Proof that high inflation leads to more public violence
NEW research appears to show a direct link between inflation and social violence. In the months before the Marikana massacre, in which more than 30 miners died, there was a spike in nondiscretionary inflation — the inflation the poor experience — from 3% to more than 10%. The same is true of the xenophobic attacks in 2008. Just before these attacks, nondiscretionary inflation surged to 20%. The recent violence in Sasolburg was also preceded by an acceleration in inflation.
That said, I don't doubt that food shortages and price hikes can, and do, trigger civil unrest and social upheaval. The idea is eminently plausible and there have been many attempts to quantify this relationship (more on this below). I commend Chris for trying to establish a more systematic understanding of the issue in the South African context.
However, I find it striking that this particular article makes no mention whatsoever of the real factors that have been driving high food prices in recent years. You know, massive crop failures due to historic droughts in the former Soviet Union, North America, and elsewhere... That kind of thing. In fact, here's a timely case study on South Africa that pinpoints these exact issues, which is itself part of a broader research programme linking food riots and political instability to agricultural supply-side shocks (in particular, those related to climate).
In contrast, the singular premise of the above BD article seems to be that food hikes — and subsequent violence — are entirely the fault of "delinquent" monetary policy.[*] I'm certainly not suggesting that loose monetary policy can't lead to inflation. Rather, the failure to acknowledge these severe real shocks makes any kind of simple analysis very misleading. (I should say that I am going strictly on the article here; Chris and his co-authors may well try to account for real factors in their actual research. At least, I sincerely hope so.)
Becker conducted similar research internationally and found that countries experiencing the highest levels of social upheaval, such as Syria, Tunisia, Egypt and Algeria, embarked on huge monetary expansion in the months before the outbreak of violence. This monetary expansion translated into sharp increases in inflation just before the outbreak of violence. In Egypt and Tunisia, the violence culminated in the overthrow of the previous governments.
It is a matter of some debate among economists how inflation manifests itself in the economy during times of monetary expansion. (E.g. Some of you may recall the rather heated discussions on Cantillon Effects that occurred in the blogosphere only recently.) Well, it is a relief to know that the issue has been resolved thanks to the careful work of Mr Lilico. It turns out that expansionary U.S. monetary policy is so potent that it can positively impact the price of global commodities with a negative lag of several months!
Note (13/02/13): Follow-up here.