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Tightening Tensions: Fiscal Policy And Civil Unrest In Eleven South American Countries, 1937 - 1995

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Executive Summary

Efforts at fiscal consolidation are often limited because of concerns over potential social unrest. From German austerity measures during the 1930s to the violent demonstrations in Greece in 2010, hard times have tended to go hand in hand with antigovernment violence. In this paper, the author assembles cross-country evidence from eleven South American countries for the period 1937 to 1995 about the extent to which societies become unstable after budget cuts. The results show a clear positive correlation between austerity and instability.

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