dialogue and trust, and promote inclusive and sustainable development.

¹: Global Civil Unrest: Contagion, Self-Organization … - PLOS ²: Social Unrest is Rising … - IMF ³: Could Renewed Social Unrest Hinder … - IMF

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