Civil unrest isn't just fueling political partisanship — it's undermining the economic recovery too

Civil unrest isn't just fueling political partisanship — it's undermining the economic recovery too
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The United States is suffering from not only a public health crisis, but also an identity crisis. Many of the principles that were once honored are now under attack. Basic rules, such as law and order, have been characterized as racist and sources of systemic injustice.

While we need to vigorously continue the search for a vaccine and pursue smart policies that allow for a permanent reopening of the economy, we also need to obtain safety and security in our cities once again. Already, many people are fleeing the cities. In addition to the impact that remote work has had on the decision about where to live, more residents are growing concerned about the safety for themselves and their families—and “voting with their feet” by moving elsewhere.

But, what about the small businesses that cannot just pick up their bags and go?

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To understand the quantitative effects that civil unrest has been having on the economy, I collected data on small businesses (e.g., employment and hours worked) from HomeBase and the intensity of Black Lives Matter riots from Google Trends across 47 metropolitan areas. Although BLM search queries are an imperfect measure for the intensity of riots, it is a reasonable proxy if residents respond to civil unrest by searching online for information in their area either out of support or fear.

Using these data between June and August, I found that a 10 percent increase in BLM search intensity is associated with a nearly percentage point decline in the number of hours worked among employees in the business, relative to pre-pandemic levels. Results are similar when using other measures of small business activity, such as business shutdowns or overall employment. Moreover, results are similar when focusing on a narrower window of time (e.g., July to August).

Why is there such a strong negative association? For starters, small businesses are concentrated in the retail and hospitality sectors. If people are afraid to go out to eat or shop, then consumption on local goods will decline. Even from a practical perspective, we’ve seen how many of these protests, in addition to turning violent, have even led participants to halt traffic and block off roads. And, since economic sentiment is a powerful driver of demand for retail services, uncertainty and civil strife is likely to lead to more precautionary behavior among residents and prospective investors.

These are not just conservative talking points. Even Portland’s police chief has pointed out that the violence has taken away from the BLM movement, prompting many people to turn away from the movement — even if they don’t want to publicly voice their reservations.

Unfortunately, what we’re seeing unfold before our eyes is not a new phenomenon and should not come as a surprise. For example, recent research found that peaceful protests from the civil rights movement led to greater political support for civil rights, whereas the violent protests had the opposite effects. Moreover, others have found that violent riots during the 1960s led to persistently lower values for black-owned property. In fact, these declines are estimated to have contributed to a 10 percent loss in the total value of black-owned residential property in urban areas.

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One of the big differences that we’re stuck with today – for better or for worse – is the presence of social media, which can amplify some of the loudest (and most harmful) voices. For example, my research has found that the decline in consumption over the pandemic was roughly twice as large because of the fear-factor that spread throughout social media. If we were all behaving “rationally” based on our local experiences, consumption would not have fallen so much. The same goes for these riots: bad news spreads more rapidly, causing even more fear and uncertainty. If we want to have a genuine economic recovery, we’re going to need to do more than just find a vaccine. We will need to return law and order to our cities so that people feel safe and secure.

Fortunately, we don’t need to repeat the mistakes of the past. We have timeless principles to stand on that have endured even more tumultuous times, ranging from the domestic implosion during the Civil War to the threat of Nazi Germany during World War II. If we learn from the past and listen to one another, we’ll emerge out of the current economic and social crisis even stronger than before.

Christos A. Makridis is an assistant research professor at Arizona State University, a non-resident fellow at Baylor University, and a senior adviser at Gallup. Follow him on Twitter and Instagram @camakridis.